Why the US economy faces a bigger shock than tariffs

Washington | US President Donald Trump’s trade tariffs will not push the US into a recession on their own, according to Australian economist Warwick McKibbin, but could shrink the world’s biggest economy once combined with another policy shock.

The former Reserve Bank board member says the mass deportation of undocumented workers or loss of independence of the US Federal Reserve would prove much larger shocks to the US economy. Added to the impact of the trade war on prices and demand, either of these could force a contraction in output.

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