Nobel Prize-winning economist Robert Shiller warned that further escalation in US-China trade tensions would immediately result in an economic crisis and lambasted President Trump for causing this chaos.
Speaking in Beijing at the annual China Development Forum on Saturday, Shiller blasted the president as a “showman,” who “obviously relishes” celebrity, and whose actions are “totally unbecoming for a president.”
As CNBC reports, Shiller then got serious, warning that the “chaos” brought by a trade war could have a devastating impact.
“The immediate thing will be an economic crisis because these enterprises are built on long-term planning, they’ve developed a skilled workforce and ways of doing things,” Shiller told CNBC.
“We have to rediscover these things in whatever country after the imports are cut off.”
Shiller then told CNBC that he did not believe there would be a significant inflationary effect to the U.S. from steel and aluminum tariffs, but he warned that heated trade rhetoric from both sides could send the American economy reeling into a recession.
“When you ask about the size of the impact on the economy, I think a lot of it is more psychological than direct, unless they really slam on tariffs,” he said.
The Yale economist pointed to the “most famous tariff war of all” during the Great Depression, which he said did not “plausibly, directly” affect economic growth “in a major degree,” but it may have helped “destroy confidence” and willingness to plan for the future.
“It’s exactly those ‘wait and see’ attitudes that cause a recession,” he explained, adding that…
“It’s just chaos: It will slow down development in the future if people think that this kind of thing is likely.”
Shiller also questioned the fitness of others in the Trump administration, telling CNBC that president “has hired some extremist people.” He cited Peter Navarro, the White House trade advisor who wrote books called “Death by China” and “The Coming China Wars.”
“It seemed to me that no responsible president would give credence to that, but here we are. I think he’s a showman who is doing this for political reasons within the U.S.,” the economist said, pointing to the upcoming midterm elections and Trump’s own attempt to get re-elected in 2020.
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