Former Labor Secretary Says Trump's Trade War, Tariffs Could Send U.S. Into A Recession

A former Labor Secretary cautioned Friday that President Donald Trump's ongoing trade war with China and potential tariffs against Mexico could draw the United States into a recession.

Robert Reich, who served as Labor Secretary for former President Bill Clinton, made the statements during an appearance on MSNBC's All In with Chris Hayes.

Speaking to Hayes, Reich cited the May job numbers released by the U.S. Department of Labor, which said 75,000 jobs were added in the country during the month. The numbers, which are often revised after they are initially released, fell short of predictions from economists in a Bloomberg report.

"75,000 new jobs is really bad. You need 125,000 new jobs just to keep up with the increase in the labor force. And relative to where we have been in this recovery that starts in 2009, it's a very bad jobs report overall," Reich said.

"There is a slowdown, there's no question about that. But if you add on to the slowdown, all of the direct and ancillary damage that comes from these tariffs, tariffs against China, retaliation from China, and tariffs that are threatened against Mexico, I mean you could easily find the American economy in a recession, certainly before the election," he continued.

Reich's comments came roughly an hour after Trump announced the U.S. and Mexico had reached an agreement on immigration and the proposed 5 percent tariff, set to go into effect on Monday, would be "indefinitely suspended."

"I am pleased to inform you that The United States of America has reached a signed agreement with Mexico. The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended," the president wrote.

While the U.S. economy has thus far absorbed Trump's trade war with China and the threat of additional taxes on Chinese goods, some economists, business owners and lawmakers balked at the idea of the country taking simultaneous blows from tariffs on imports from the two countries.

The job report also marked a sign to economists that the Federal Reserve will move to cut interest rates and is another check towards a possible economic slowdown.

"This should be a clear warning to the administration and the Federal Reserve to tread very carefully on the policy front. The May jobs report gives us a taste of what's ahead if these trade threats continue, " Scott Anderson, chief economist at Bank of the West in San Francisco told The New York Times.

Luke Tilley, chief economist at Wilmington Trust, told CNBC he feels the latest job numbers are the sign of a "true slowdown in hiring right now."

"Sometimes you can be a little bit dismissive of monthly volatility, but I think we have enough indication," Tilley said.

Though job reports appear to concern some economists, the United States imports and exports equal to 27 percent of its gross domestic product (GDP). Additionally, Chinese tariffs began in June 2018 and amounted to an economic loss of 0.04 percent last year, CBS News reports.

Speaking to Reich, Hayes said that he had seen individuals arguing for both sides, with some saying that there is no concern that trade wars and tariffs could spark a recession.

"Are the effects of this big enough to actually knock America off of an expansion and into recession. I've seen people arguing on both sides. The sheer size of it relative to the size of the American economy is not big enough, and I've seen others argue, it can. What's the case that it could?," Hayes asked.

"Well, it's the interaction, Chris, between the tariffs, and also the slowdown that is almost inevitable given how long this recovery has gone. I mean recoveries don't go forever. They gradually slow down," Reich said, adding that Americans and American companies are also deep in debt and that creates another problem.

"Finally you've got that tax cut for big corporations and the wealthy that did not trickle down, it just added $2 trillion over the next 10 years to our debt," Reich added. "Now, put all of that together and you get an economy that is very, very vulnerable."

A study from the Urban-Brookings Tax Policy Center, which Hayes cites in the segment, said that most Americans have seen most of the savings generated from the GOP tax cut erased by tariffs and, should all the proposed taxes be imposed, the average American could pay $3,000 more a year.

According to Bloomberg, current tariffs have cost the average household about $831.

Robert Reich
Robert Reich attends the Tribeca Talks: After the Movie "Inequality for All" during the 2013 Tribeca Film Festival on April 28, 2013 in New York City. Getty/Robin Marchant

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