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By Thomas J. Donohue
Thomas J. Donohue is chief executive of the U.S. Chamber of Commerce.
Amid all the talk of a possible recession, it’s important for everyone to remember this: Economic expansions do not die of natural causes. They often die because of missteps and policy mistakes. And the biggest mistake our leaders could make right now — putting our economy at greater risk of a downturn — is to stoke further uncertainty.
That’s why President Trump — and Chinese President Xi Jinping — should withdraw the additional tariffs scheduled to go into effect Sept. 1 and Dec. 15 and return to the negotiating table in good faith.
When leaders make choices that foster certainty, businesses have the confidence to invest, hire, grow and, in turn, drive the economy. Case in point: The one-two punch of tax reform and regulatory relief early in the Trump administration sent our economy soaring, closing in on 3 percent growth and pushing the unemployment rate to a generational low.
We’re in the third straight year of salary and wage growth, and employee compensation rose 3.4 percent in the first half of 2019. Inflation remains near record lows. Consumer spending is strong, with retail sales beating expectations in June.
But with an escalating trade war and signs of a softening global economy beset by numerous challenges from Iran to Hong Kong to Brexit, business confidence is faltering.
Companies are taking stock of the uncertainty at home and abroad and sitting on their cash. The result is the first decline in business investment in three years. The manufacturing sector has been in a downturn since December, and farm incomes have plummeted. This month, we all saw investors panic over “inverted yield curves” in the bond market, historically a harbinger of recession. Wild swings in the stock market are amplifying concerns.
At this moment of uncertainty, it is critical that our leaders take decisive steps to bolster the economy and avoid actions that could turn talk of recession into reality.
For the Trump administration’s part, the escalation of trade tensions with China must come to an end. A U.S. Chamber of Commerce survey of 138 recent earnings calls of Fortune 500 companies revealed that executives are overwhelmingly concerned about the economic impact of tariffs. Deterioration of the U.S.-China relationship is affecting business performance, many reported. And that was before Trump called for U.S. businesses to halt commercial activity in China.
The business community shares the administration’s concern over China’s trade and industrial practices, and the U.S. Chamber strongly supports efforts to secure a deal that addresses forced technology transfer, industrial subsidies, data privacy and intellectual-property protection, and market access. The initial tariffs have brought China to the negotiating table, but the current path of constant escalation doesn’t increase the likelihood of a deal; it risks a recession here at home.
That’s why we believe Trump and Xi should withdraw the tariffs scheduled to take effect this weekend — and then again in December — and instead restart their negotiations.
Congress has an immediate opportunity to boost confidence by approving the U.S.-Mexico-Canada Agreement (USMCA) this fall. This hard-fought deal will preserve and modernize our relationship with Canada and Mexico — our largest trading partners. The chamber has worked closely with the White House on this priority, leading the private-sector effort to advance the USMCA in Congress.
U.S. Trade Representative Robert E. Lighthizer, House Speaker Nancy Pelosi (D-Calif.) and congressional leaders have worked on a bipartisan basis to resolve a handful of remaining issues. On the USMCA, we are within striking distance. With our economy on the edge, lawmakers must finish the job without delay and eliminate any question about the future of our trade relationship with our North American neighbors.
And if Congress really wants to show that it’s committed to keeping the economy on track, it should enact an infrastructure bill. That would boost Main Street confidence in untold ways.
Just as growth is not guaranteed, neither is a recession. Both result from the choices we make. We’re calling on our leaders to eliminate the uncertainty, rebuild business confidence and keep this economy working for all Americans.