Mohamed El-Erian says Trump tariffs risk US recession

Finance

Mohamed El-Erian says Trump tariffs risk US recession

Mohamed Aly El-Erian, chief economic advisor for Allianz SE.

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President Donald Trump‘s extensive raft of import tariffs are putting the U.S. economy at risk of recession, Allianz’s Chief Economic Advisor Mohamed El-Erian warned on Friday.

He added that Trumps swathe of so-called reciprocal tariffs could have a significant effect on the global economy.

“You‘ve had a major repricing of growth prospects, with a recession in the U.S. going up to 50% probability, you’ve seen an increase in inflation expectations, up to 3.5%,” he told CNBCs Silvia Amaro on the sidelines of the Ambrosetti Forum in Cernobbio, Italy.

“I dont think [a U.S. recession] is inevitable because the structure of the economy is so strong, but the risk has become uncomfortably high.”

El-Erian also warned that markets were underestimating the inflation impact of the tariffs regime.

“The first reaction has been concerns about growth. We havent had two other reactions yet: what will happen to growth in other countries, and that makes a question mark on whether the dollar weakness will continue, and then what does the [Federal Reserve] do？” he questioned.

“I think if we‘re lucky we’ll get one rate cut, not four, and it wouldnt surprise me if we get none,” El-Erian added.

“If its a normal Fed — and I say this qualification with a lot of emphasis, because this has not been a normal Fed — we would unlikely to get even one rate cut.”