Trump says US economy in ‘transition’ as trade war escalates

Trump says US economy in ‘transition’ as trade war escalates

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João da Silva & Natalie Sherman

Business reporters, BBC News

Getty Images

A sell-off in the US stock market gathered steam on Monday, fuelled by rising concern about the cost of the trade war to the world’s largest economy.

The S&P 500, which tracks the biggest American companies, fell about 2% in early trade, while the Dow Jones dropped 0.9% and the Nasdaq sank more than 3.5%.

The falls came after President Donald Trump ducked questions about whether the US economy was facing a recession or price rises as a result of tariff moves, while warning instead of a “period of transition”.

Commerce Secretary Howard Lutnick, however, insisted there would be no contraction in the US, although he acknowledged that the price of some goods may rise.

Investors fear that tariffs – which are taxes on goods applied as they enter the country – will lead to higher prices and ultimately dent growth in the world’s largest economy.

“The level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line,” Rachel Winter, investment manager at Killik & Co, told the Today programme.

Economist Mohamed El-Erian said investors had been optimistic about Trump’s plans for de-regulation and lower taxes, while under-estimating the likelihood of a trade war.

He said the recent falls in the stock market, which started last week, reflect the adjustment of those bets.

“It’s a complete change in what the market expected,” he added, noting that investors are also responding to signs that businesses and households are starting to hold off on
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