Commercial Investment Real Estate July/August 2019 | Page 27

&
TARIFFS TRADE
COULD STALL ECONOMY
While this extended recovery will break the 120-month expansion
record in July, the “vroom” economy is being forced to make a pit stop.
by K.C. Conway
T
hrough the first five months of 2019, the U.S.
economy shook off Federal Reserve rate hikes and
a government shutdown, defying prognostications
for recession. In fact, it behaved more like an econ-
omy in the early stages of a recovery, posting first quarter
growth of 3.1 percent gross domestic product, averaging
200,000 in monthly job increases, and posting healthy
corporate earnings across various industries.
Small business optimism, according to the National Fed-
eration of Independent Business, also rebounded to 105 in
May from a brief lull of 101.2 in January, following the gov-
ernment shutdown and a fourth Fed rate hike in December
2018. I originally characterized the U.S. economy heading
into summer 2019 as having “vroom” — but then came the
tariff boomerang. It resurfaced as a top risk — one that
wasn’t just 10 percent tariffs on China, but now 25 percent
on China and potential penalties on Mexico. Combined,
the two tariff issues are tough to shake off. Additionally,
the timing is terrible because it complicates the crucial rati-
fication of the United States-Mexico-Canada Agreement
(USMCA), which is scheduled for Congressional vote
before the August recess.
Unfortunately, the tariff issue is all the market needed
to lose confidence. An early warning sign that the vroom
is dropping out of the economy was the May ADP jobs
data, which revealed that just 27,000 jobs were produced in
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