Global Market Risks Tilt Towards Recession Amid US Trade Tensions

The Edge Malaysia Weekly has reported mounting global market risks linked to the intensifying trade tensions initiated by US President Donald Trump, particularly with the European Union and Canada. This tension comes alongside fears of stagflation and a weakening global economic outlook. While Trump downplays the recession risks, economic experts, including Dr. Yeah Kim Leng from Sunway University and Taimur Baig from DBS Group Research, argue otherwise, suggesting that the probability of a recession and stagflation in the US remains significant. The projected impact includes not just escalating prices and inflation but also declines in consumer spending and corporate earnings. Bruce Kasman of JP Morgan further highlights an increased probability of recession at 40% due to lagging economic growth. Historical references were made to the 1970s stagflation era to caution on possible adverse outcomes on job markets and wage dynamics. Commenting on future monetary policies, analysts foresee limited rate cuts by the Federal Reserve, not exceeding two, even if signs of economic weakness surface. Adding complexity, high household-interest rates may further exacerbate financial stress in certain demographics, especially for the lower-income brackets. However, there's a silver lining with continued regional policy coordination led by China and potential internal market stabilizations. On the whole, the article reflects a sentiment of cautious optimism interspersed with overt warnings regarding potential economic contractions that could influence not just America's economy but also global markets, as illustrated by the anticipated slow economic expansion in Malaysia driven by reciprocal tariffs from trade partner retorts.