Trade eating into strong economic outlook under Trump: study

American chief executives think the economy is still strong, but are worried about trade, according to a quarterly Business Roundtable index that measures CEO economic expectations released Wednesday. 

The index dropped to 89.5, a drop of 5.7 points from the previous quarter, but still higher than the historical average of 82.6. CEOs saw no recession in sight, which is typically indicated by an index below 50.

Still, the drop was a sign of trade tensions eating into business sentiment.{mosads}

“The second quarter CEO survey was in the field during a turbulent few weeks for U.S. trade relations with China and Mexico,” noted Business Roundtable President and CEO Joshua Bolten.

“Business leaders are ready and eager to invest and hire in the United States. Yet, the uncertainty over trade policy is making it more difficult for companies to invest and operate confidently,” he added.

Despite the warnings on trade, the results should be a boon to President Trump, who is relying on the economy continuing to roar ahead to secure reelection in 2020. A recession in the months leading up to the election could be disastrous for the incumbent.

CEOs estimated that 2019 gross domestic product growth would come in at 2.6 percent, a moderately healthy pace, but well below the sustained 3 percent level that Trump and his administration promised.

A separate survey released Wednesday, from the Securities Industry and Financial Markets Association (SIFMA), found that U.S. chief economists at some of the largest banks are forecasting a slightly slower pace of growth.

That survey had economists predicting 2.2 percent growth for the year, and just a 25 percent chance of a recession in the next 12 months. Over the coming two years, however, the median survey participant expected the chances of a recession to reach 42.5 percent.

Once again, trade was seen as a contributing factor.

“U.S. trade policy and China’s deteriorating economic conditions were among the most important considerations in the forecast change, as they pose the greatest downside risks to the U.S. expansion,” said Ellen Zentner, chief U.S. economist at Morgan Stanley.

Updated at 4:50 p.m.