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Trump – not the Fed – is the biggest threat to the US economy



Gov Raghuram Rajan, Reserve Bank of India,

Punit Paranjpe | AFP | Getty Images

Former Indian Governor Raghuram Rajan warned that the biggest threat to the US economy would come from President Donald Trump's trade policy.

In an opinion piece titled "Will Economic Winter Come?" published on the Project Syndicate website on Tuesday, Rajan said the old rules for macroeconomic cycles no longer seem to apply, and it remains to be seen what could cause the next recession in the United States

"But whose recent history is our guide "The biggest threat comes not from the US central bank or a sector of the economy, but rather from the White House," said Rajan, who is currently a professor of finance at the University of Chicago Booth School of Business.

He further emphasized that Trump's administration "doubled" on its trade war with China just after the Fed began its price-rising path last year.

"After the markets began to tumble in late 201

8, the Fed backed off. With a comprehensive deal to resolve the trade war nowhere in sight, and with a formal investigation by Trump now underway, it is unlikely that The Fed will tighten monetary policy at any time, "Rajan said.

Meanwhile, another factor Rajan points out is, geopolitica I risk as the attack on Saudi Arabia's oil plant in September. "An increase in oil prices could tip the global economy into recession."

Rajan, who served as governor of India Bank for three years, from September 2013 to September 2016, said while the recession is unpredictable by nature, the biggest threat is not rising prices, but unforeseen actions in areas such as trade and geopolitics.

"If the world had fewer wannabe strong men, the global economy would be much stronger than it is. Unfortunately, most of today's authoritarian leaders are there because voters put them there."

CNBC reached the White House, but a comment was not immediately available.


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