Economist Art Laffer says US recession may not be imminent

U.S. stocks plunged Wednesday on the inverted Treasury yield curve and growing trade fears, as Wall Street worried about a recession.

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But former Reagan economic adviser Art Laffer said a recession may not be imminent because he doesn’t see the Trump administration’s deviating from its economic policies, which are the root behind an economic decline.

“Recessions are caused by policy actions and they can occur in taxes, they can occur in spending, they can occur in regulation, they can occur in monetary policy and they can occur because of trade policy,” he said on "Making Money."

However, Laffer warned that the uncertainty of the ongoing trade war between the world’s two largest economies will continue to have a major impact on the U.S. markets and the global economy.

“I don’t see any reason for there being a recession right now unless something in the future develops that’s quite material, like a trade war,” he said.

The Treasury yields inversion and weaker economic data coming out of China and Germany fueled global fears, dragging the Dow Jones Industrial Average down 800 points.


Laffer said the rest of the world has fallen into a recession, driven by bad political policies that are affecting the U.S. economy.

“They’re in really bad shape and that does impact us,” he said. “We have been fighting against it because we’ve been doing very good policies while they have not been doing good polices.”