The world’s most accurate economic forecaster 8 years running told us why Trump’s Phase One trade deal is not nearly enough to prevent a looming US slowdown


  • The Phase One trade deal between the US and China will not serve as a silver bullet that reignites stateside economic growth, according to Christophe Barraud, the chief economist of Market Securities. 
  • Barraud has been ranked as the top forecaster of the US economy for eight straight years. 
  • In an exclusive interview with Business Insider, he explained why the trade war risk to markets is far from eliminated.  
  • Click here for more BI Prime stories. 

With a few pen strokes, President Donald Trump and Chinese Vice Premier Liu He on Wednesday took the most concrete step yet towards ending the trade war they have waged for nearly two years.

But the Phase One trade deal is by no means a silver bullet that eliminates the risk of a US recession, according to Christophe Barraud, chief economist of the broker-dealer Market Securities. 

When it comes to making such forward-looking statements about the US economy, Barraud is in a league of his own. He has consistently held the top spot on Bloomberg’s ranking of economic forecasters for eight years running. Also, his expectations for the euro area economy have been the closest to actuality every year since 2015, and he has been the most accurate on China since 2017.

“We think that the US economy will slow next year and will converge towards its long-term potential, which is 1.7%,” Barraud told Business Insider in an exclusive interview. The consensus forecast calls for GDP growth of 2.3% in 2019, according to Bloomberg.

Barraud is not dismissing the significance of the Phase One deal, which marked the first tangible sign of de-escalation of a trade war that threatened to sinking the global economy into a recession. One of the positive effects he sees taking shape in earnest is a recovery of global trade growth, with the auto and semiconductor sectors as notable beneficiaries. 

But where the US economy is concerned, Barraud sees multiple reasons why the Phase One deal will not reignite growth across the board. He is convinced of this for three reasons: 

  1. The trade uncertainty that has held businesses back from big capital-spending initiatives is poised to morph into political uncertainty about the 2020 elections. 
  2. The positive impact of tax cuts is set to almost disappear, shutting off an engine that has allowed the economy to soar above its potential for the past two years. 
  3. Finally, he expects the Boeing 737 Max crisis to continue hurting the manufacturing sector. 

Additionally, there are issues that the Phase One deal left unaddressed, including tariffs on more than $360 billion worth of Chinese products left to ensure compliance, albeit some at a lower rate than before. 

“In the medium term, we’re a bit cautious because we think this kind of conflict will last for years,” Barraud said. 

“It will be very difficult for the US to push China to reform itself in several areas like state subsidies and cybersecurity. And that’s why we think that the conflict should restart likely after the election — and no matter who is elected.”

In the interim, he does not foresee the US economy sinking into a recession even if its growth slows. He noted that during the past half century, only one president suffered a recession in the final year of his first term: Jimmy Carter. And it was due to a sudden jump in oil prices. 

He expects the Trump administration to act just like its predecessors by going the extra mile to keep the economy afloat in an election year.

In his view, this makes the case for staying invested in US stocks, although he would not advise an ‘overweight’ at these lofty valuation levels.  

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