Analysts Who Predicted Trump Tariffs Says We're Headed for 'Worse Financial Crisis' Than 2008 – 'It's Probably Too Late'

Many Wall Street analysts were forecasting a rosy future for the US financial markets following Donald Trump's victory in the presidential elections last year. But there was one analyst who was ringing alarm bells. Peter Berezin, the chief global strategist at BCA Research, predicted the Trump administration would impose tariffs on America's key trading partners, resulting in a slowdown in GDP growth and higher prices.

Berezin now believes we are headed for a financial crisis that could be worse than the one in 2008. Talking to Bloomberg earlier this month, he said a decline in the dollar shows investor confidence in the US markets is falling. He believes this development is "very unnerving" since investors usually turn to Treasuries during market volatility, which drives up demand for dollars.

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"This idea that perhaps holders of Treasury bills will be forced to roll their money over into low-yielding long-term bonds, I mean, this is crazy," Berezin said. "The Treasury market is the ultimate risk-free asset. If we undermine the sanctity of the Treasury market, then we’re looking at a worse financial crisis than what occurred in 2008."

He believes Trump's efforts to decrease the trade deficit could result in foreign investors lowering their US investments, which could result in further weakening of the dollar. 

"That’ll result in a lower trade deficit, but we’re talking about something that will also entail a huge decline in stock prices and probably a financial crisis," Berezin said.

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‘It's Probably Too Late'

Berezin told Bloomberg the US economy was already showing signs of weakness ahead of the trade war escalation. He also believes tariffs could push inflation to "well over" 3% and result in negative income growth. He thinks falling stock prices would result in negative market sentiment and lead to lower consumer spending and profits for companies, causing a slowdown in economic growth.

"I think the outlook is quite worrying at this point and it’s probably too late to avoid recession."

Berezin thinks Trump is not likely to "reverse course" on tariffs as he's been supporting protectionist economic policies over the past 30 years. He said he doesn't understand the rationale behind the belief that Trump is using tariffs as a negotiating tactic.

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Berezin said Trump thought other countries would reduce their tariffs if the US raises its import duties on them. He called this idea "naive" and said most rich countries don't have high tariffs against the US and they don't specifically target US companies. He also said countries were likely to retaliate since that's a popular move among the masses.

‘So people are saying, ‘Well, wait a second, if we can get more votes by retaliating, we'll retaliate.' And so we're not going to get countries acquiescing to Donald Trump's demands. We're going to get retaliation, and that could very well spark another round of tariffs," he told Bloomberg.

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