CSCMP's Supply Chain Quarterly
Manufacturing
February 21, 2020
Forward Thinking

Report: Manufacturing execs say global recession is likely in 2020

Comment
Trade restrictions, geopolitical instability remain top issues in the new year, but longer term outlook calls for trade improvements, tech firm survey shows.

Manufacturing and production executives say a global recession is likely in 2020 due to an extended trade war and ongoing concerns over trade restrictions and geopolitical instability, according to a January survey by supply chain artificial intelligence provider LevaData. 

The news comes despite today's signing of the "phase one" trade deal between the United States and China, which lowers tariffs on some Chinese goods beginning in February, and approval of the United States Mexico Canada Agreement (USCMA) in the Senate. 

The LevaData survey, which is scheduled to be published later this month, polled more than 100 manufacturing and production executives about their global trade concerns for the coming year and found that trade issues remain top of mind for the majority of them. More than 60% of executives polled said that a global recession is likely in 2020 and 70% said an extended trade war is likely to cause a recession. Trade restrictions were cited as the biggest concern by far (42%), followed by geopolitical instability (15%), natural disasters (12%), and impeachment-related uncertainty (11%).

The survey also found that manufacturing executives expect consumers to feel the brunt of the tariff woes as increased production costs get passed along to them. Nearly 90% of executives surveyed said they expect tariffs to increase production costs in 2020—by 10% to 20% over the course of the year—and nearly 80% said they will increase the price of their goods and services as a result.

Despite the short-term concerns, the survey revealed a more positive long-term trade outlook in the manufacturing sector: Just 22% of executives surveyed said they don't support recently imposed tariffs while nearly a third (32%) say they support them, and 46% claimed to be "neutral." What's more, 65% said they think tariffs will ultimately lead to improved global trade practices; 40% said they will lead to improved U.S.-China trade relations in two to three years; and 37% said their supply chain operations will run more smoothly in the long term.

Separately, the National Retail Federation expressed support for the phase one deal with China this week, emphasizing the need to address that country's unfair trading practices while reiterating its strong stance against tariffs.

"NRF strongly supports the administration's efforts to address China's unfair trading practices but we hope this is the first step toward eliminating all of the tariffs imposed over the past two years," NRF President and CEO Matthew Shay said in a statement. "The trade war won't be over until all of these tariffs are gone. We are glad to see the phase one deal signed, and resolution of phase two can't come soon enough."

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