New York: Donald Trump will fold and settle for a weak trade deal with China to avoid pushing the country into a recession in a re-election year, according to the US President's former communications chief Anthony Scaramucci.
Anthony Scaramucci slammed his former boss, US President Donald Trump, for his handling of the US-China trade dispute. Credit:AP
Scaramucci, an investment banker who has spectacularly fallen out with the President in recent days, said American business leaders had finally lost patience with Trump's unpredictable tariff hikes and reversals.
US sharemarkets plummeted on Wednesday, local time, when bond markets showed an “inverted yield curve”, a development that has traditionally foreshadowed a recession. The markets stabilised on Thursday thanks to strong retail trading figures but remain well down since July.
"The President's trade policies will be his undoing," Scaramucci said in an interview with The Sydney Morning Herald and The Age in New York. "He has been trying to strangle and drown China but he forgot he was also holding his own head underwater.
"Clinically and objectively, as someone who manages US$10 billion ($15 billion) in capital, I would say there is a 65 per cent chance that we are headed for a recession in the second or third quarter next year."
US President Donald Trump.Credit:AP
If that prediction proved correct, the US would enter into a recession just months out from the 2020 presidential election.
Speaking before a campaign rally on Thursday, Trump said he did not believe the US was heading towards recession.
"I think the longer the trade war goes on, the weaker China gets and the stronger we get," he said. "I have a feeling it's going to go fairly short."
He suggested Beijing may be holding out for a possible administration led by Democratic frontrunner Joe Biden.
Scaramucci, the founder and managing director of investment firm SkyBridge Capital, said: "The president is isolated and won't listen to anyone.
"He thinks he is the smartest person in the room, if not the world.
"He is playing Trump tariff roulette and that is providing no predictability for people who have to manage capital."
Scaramucci said Trump had made a major mistake in acting unilaterally rather than building a coalition of economic allies to combat China's questionable trade practices.
[Trump] has been trying to strangle and drown China but he forgot he was also holding his own head underwater.
"He should have joined forces with the European Union, with Australia – countries that have their own issues with China," he said.
"Instead he went it alone and over-negotiated.
"He's painted himself into a corner and now he will end up cutting a weak, inferior deal.
"He had much better cards to play earlier on."
Scaramucci was fired after less than a week as Trump's director of communications for making crude and scathing comments about other senior administration officials in a conversation with a New Yorker journalist.
Despite his speedy exit from the White House, Scaramucci remained a loyal defender of the President and wrote a flattering book last year called Trump, the Blue-Collar President.
But "the Mooch", as he is known, has since become a vociferous critic of the President, a change he attributes to Trump's call for four non-white congresswomen to "go back" to their countries of origin.
In recent days Scaramucci has said Trump is "mentally declining", that he had "gone off the rails" and called on Republicans to find another candidate for the 2020 election.
Scaramucci is openly critical of Mr Trump’s handling of the trade war with China.Credit:Bloomberg
"He is damaging the social fabric of this nation and that will be even harder for us to recover from than a recession," he said in the interview.
White House trade adviser Peter Navarro, a China hawk, told Fox News that the "underlying fundamentals of the US economy are solid as a rock" while criticising the US Federal Reserve for keeping interest rates too high.
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