A widely followed economist thinks that President Trump’s trade war can trigger conditions that could catalyze a repeat of the 2008 stock market meltdown.
Economist Alex Krüger tells his 208,600 followers on the social media platform X that Trump’s tariffs are creating conditions that could spark a new credit crisis when borrowers can’t access credit easily despite their willingness to pay interest.
[adinserter block="1"]Krüger says that once lenders lose the confidence to issue new debt due to an uncertain macroeconomic backdrop, the S&P 500 could witness a 2008-style collapse.
“This is how the 2008 bear market looked like, -50% in one year. Notice the extensive number of extremely positive news from October onwards. Sometimes, increasing liquidity is not enough.
Once credit markets break, it is very hard to stop the snowball.
We may be two tweets away from going in that direction. Europe retaliating in kind, and Trump losing it.
Of course, [we] would need more than that to have such a protracted bear market. 2008 was a credit crunch after all, which is not the case now.
But a trade war can trigger a credit crisis. Stagflation => consumer spending freezing => corporates blowing up => banks blowing up => dead.”
He also believes that Trump’s tariffs have increased the odds that the US will witness a recession within a year.
“If this keeps escalating, yes, anything is possible now, that’s what’s changed in my opinion, there’s nothing off the table.”
As of Monday’s close, the S&P 500 is trading at 5,062 points.
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