US recession risk rises as trade tensions with China remain unresolved

U.S.-China trade tensions are weighing on stocks and pushing up on bond prices, sending yields crashing this week.

Recession fears are mounting as U.S. 10-year treasury yield has fallen to a 20-month low and is now lower than the 3-month Treasury bill rate, a situation known as an inverted yield curve.

A yield curve inversion should be of great concern for the economy and investors, Bankrate senior economic analyst Mark Hamrick told FOX Business’ Neil Cavuto

“It should worry us because it has a pretty good track record of telling us that a recession is down the road,” he said on Wednesday.

The U.S. economy will have been expanding for ten years by this summer, as it has recovered from the 2008 financial crisis,  marking the longest period of sustained economic growth on record, according to the National Bureau of Economic Research. But the sustainability of economic growth remains in question, leaving some economists to suggest a U.S. recession is in sight.

“The bond market is flashing this signal that don’t take this expansion for granted,” Hamrick said on “Cavuto: Coast-to-Coast.”

The ongoing tension over trade between the world’s two largest economies and the imposition of import tariffs has caused a stock market sell-off this month and driven bond prices up, lowering yields. In retaliation for President Trump imposing import tariffs, China is reportedly now considering restricting rare-earth exports to the U.S., the material used to make smartphones and other networking gear. The move could paralyze production of new technology products in the U.S. including electric vehicles and wind turbines.

Secretary of State Mike Pompeo told FOX Business’ Maria Bartiromo that he is confident the U.S. economy will continue to grow despite China’s latest action to weaponize strategic materials.

“Somehow there is this idea that President Trump’s decision to push back against China caused problems for the American economy, when in fact, the challenges have been the fact that the Chinese were in a trade war with us a long time ago,” Pompeo said on Wednesday.

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Hamrick said there’s a high degree of uncertainty that’s filtering through the global economy as a result of the unresolved trade dispute.

“We don’t know how bad this can get, but we know that is bad enough already,” he said. “We really need for it to be resolved in a way that basically takes care of the questions the United States has raised about the way China treats its trading partners.”