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The U.S. economy is slowing and the biggest risk it faces is U.S. trade policy, according to two leading business surveys.

“Uncertainty over trade policy is making it more difficult for companies to invest and operate confidently,” said Joshua Bolten, Business Roundtable president and CEO, in a statement.

The Business Roundtable’s CEO Economic Outlook Index, based on the views of 127 CEOs, decreased 5.7 points to 89.5 in the second quarter due to expectations for weaker sales, capital spending and corporate employment over the next six months compared with the previous quarter’s outlook.

The Securities Industry and Financial Markets Association’s midyear 2019 survey of more than 20 bank and brokerage economists also showed a weaker outlook for U.S. growth with a median forecast of 2.2% on a fourth quarter-over-fourth quarter basis for this year and 1.9% in 2020.

“U.S. trade policy and China’s deteriorating economic conditions are among the most important considerations in the forecast change, as they pose the greatest downside risks to the U.S. expansion,” said Ellen Zentner, chief U.S. economist for Morgan Stanley and chairman of SIFMA’s Economic Advisory Roundtable.

Tariffs on products from China and elsewhere are expected to slow growth and raise prices, but not by that much, according to the economic advisory roundtable. Only 13% of economists responding to the SIFMA survey expect tariffs will shave more than 20 basis points from GDP growth this year.

SIFMA Roundtable economists also gave a median 25% odds for a recession over the next 12 months, rising to 42.5% over the next 24 months. Both cases suggest greater than even odds that the economic expansion, now entering its eleventh year and poised to be the longest on record, continues.

Despite this outlook, 65% of the respondents surveyed believe the Fed’s next move will be an interest rate cut, and 38% expect that will occur in the second half of the year. Just 35% expect the Fed’s next move will be a rate hike, but just 27% expect a hike in 2020.

“Usually there is consensus about direction of the Fed’s next move and debate on timing,” said Zentner in a call with reporters. “Now there is debate on the timing and direction as well. Exogenous factors like trade are raising a lot of risk around the outlook.”

SIFMA roundtable economists expect the U.S. unemployment rate will drop from 3.9% in 2018 to 3.6% this year and inch up to 3.7% in 2020. Nonfarm payroll growth is seen slowing from a peak of 223,000 in 2018 to 130,000 in 2020.

Inflation, as measured by the core personal consumption expenditures (PCE) deflator, which excludes food and energy, is expected to rise from 1.7% in 2019 to 2% in 2020.

Zentner said markets now will be will be focused on the outcome of the G-20 meeting in Japan later this month, specifically on whether President Donald Trump and China’s Xi Jinping release a “positive message” of continuing to work together toward a solution to the trade issues. No meeting of the two has been officially announced yet.

The worst outcome of the G-20 meeting would be one where the two are not talking, which would “get economists and investors and the Fed to assume a turn for the worst,” said Zentner.

Despite these uncertainties about trade negotiations and greater than even odds of a Fed rate cut rather than a Fed rate hike, SIFMA roundtable economists are expecting rising interest rates through mid-2020 with the two-year Treasury fluctuating between 2.28% and 2.315% and the 10-year Treasury trading between 2.46% this year and 2.64%. Yields are well below those levels currently — at 1.88% for the two-year and 2.12% 10 year as of the close on Wednesday.

— Check out The Warning Sign That Predicted Nearly Every Modern Financial Crisis: Richard Vague on ThinkAdvisor.