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Cashin: US economy could be in 'borderline recession' by Q4 if US-China trade war drags on

Key Points
  • Prepare for a possible "borderline recession" if the U.S. and China don't come to a trade deal soon, says UBS' Art Cashin.
  • President Trump and his Chinese counterpart are set to meet next week to discuss the ongoing trade war.
  • "We can't afford to let it drag on too long," Cashin says. "The president can't afford it because of the election coming up."
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Veteran trader Art Cashin thinks market's focus is on China trade, not Iran

The U.S. economy could be headed for a "borderline recession" If Washington and Beijing don't come to a trade deal soon, veteran trader Art Cashin warned Thursday on CNBC.

"The slowdown in the global economy is reaching this shore. And if you continue to slowdown at the rate that we've slowed down in the last two months, by the fourth quarter you could be borderline recession," said the UBS director of floor operations at the New York Stock Exchange.

President Donald Trump and China's president, Xi Jinping, are set to meet next week in Japan at the G-20 summit, where they're expected to reengage in trade talks. But if the world's two largest economies fail to make a deal, investors should brace for a possible further economic slowdown and potentially more retaliatory tariffs.

"We can't afford to let it drag on too long," Cashin said in an interview on "Squawk Alley." "First of all, the president can't afford it because of the election coming up."

"Obviously, if you're running for office, you don't want that," Cashin added.

However, Xi is meeting with North Korean leaders before the Trump summit. And that may be a sign that China is trying to bring something to the bargaining table next week, Cashin speculated.

Nuclear talks between the Trump administration and North Korea reached a stalemate in February after the two sides failed to agree on the removal of sanctions.

The Chinese could potentially strike a deal with North Korea that benefits the U.S., and ask the White House to back off on some of its trade demands, Cashin said.