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A US recession is 'the biggest concern' amid the tariff war, says Standard Chartered

Key Points
  • The probability of a U.S. recession in the next 12 months has risen from 25% to "as high as 40%," said Standard Chartered Private Bank's Clive McDonnell.
  • The ongoing trade war between the two economic powerhouses is heating up again, with both the U.S. and China announcing tariff hikes on each other's goods.
  • Amid the uncertainty, McDonnell said he was telling clients to look at putting their money in gold.
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A recession in the US is the 'biggest concern' right now: Strategist

The potential of a recession in the U.S. is now "the biggest concern" as Washington and Beijing continued to up the ante in their protracted trade fight, according to a strategist at Standard Chartered Private Bank.

The probability of a U.S. recession in the next 12 months has risen from 25% to "as high as 40%," said Clive McDonnell, head of equity strategy at the bank.

The ongoing trade war between the two economic powerhouses is heating up again after China on Friday announced new duties on $75 billion worth of goods from the U.S, in retaliation for U.S. President Donald Trump's threat to impose more tariffs earlier in August.

That prompted a swift response from Trump, who announced he will hike tariff rates on most goods imported from China.

He also tweeted that American companies "are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA."

"The compounding effect of all these ... continuous ratcheting in terms of tariffs is definitely escalating the risk that the U.S. just glides into recession," McDonnell told CNBC's "Street Signs" on Monday. "I think that's a real concern for markets now."

'Preferred status' for gold

Amid the escalating uncertainty, McDonnell said he was telling clients to look at putting their money in gold,

"Gold was an asset class that for many, many years ... we shunned," he said. "But last month, we upped gold to a preferred status to reflect that ... increased anxiety, increased uncertainty."

Spot gold, which crossed the $1,500 per ounce barrier earlier in August, last traded at $1,533.00.

"I would not be surprised if — and I emphasize if — the U.S. were to slide into recession that we would see ... upwards of $2000 on the gold price," McDonnell said.

"In an environment where ... all assets aside from U.S. Treasurys ... would be weakening ... gold would be ... an asset that could re-rate further," he said.