Economist: Tariffs are best option against China
They are best way combat No. 2 economy, he tells execs in Palatine
Comparing it to a James Bond movie villain, nationally known economist Robert Genetski said China is a viable threat to the continued economic growth of the U.S., and tariffs are the best way to combat that threat.
The Saugatuck, Michigan-based expert told about 250 suburban business executives at the 16th Annual Cornerstone National Bank and Trust Company Economic Breakfast in Palatine on Thursday that, overall, the national economy should continue to grow next year at a rate of 2% to 3%, with inflation remaining about 2% and long-term Treasury notes at 2%.
However, Genetski said a key threat to the future of the U.S. economy is China, which has positioned itself as the No. 2 global economic power. Quoting Jonathan Ward's book "China's Vision of Victory," Genetski said China's mentality is that it is the dominant country in the world, and its totalitarian government has made investments and decisions that are moving them toward that global dominance.
"China is within five to 10 years of a tipping point where they will totally dominate the world economy, where their economy will be so strong that they can basically control what other people think," he said. "The whole state works together to accomplish one thing, and that one thing is to make sure they are the dominant economy that controls everyone."
While tariffs traditionally tend to impede economic growth at home, Genetski predicted those put in place against China by President Donald Trump will work to keep China from becoming a totalitarian economic power. He quoted Hong Kong publisher and pro-democracy figure Jimmy Lai, who said: "President Donald Trump is probably the first president who seems to understand what the Chinese are really like. I think Trump will be able to handle them because he's used to dealing with gangsters."
Genetski noted that, while tariffs could adversely affect U.S. economic growth by as much as 1%, the country could absorb that if it maintains current growth patterns of 2% to 3%.
Another factor that could affect the economy next year are actions by the Federal Reserve, which Genetski said has made some "very confusing" moves during the past decade but will likely move forward to maintain a balance of growth.
"I've got a lot more faith that we're going to have a sufficient amount of money in the economy next year, so that the economy can move forward," he said.
As a result, he predicted long-term interest rates will rise by about a percentage point and the stock market rise by as much as 6%.
While the national economy looks promising, Genetski cautioned that Illinois is still in a precarious situation. While the state's economic declines have leveled off, Genetski warned that people continue to move out of Illinois due to several factors, such as high taxes. As a result, home prices have been well below the national average.
He predicted the income tax increase will do further damage to the state.
Genetski said there needs to be a "full-scale change in the political makeup of the state" in order for it to improve its current conditions.
"I think you can have an ideal governor in the position, but if you have a legislature that isn't going to go along with that, then you're not going to make progress," he said.