SIDNEY – While he’s feels very positive about the United States economy, Derek Harris said the next 30 days of trade negotiations between the U.S. and China will be significant, especially for the agriculture industry.
Harris, the managing director and head of global wealth management portfolio and investment strategy for global research at Merrill Lynch, Pierce, Fenner & Smith Inc., was the keynote speaker at Wednesday’s 32nd annual Economic Outlook Luncheon at the Sidney-Shelby County YMCA. Merrill Lynch, in partnership with the Sidney-Shelby County Chamber of Commerce and the Y, presented the luncheon, which was attended by more than 225 individuals.
Harris thinks the United States’ economy is well positioned for continued expansion but did caution that regions dependent on agriculture could be harmed by tariffs imposed on trade between the United States and China.
“I look at the economy as a whole when I’m making investments, and when you look at the agriculture slice of the economy, while it’s important, it’s not going to cause the entire economy to slow down though it’s very painful in localized regions,” Harris, who is based out of New York City, said.
The trade war with China was a big topic recently when Harris hosted a conference call for clients that featured Charlene Barshefsky, who was a United States trade representative from 1993 to 2001 and was the architect of China’s entrance into the World Trade Organization. According to Harris, Barshefsky said there’s a window after tariffs are implemented before the effects are noticeable.
“Even though tariffs went in recently, you really have about 25 days until they really take effect because it only impacts goods that were just produced and have not left China yet,” Harris said. “So there’s about 25 days where it will not impact any economy. The negotiators know that. So the next 25 days should be very busy.”
Barshefsky wasn’t surprised that the United States and China haven’t reached a trade deal yet, Harris said, and still thinks the countries can come to an agreement before the tariffs begin to affect their economies.
“In terms of getting a deal done, in her experience, she always said that trade deals, all the difficult aspects of a trade deal, are decided at the end, not at the middle or not at the beginning,” Harris said. “So it always looks darkest before the dawn.”
If a trade deal isn’t reach in the next month, it could start to negatively affect the American economy.
“Trade wars is definitely going to create volatility,” Harris said. “And if they don’t get to an agreement, let’s say in the next 30 days, then I think the rumblings about economic slowdown will accentuate, and we will have to review our risk budget. So there is quite a lot riding on trade.”
Even with looming trade wars, Harris remains optimistic about the economy and thinks the United States is still in the middle of the current economic expansion.
The United States is approaching 10 years of economic expansion, and in July the business cycle is poised to become the longest in the U.S. since World War II. The record success doesn’t mean the economy has to falter anytime soon, Harris said, pointing to Australia and its current 27-year stretch without a recession as a reason for optimism in America.
Harris is responsible for managing research portfolios at Merrill Lynch and is responsible for $42 billion of assets within the firm. His chief role is to set risks budgets for how research portfolios are situated. Merrill Lynch has been encouraged by the economic outlook, he said.
“The economic data is fantastic, and we’ve actually increased our risk budget,” he said.
Harris and his colleagues rely on data collected from consumers to make their predictions, data that has dictated his optimistic outlook on the economy.
“We are the largest credit card issuer in the country, so we aggregate how the consumer is spending money and where they’re spending money,” Harris said. “It’s unbelievable insight into how the economy’s working. All that data is proving to be positive.”
If the trade war with China isn’t resolved, Harris expects the U.S. government to provide a bailout to farmers like it did last year when the Trump administration announced a $12 billion relief package for American farmers.
“What I’ve read is that if the trade wars are escalated more than what they will do is they may subsidize the farmers even more,” Harris said.
