Welcome to Thoughts on the market. I'm Michael Zezes, head of public policy and municipal strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and financial markets. the

perspectives I'll be talking about the intersection between US public policy and financial markets.

It's Wednesday, November 27th at 9 a.m. Easter.

I had the privilege of spending last week in Singapore at Morgan Stanley's

Asia Pacific Investor Summit.

This was the 18th year of the conference

and it brought together over 2,000 investors

from around the globe.

So what was top of clients' minds?

U.S. trade policy and its impact on markets.

Fortunately, this is one of our favorite topics, so we had plenty of analysis to share.

First and foremost, clients remain concerned that if the U.S. and China don't resolve their differences and resort back to raising tariffs on one another, the U.S. economy might experience a recession.

Here we agree, as we recently argued in our 2020 outlook.

Our economists believe that if the December 15th tariffs go ahead as planned and stay in place, you could get a shallow recession

starting in the second quarter of 2020.

Why?

Our economists call it nonlinear effects, where more tariffs increase costs, hurt corporate confidence, and weakened demand for labor in a vicious cycle.

Clients were also concerned about trade issues between the US and the EU,

but here there's a bit of a better story to tell. A key November 14th deadline passed quietly for the U.S. to apply

auto tariffs on the EU with the U.S. taking no action or publicly discussing its

intentions. We're guessing that means the auto tariff threat has gone for the

...