In an interview with CNBC, Eisman stated that the current tariff trajectory under Trump carries the risk of triggering a chain reaction that could become difficult to contain, similar to what occurred during World War I.
Steve Eisman, the investor best known for correctly predicting the 2008 subprime mortgage crisis, reportedly warned Tuesday that U.S. President Donald Trump’s escalating tariff policies risk tipping the world into a global recession.
“If there’s a trade war, chances are we go into global recession,” Eisman told CNBC in an interview. “It reminds me a little bit about all the books I’ve read in life about World War I. Nobody wanted World War I, and yet, because of all the reciprocal treaties that existed between countries, they somehow ended up there.”
The comments come as the U.S. Dollar Index (DXY) has fallen by over 9% so far this year, and the S&P 500 (SPX) has barely gained 2%.
Eisman said the current tariff trajectory under Trump carries similar unintended consequences, where countries respond to each other’s actions in a chain reaction that becomes difficult to contain.
“I don’t think anyone wants a trade war, but it’s certainly possible,” he said, pointing to the complexities of global trade negotiations and the multitude of domestic interests involved. “The negotiations of trade are incredibly complicated, with incredible special interests involved. It’s complex. It takes time. Anything could happen. I just don’t know how to handicap it all.”
However, Eisman said he remains optimistic about the long-term outlook for the U.S. economy, as long as a trade conflict is avoided. “If there’s no trade war, I’m very positive on the U.S. economy long term, and I would be very positive on the markets,” he added.
His sentiment is echoed by investors in Bank of America’s monthly global fund survey, which showed that the U.S. dollar is facing the worst investor sentiment in more than 20 years.
Broader markets were trending lower in midday trade on Tuesday. The SPDR S&P 500 ETF (SPY) was down 0.25%, while the SPDR Dow Jones Industrial Average ETF (DIA) slipped around 0.12%.
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