The US Might Actually Benefit from the Recession in Europe

While Washington believes that the effect of a recession in the EU on the US economy would be modest, some US economy experts believe Europe’s troubles may actually be good for America in the current situation.

White House aides believe that under the current trajectory, the growing likelihood of a recession in Europe – where amid soaring energy prices and spiking inflation, the European Central Bank raised interest rates by .75 points last week – is unlikely to change.

The estimates of the US Treasury Department and the Council of Economic Advisers, according to one senior member of the Biden administration, such an event would have a modest and manageable impact on the US.

As per Dean Baker, co-founder of the Center for Economic and Policy Research, the US economy could actually benefit from the whole situation which would potentially cause a reduction in global demand for energy and further alleviate price pressures in the US, which has enough of its own natural gas to minimize the impact of a possible stoppage of Russian energy supplies to the EU.

On top of that, less than 1% of the US gross domestic product comes from trade with Europe and as it goes into recession, it’ll decrease the demand for a wide range of products.

However, Mark Zandi, an economist at Moody’s Analytics warned that if Moscow responds to the proposed price cap on its energy imports by completely cutting the sale of its oil and gas not only to the EU but also to other markets, it will threaten the US economy and will possibly push it into recession.

Zandi is convinced that the US can’t digest $5 a gallon, which was the record gas price that could be reached again almost overnight.

The price cap on Russian oil that G7 confirmed on September 2 as part of expanded sanctions campaign against Russia, will take effect on Dec. 5 for crude oil and on Feb. 5, 2023, for refined products coming from Russia.

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