President Trump talks with Chinese President Xi Jinping during a welcome ceremony at the Great Hall of the People in Beijing. (Andy Wong/AP)
Opinion writer

Tuesday’s stock market mostly recovered after a precipitous slide, but it should remind us that a 10-year recovery doesn’t mean that the business cycle has been repealed or that we won’t face another downturn. “Tuesday’s swings were only the latest to buffet markets in October, a month that has shaken not just stocks but also government bonds, currencies and commodities,” The Wall Street Journal reports.“The selling began early Tuesday after industrial giants Caterpillar Inc. and 3M Co. released tepid quarterly results and forecasts, adding to recent doubts among investors about the strength of corporate earnings.”

The nub of the problem here lies in part with China, exacerbated by the Trump administration’s foolish trade war. The Journal reports, “Industrial shares sold off on Tuesday after manufacturers flagged challenges including rising costs, a stronger dollar and concerns over growth in China. … The selloff is the clearest signal yet that fortunes could be turning for manufacturers after a year of strong production and sales driven in part by tax cuts and high consumer confidence.” Caterpillar and 3M might not be isolated cases:

Rising costs, including from tariffs on trade between the U.S. and China, were top of mind for many investors.

Caterpillar said tariffs the Trump administration implemented earlier this year on foreign steel and aluminum made parts for the machinery it manufactures in the U.S. more expensive. Caterpillar said tariff-related costs for this year would likely come in at the low end of the previous range of $100 million to $200 million it forecast. 3M expects the tariffs to push up costs by about $20 million this year and $100 million next year.

Sales to China are declining for some U.S. manufacturers as China’s 6.5 percent growth rate for the third quarter was its weakest in a decade. Inflation fears, interest hikes (about which President Trump is already complaining) and a trade war are not a healthy combination.

Moreover, economists fear that if a recession does hit, we’ll be without many of the tools that help soften the blow. Former European Central Bank president Jean-Claude Trichet explained this summer that the United States and its trading partners would be hampered by fiscal and monetary constraints:

First, in most economies—especially in advanced economies—the fiscal situation is already very difficult. The overall public debt outstanding as a proportion of GDP is significantly augmented in comparison with the pre-crisis level. As a consequence, the room for maneuver to counter the recession with fiscal policy would be practically non-existent in an overwhelming majority of advanced economies. Second, in many economies and more particularly in advanced economies, the monetary policy tools to be utilized in case of a recession would be very limited. Even in the United States, further along in the normalization of monetary policy, interest rates are too low to effectively counter a recession.

In sum, Trump inherited a strong economy, solid job growth and low unemployment. Rather than use the opportunity to make wise investments in the economy and/or pay down our debt, he delivered a huge tax cut primarily to the wealthy, grew the debt, started trade wars and added to international instability by picking fights with our allies as well as China. The economy might weather all of that, but there is an increasing chance (50-50, according to JPMorgan Chase economists) that we’ll see a downturn in the next couple of years. If so, our options will be limited, in large part because of the policy choices the administration is making.