‘Big Short’ Investor Kyle Bass Warns US May Need Brief Recession To Rebuild Foundation

Kyle Bass, the founder of Hayman Capital Management, said on Thursday that the U.S. may need to experience a recession as it tries to redraw trade ties and cut fiscal deficit.

In an interview on Bloomberg Television, Bass said, “We might have to go to a brief recession in order to rebuild our foundation.”

Bass, who successfully predicted and bet against the U.S. subprime mortgage crisis of 2008, added that this was a necessary reset for the country’s future growth.

Trillions of dollars have been wiped out of the U.S. stock market since President Donald Trump announced universal 10% tariffs on all imports and even higher reciprocal tariffs on a host of countries.

Even though the U.S. paused the tariffs on most countries for 90 days to negotiate trade deals, Trump slapped 145% tariffs on China after Beijing retaliated by imposing its tariffs on U.S. goods.

Bass told Bloomberg that the moves will likely lead to a slight inflationary uptick on some goods, but short-term pain will help the economy emerge on a firmer footing.

He also said that Trump holds the upper hand in the brewing trade war with China, as the U.S. imports many Chinese goods.

“If we’re doing tit-for-tat on tariffs, China loses, because there is no functional equivalency in the amount of goods and services moving back and forth,” said Bass.

The SPDR S&P 500 ETF Trust (SPY) was 0.5% lower in extended trading, while the Invesco QQQ Trust, Series 1 (QQQ) was down nearly 0.7% at the time of writing.

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