“First, there would be no winners from a global trade war. Even if the aggregate costs are modest and skewed toward more open economies, all countries would ultimately be worse off compared to the status quo,” noted Neil Shearing, group chief economist at Capital Economics.
“(it)… would inflict lasting damage to growth and cause a permanent loss of output.”
President Donald Trump’s administration threatened duties on $267 billion of Chinese goods on top of tariffs already levied on $250 billion previously — amounting to almost all imports. Beijing retaliated.
A majority of economists covering the U.S. economy who were asked an additional question said U.S. economic policy toward China over the next few years would become more confrontational.
Along with faster-than-expected increases in interest rates compared to the previous poll, that points to a substantial slowdown in the U.S. economy by late next year, even as it remains the current major driver of global growth.
But only a slim majority expect U.S. wage growth to pick up meaningfully before the next recession.
“The risk of a self-inflicted wound in the U.S. is rising. The dominant downside risk to the global outlook remains the Trump administration’s attempt to rebalance trade with China through tariff policy,” noted Jean-François Perrault, chief economist at Scotiabank.
“The consequences of escalating trade actions are undeniable: higher prices in China and the U.S., less purchasing power for consumers in these countries, higher input costs, heightened financial market volatility, and possibly higher interest rates. These effects would likely spill over from these countries.”
While global growth this year will hold strong, unchanged at July’s 3.8 percent prediction, the consensus for 2019 was 3.6 percent, a cut for the first time since polling began for that period in July 2017. That was also lower than the International Monetary Fund’s recent 2019 projection of 3.7 percent.