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The Organization for Economic Cooperation and Development warns an escalation would hurt the US economy and damage the rest of the world, shaving 0.7% from global growth by the year 2021. That’s roughly $600 billion. The OECD sees the potential for new trade barriers between the United States and the European Union and Brexit-related uncertainties, as well.
“If talks stall, no deal is agreed upon and the US imposes 25% tariffs on the remaining $300 billion of imports from China, we see the global economy heading towards recession,” Morgan Stanley’s analysts wrote. Under that scenario, the US Federal Reserve would have to cut interest rates, ultimately back to zero and China would need huge new stimulus, they said.
At Bank of America, analysts report the trade war has already hurt confidence on Main Street, noting a protracted trade war “could have a meaningful impact on consumer spending.”
It will mean higher prices for consumers, or lower profits for companies. That can mean fewer jobs.
But a year into the trade war, there is a growing realization that ‘s tariff regime may become permanent.
The president dismisses these concerns, admonishing American companies to manufacture in the United States if they want to avoid tariffs. The president’s advisers say, US economy is strong enough to absorb any hit.