The OECD became the latest organization to warn that a U.S. trade war with China could put an anchor on the global economy. The notion that one nation will win with no effect on GDP and that the other will lose was not a conclusion of the analysis.
In a new statement on the subject, the organization’s management said: “The global economy is expected to achieve moderate but fragile growth over the coming two years. Vulnerabilities stem from trade tensions, high policy uncertainty, risks in financial markets and a slowdown in China, all of which could further curb strong and sustainable medium-term growth worldwide.”
The OECD also said, in a forecast released late last week that the global economy would grow this year at a rate of 3.2% and 3.4% next year. While this was a downward revision from its forecast in March, some nations are not expected to be affected as much as others. There was no revision in the 6.2% forecast for China or the 7.1% GDP improvement forecast for India. The U.S. was revised up slightly to 2.8%.
As a cornerstone of the forecast, its authors wrote: “China remains key to global economic growth. Significant fiscal policy stimulus has buffered the economy as it rebalances from investment and export-led growth to a more domestic footing. A sharper slowdown than already seen in China would pose important risks to both global growth and trade prospects.”
The trade war could be the trigger for that slowdown.