Economy

Opinions Grow That Trade War Will Hit US Growth

Douglas A. McIntyre

Published: May 28, 2019 6:15 am

Last Updated: January 6, 2020 4:20 am

A number of analysts have looked at what the huge trade war between China and the United States will do to the growth of the two nations and the world as a whole. Expert opinion that the United States will have a slowdown in gross domestic product (GDP) has burgeoned.

Morgan Stanley economists are the latest to say that American growth will be undermined and that the Federal Reserve will need to take interest rates to zero to combat the effects. CNBC reports that the bank’s experts wrote: “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.”

Bloomberg economists have created several scenarios using models that show the global economy could drop $600 billion in 2021. The effects on China would be several tenths of a percent in GDP falloff. If the trade war continues into next year, the drop could worsen.

Harvard economist Carmen Reinhart, quoted by Bloomberg, remarked that the trade war was worse than most experts say. His opinion is that damage to the Chinese economy will ripple across the world because of its contribution to global GDP.

Finally, the Organisation for Economic Co-operation and Development (OECD) has weighed in with an analysis that shows a trade war could undermine growth across many nations. In its economic outlook, its experts wrote:

Looking ahead, trade tensions are not only hurting the short-term outlook but also medium-term prospects, calling for urgent government action to reinvigorate growth. The global economy was expanding in sync less than two years ago, but challenges to existing trade relationships and the multilateral rules-based trade system have now derailed global growth by raising uncertainty that is depressing investment and trade.

The positions of the Trump administration and China’s government are that each can weather the war. Fewer and fewer experts believe that.

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