President Donald Trump’s trade war with China could cause economic output to plummet around the world if it continues to escalate, according to an analysis by Bloomberg Economics.
Bloomberg economists Dan Hanson and Tom Orlik found that if the tariffs expand to cover all of the trade between the United States and China and cause markets to slide as a result, global GDP would fall by $600 billion by 2021.
The analysis came after Trump announced earlier this month that he would raise tariffs to 25% on $250 billion worth of Chinese exports and China retaliated with tariffs of their own. According to Bloomberg, the tariffs would cause Chinese GDP to fall by 0.5% and US GDP would fall by 0.2% within two years.
Trump threatens to escalate trade war:
While a trade deal could still be achieved between the two countries, Trump has threatened to place a 25% tariff on all Chinese imports if no deal is reached.
Such a move would cause US GDP and global GDP to fall by 0.5% while Chinese GDP would fall by 0.8%, according to the analysis.
The Bloomberg model also predicts that the 25%-across-the-board tariffs could cause the equity market to fall by 10%, which would cause the US GDP to fall by 0.7% and global GDP to fall by 0.6% by 2021.
Many other countries caught in the crossfire:
“The fallout from any of these scenarios would spread well beyond the U.S. and China, the world’s two biggest economies,” Bloomberg reported.
One analysis showed that “the worst blows from a drop in China’s exports to the U.S. would fall on Taiwan, South Korea and Malaysia—all embedded in Asia’s export supply chain. About 1.6% of Taiwan’s output is tied up in China’s exports to the U.S, with computers and electronics accounting for the largest share. For South Korea and Malaysia, those numbers are 0.8% and 0.7%, with the same industries in the crosshairs.”
Canada and Mexico would also be greatly affected.
