What Turns A Trade Skirmish Into A Trade War

Investing.com – Economists say the Trump administration’s initial $50 billion round of tariffs against China was structured to have minimal impact at home.

But if the U.S. imposes additional tariffs and China retaliates, then some $450 billion in goods will be affected.

And that, UBS says, turns a “trade skirmish into a trade war.”

UBS says that would disrupt the global supply chain, and weigh “substantially on GDP growth and boost U.S. consumer inflation.”

Fitch Ratings says an escalation could put $2 trillion in global trade in jeopardy.

That scenario includes a U.S. withdrawal from Nafta.

Fitch says that could mean a “shock” of 35%-40% on import prices and a reduction of 0.5% to U.S. GDP.

Economists say such a worst-case scenario is unlikely, but serves as a warning that trade disputes can snowball quickly.

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