Closer to a trade war?

Summary

At BBVA Research we estimate that a tariff increase to 25% could bring Chinese GDP down 0.5 pp from our base scenario, in which China grows by around 6% in 2019. The impact on the other two trading blocks will be less severe, around 0.2 pp in the United States and 0.1 pp in the eurozone.

Key points

• Key points:
• The global economy is one step closer to total trade war if, after the announced rise and Chinese retaliation, the US carries through its threat to slap tariffs on China’s remaining imports.
• International trade costs, and in particular tariffs on goods, have been steadily and continuously falling, putting them at minimums not seen for several generations.

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