Escalating trade tensions between the U.S. and China get some of the blame for the global stock-market rout that kicked off this week’s trading, but the economic fallout from the tariffs announced so far looks pretty limited, economists say.
A tech-led U.S. selloff dragged the Nasdaq Composite COMP, +1.04% lower on the year in Monday’s trade, while the broader S&P 500 SPX, +1.26% dropped below the technically important 200-day moving average and the Dow Jones Industrial AverageDJIA, +1.65% fell sharply. Stocks scored a partial rebound Tuesday.
So, what would it take to escalate a U.S.-China trade skirmish into a global trade war? Adam Slater, lead economist at Oxford Economics, broke down the warning signs in a note.
The China-U.S. relationship carries the biggest potential for causing global economic damage, Slater wrote, noting that Trump administration officials have become “somewhat fixated” with the $340 billion bilateral trade deficit the U.S. runs with China. President Donald Trump has called for the gap to be slashed by $100 billion.