A bit of commentary from the banks on the trade war so far, via Reuters
Bank of America / Merrill Lynch U.S. economists Joseph Song and Stephen Juneau note to clients.
- analyzed the impact of a trade war on the U.S. economy based on the Fed's large-scale equilibrium macroeconomic model and said it showed "a notable drag on growth." "This suggests that the boost to growth expected from fiscal stimulus - e.g., tax cuts and greater federal government spending - will essentially be offset by the negative trade shock,"
- "Our calculations suggest that a major trade war would lead to a significant reduction in growth. A decline in confidence and supply chain disruptions could amplify the trade shock, leading to an outright recession."
cost to the U.S. economy of the current imposed tariffs so far has been small, several economists said they expect the impact to be deeper if more protectionist measures were to be imposed
Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York.
- "The imposition of tariffs on half of our imports from China would likely have more pronounced indirect effects for two main reasons"
- "First, the tariffs on $200 billion of imports would affect a wide array of business sectors including some with significant supply chain multipliers - i.e., sectors where each dollar of activity generates more than a dollar of activity in other sectors. Second, the potential financial market and confidence impact would be substantial."
