There are plenty of downside risks to the global outlook. The most recent headline grabber is the ongoing China/U.S. trade dispute. The imposition of additional tariffs would, of course, create a drag on growth for both parties. For example, the maximum threatened additional U.S. tariffs on Chinese products would raise about $105 billion in annual taxes or about 0.5% of U.S. GDP, and that assumes (falsely) that U.S. buyers do not switch to any non-Chinese products. So, the main immediate direct risk to U.S. growth would not be more than a few tenths of a percentage point, and the effect on global growth would hardly be noticed. There are potential secondary impacts of the tariff dispute, such as possible disruptions to global supply chains, postponed investment decisions, deterioration of consumer and business confidence, and adverse impacts on global financial markets. Their effects on growth are harder to ascertain and could be significant, but we do not think the “trade war” will sink the US economy.

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