There is a 35 percent chance that President Donald Trump escalates his trade war with China and others, Moody's Analytics says.
Economists at Moody's Analytics estimate in a report that further escalation of President Donald Trump's trade war with China could cost the American economy hundreds of thousands of jobs and plunge it into a deep recession.
"These include Chinese bans on U.S. technology exports, voluntary boycotts of U.S. brands, revoked market licenses for U.S. firms, a sharp devaluation of the yuan, and a threat to sell China's vast holdings of U.S. Treasuries." "Although the Fed quickly lowers the federal funds rate to the zero lower bound and both major and developing economies adopt monetary stimulus, the blow to global demand overwhelms efforts to ease financial conditions.
In GDP terms, escalation would leave the U.S. 0.1 percent lower than the baseline in 2019, 2 percent lower in 2020, which is the year of the next election, and 4 percent lower in 2021.
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