Washington rolls out tariffs against China. Photo: iStock
Photo: iStock

One of the world’s most influential economics think tanks is warning US President Donald Trump that any further escalation of the ongoing US-China trade war would unleash significant damage for the American economy, as well as the rest of the world.

According to a report in The Guardian, the Paris-based Organization for Economic Co-operation and Development said that an intensification of the trade war between Washington and Beijing would likely knock as much as 0.7% off the level of global GDP by 2021-22.

A hit to the world economy of this magnitude from higher tariffs could be quantified at nearly US$600 billion, the report said.

Under the worst-case scenario  — should tariffs be imposed on all US-China trade and businesses pause investments — US GDP would be more than 0.8% lower. Chinese GDP would likely be more than 1.1% lower.

The long-running trade dispute between the two superpowers unexpectedly escalated earlier this month when Trump raised tariffs on US$200 billion of Chinese goods  from 10% to 25%. China hit back with tariffs on US$60 billion of US imports.

Laurence Boone, chief economist at the OECD, told The Guardian that growth in world trade flows had fallen from 5.5% in 2017 to about zero in the first few months of this year: “The trade tensions have derailed global growth that we were seeing in sync in 2017. What’s happening is very worrying.”

According to QZ.com, the OECD already forecasts zero economic growth in Italy this year, the growth rate in Germany to halve from last year to 0.7%, and Japanese growth to slow to 0.7%.  Only a few G20 countries are expected to grow faster in 2019 than last year: Brazil,  Saudi Arabia, South Africa, Argentina and India, which will grow at 7.2%, the fastest in G20.

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