#TrumpTariffs What will be the economic impact of Trump’s tariffs trade war?

Economists widely agree that steep tariffs over a sustained period would push up prices and hinder the growth of both the US and global economies.

The World Bank and the Organisation for Economic Co-operation and Development (OECD) last month downgraded their outlook for the global economy, cutting their forecasts from 2.8 percent to 2.3 percent, and from 3.3 percent to 2.9 percent, respectively.

At the same time, anticipating the impact of Trump’s trade war has been made more challenging by his administration’s repeated U-turns and conflicting signals on tariffs.

Trump’s steepest tariffs have been put on pause, though a 10 percent baseline duty has been applied to all US imports and levies on Chinese exports remain at double-digit levels.

JP Morgan Research has estimated that a 10 percent universal tariff and a 110 percent tariff on China would reduce global gross domestic product (GDP) by 1 percent, with the hit to GDP falling to 0.7 percent in the case of a 60 percent duty on Chinese goods.

So far, the fallout from the tariffs introduced has been modest, though analysts have warned that inflation may still take off once businesses burn through inventory stockpiles built up in anticipation of higher costs.

Despite fears of sharp price rises in the US, annualised inflation came in at a modest 2.3 percent in May, close to the Federal Reserve’s target.

The US stock market, after suffering steep losses earlier this year, has bounced back to an all-time high, while the US economy added a stronger-than-expected 147,000 jobs in June.

Other data points to underlying jitters, however.

Consumer spending fell 0.1 percent in May, according to the US Commerce Department, the first decline since January.

“As for the economy generally, the jury’s out on whether we’re still waiting on the worst of the tariff hit,” Dutch bank ING said in a note on Friday.