How the US-China trade war could spark a global recession


President Trump's trade war with China is about to go global.
Trump has spent pretty much his entire presidency trying to negotiate a trade deal with China, with both countries levying tit-for-tat tariffs all the while. And while those tariffs have mainly hurt American farmers so far, a new Morgan Stanley analysis published by Reuters suggests they could turn into a problem for the whole world.
After a brief hibernation, trade talks with China started up again earlier this month. And in the middle of those discussions, Trump upped a 10 percent tariff on $200 billion worth of Chinese exports to 25 percent, leading China to, of course, retaliate. If that pattern continues, specifically "if talks stall, no deal is agreed upon, and the U.S. imposes 25 percent tariffs on the remaining circa $300 billion of imports from China," then "we see the global economy heading towards recession," a Morgan Stanley analyst wrote in a Monday memo. The Federal Reserve Board would then have to cut interest rates down to zero, the analyst predicted.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Back in the states, the Peterson Institute for International Economics estimates Trump's current tariffs translate to an average tax hike of $550 for each American family, Politico reports. Extending that tariff to $500 billion worth of goods could lead to a $2,200 tax spike for a family of three. That effectively erases the $800 average tax cut U.S. families saw under Trump's Tax Cuts & Jobs Act. Making matters even worse, companies including Walmart are warning that ongoing tariffs will just lead to higher consumer prices. Read more about the everyday negatives of Trump's tariffs at Politico.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Kathryn is a graduate of Syracuse University, with degrees in magazine journalism and information technology, along with hours to earn another degree after working at SU's independent paper The Daily Orange. She's currently recovering from a horse addiction while living in New York City, and likes to share her extremely dry sense of humor on Twitter.
-
Trump's actions cut a wide swath across Hawaii's economy
In Depth The state's tourism and farming sectors are two of the largest hit industries
By Justin Klawans, The Week US Published
-
5 immersive books to read this April for a brief escape
The Week Recommends A dystopian tale takes us to the library, a journalist's ode to her refugee parents and more
By Theara Coleman, The Week US Published
-
'The winners and losers of AI may not be where we expect'
Instant Opinion Opinion, comment and editorials of the day
By Justin Klawans, The Week US Published
-
Markets notch worst quarter in years as new tariffs loom
Speed Read The S&P 500 is on track for its worst month since 2022 as investors brace for Trump's tariffs
By Peter Weber, The Week US Published
-
Tesla Cybertrucks recalled over dislodging panels
Speed Read Almost every Cybertruck in the US has been recalled over a stainless steel panel that could fall off
By Justin Klawans, The Week US Published
-
Crafting emporium Joann is going out of business
Speed Read The 82-year-old fabric and crafts store will be closing all 800 of its stores
By Peter Weber, The Week US Published
-
Trump's China tariffs start after Canada, Mexico pauses
Speed Read The president paused his tariffs on America's closest neighbors after speaking to their leaders, but his import tax on Chinese goods has taken effect
By Peter Weber, The Week US Published
-
Chinese AI chatbot's rise slams US tech stocks
Speed Read The sudden popularity of a new AI chatbot from Chinese startup DeepSeek has sent U.S. tech stocks tumbling
By Peter Weber, The Week US Published
-
US port strike averted with tentative labor deal
Speed Read The strike could have shut down major ports from Texas to Maine
By Peter Weber, The Week US Published
-
Biden expected to block Japanese bid for US Steel
Speed Read The president is blocking the $14 billion acquisition of U.S. Steel by Japan's Nippon Steel, citing national security concerns
By Peter Weber, The Week US Published
-
Judges block $25B Kroger-Albertsons merger
Speed Read The proposed merger between the supermarket giants was stalled when judges overseeing two separate cases blocked the deal
By Peter Weber, The Week US Published