China, United States Trade War: Threat to global economy

Threats to the global economy do not come much bigger than a trade war. Tariffs helped turn a stock market crisis and recession into the Great Depression back in the 1930s, scarring the world economy for decades to come.

The key lesson for the best part of the past century was that prosperity flows when borders are open to trade.

So far the trade spat between the US and China has not tipped the world into crisis. That is not guaranteed to continue: IMF chief Christine Lagarde this week warned it is “a threat for the global economy.”

The trade war started at a time of strong economic growth, and central banks around the world have responded with economic stimulus measures, dampening the conflict’s impact.

However, global growth has weakened since then and the current fragile stability could let much of the world avoid a recession, if there are no more shocks.

Yet that could change this week. After months of negotiations, the US looks set to raise more tariffs on Chinese imports.

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