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Lose-lose in a trade war

Researchers at MSCI built out scenarios of what a trade war between the U.S. and China would look like in the short term on a macroeconomic level, as well as what the scenario would look like if all countries raised tariffs on each other.

Using data from the Organization for Economic Cooperation and Development and the International Monetary Fund, U.S. GDP would decline in both scenarios along with higher inflation. Similar outcomes were predicted for the Chinese economy, but to lesser degrees. Further, researchers see a decline in the yuan vs. the dollar in both scenarios as demand for the currency declines along with demand for Chinese-made goods.

Other findings show that both scenarios would have negative impacts on global, Chinese and U.S. equity markets, with more pronounced declines in the event of an all-out trade war relative to one isolated to just the U.S. and China.