Analysis: Trump’s Trade War Could Cost Nearly $500 Billion

JM Ashby
Written by JM Ashby

Under the worst case scenario (as Bloomberg sees it), Trump's budding trade war could cost the global economy up nearly $500 billion according to Bloomberg's economic policy shop.

A full-blown trade war could cost the global economy $470 billion, according to Bloomberg Economics. The U.S. decision to slap tariffs on steel and aluminum may just be the beginning, with President Donald Trump warning of more levies and other economies promising to respond. Cecilia Malmstrom, the European Union’s trade chief, vowed on Monday to “stand up to bullies.” In a scenario where the U.S. implements a 10 percent levy on imports and the rest of the world retaliates, analysis by Bloomberg Economics published Monday says the global economy would be 0.5 percent smaller by 2020 than it would have been without tariffs. According to economists Jamie Murray and Tom Orlik, that’s an extreme scenario, “but it’s no longer an impossible one.”

I'm not an economist but I believe we have reason to believe this does not represent the worst case scenario.

For example, the tariffs Trump has already imposed on washing machines (30 percent), solar panels (30 percent), and heavy metals (10 to 25 percent) is larger than the 10 percent cited by Bloomberg Economics. We don't know how large the tariffs Trump imposes on imports from China will be, but it doesn't seem like a stretch to assume they will be at least if not higher than 10 percent.

Furthermore, we should probably expect that Trump will retaliate when other nations retaliate. That's why they call it a "trade war." It never ends, it simply spirals out of control. And Trump is not known for exercising restraint or due diligence.

  • So, a nuclear war with North Korea is starting to look like the best possible outcome.

  • muselet

    Losing $470 billion from the world economy is not an “extreme scenario,” that’s the best-case scenario.

    The worst-case scenario is a global depression that would make 1929–41 look like good times.


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