The Rise in Protectionism and the Prospect of a Global Trade War

The risk that a trade war will impact the global economy has clearly increased over recent months. The first U.S.salvos, followed by the retaliatory measures of other countries, have caused tensions to rise. As things currently stand, the situation is still contained but unclear, and increased tariff barriers remain bilateral and with the United States. Nonetheless, it begs the question: Could a real trade war put an end to the current global economic growth cycle? Our base scenario presumes some easing in the short term and the successful renegotiation of the NorthAmerican Free Trade Agreement (NAFTA), but the alternative bearish scenario, in which trade restrictions intensify, is gaining steam.