Trade war: How much the global economy could be hurt

A global trade war could cut the world’s economic growth by 1%, the S&P’s global chief economist says.

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“It may not be a global recession, but, one could imagine a scenario where rather than global growth in the threes we have global growth in the twos, where you get the U.S. and Europe and China all pulling back at the same time," Paul Gruenwald said during CNBC's "Squawk Box Europe."

Prospects of a global trade war have been growing. In January, the United States levied a tariff on solar panels. In March it imposed a 25% duty on steel imports and a 10% tariff on aluminum imports. While some countries were initially exempt from the tariffs, on June 1 steel and aluminum tariffs were levied against U.S. allies Canada, the European Union and Mexico.

In April, the World Trade Organization warned that it was detecting signs that trade tensions could already be hurting business confidence and investment decisions.

Also, the WTO warned that a tit-for-tat trade war between the U.S. and China could undermine the global recovery. “A cycle of retaliation is the last thing the world economy needs,” said Roberto Azevêdo, the WTO’s director-general.

While tariffs are continuing in the backdrop, the global economy has continued to expand. The Organization for Economic Cooperation and Development forecasts global growth will be 3.8% this year and 3.9% in 2019. In 2017, global growth was 3.7%.