As per World Bank’s baseline scenario, US GDP growth will slow by 0.4 percentage points in 2019 and another 0.8 percentage points in 2020
They say, ‘When elephants fight, it is the grass that suffers’. With the US and China, the two elephants in the world economy, locked in a trade war, it is inevitable global growth will suffer. But can we quantify the extent of the damage?
A World Bank report has done just that, computing the impact on global growth of a percentage point slowdown in the US, in China and also when both of them slow by a percentage point each.
The details are in the accompanying chart, which shows if both the US and Chinese growth fall by a percentage point, global growth will slow by 0.8 percentage points this year and 0.7 percentage points in 2020. If only the US or China slow down, the impact is much less.
Thankfully, the World Bank doesn’t think things will get so bad. Its baseline scenario is US GDP growth will slow by 0.4 percentage points in 2019 and another 0.8 percentage points in 2020. For China, its estimate is a slowdown in growth by 0.3 percentage points this year and no further slowdown in 2020.