The outlook for global growth in 2019 has dimmed. The US-China trade war and tightening financial conditions are expected to trigger a downturn. While the US is booming, most of the rest of the world is slowing or even stagnating. Financial conditions are tightening and trade tensions are intensifying.

The top two triggers for the next global downturn are a further escalation of US-Sino trade tensions, and tightening in financial conditions driven by a deep sell-off in global equities or a rapid rise in government bond yields. Even if aggregate costs are modest and skewed towards more open economies, all countries would ultimately be worse off compared to the status quo.

Only a slim majority expect US wage growth to pick up meaningfully before the next recession. The risk of a self-inflicted wound in the US is rising. The dominant downside risk to the global outlook remains America’s attempt to rebalance trade with China through tariff policy. With no let-up in the US-China trade war, growth forecasts point to more pain ahead - not just for developed but also emerging market economies.

The consequences of escalating trade actions are higher prices in China and the US, less purchasing power for consumers in these countries, higher input costs, heightened financial market volatility, and possibly higher interest rates.