The potentially imminent escalation of the U.S.-China trade fight — and the threat of further tit-for-tat measures — marks a significant risk to both countries and the world economy, analysts said.

The Trump administration plans to more than double tariffs on $200 billion of Chinese imports and extend levies to other goods from the country early Friday. Beijing promises to retaliate.

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“No one wins trade wars, not even the bystanders,” wrote Gregory Daco, chief U.S. economist at Oxford Economics, a research firm, in a Thursday note.

Oxford Economics

Daco updated his outlook for the U.S., Chinese and global economies, estimating that the move to hike tariffs to 25% from 10% on half of U.S. imports from China — with China raising 8% tariffs on $60 billion of U.S. imports to 25% — would reduce U.S. gross domestic product by 0.3% in 2020, while curbing China’s output by 0.8% (see chart above).

See: The group losing faith in a quick China trade resolution? The farmers drained by lost exports

The global reverberations would also be more significant, Daco wrote, with the eurozone and Japan seeing losses of around 0.1% to 0.2%, with Singapore suffering a 0.7% drag and global GDP being reduced by 0.3%, or $105 billion.

Read: Trump’s comments apparently emboldened China to take harder line on trade talks

Oxford Economics estimates that the existing tariffs put in place since early last year, hitting around $360 billion of bilateral trade, will impose a drag of 0.1% on real U.S. gross domestic product growth this year, worth about $22 billion, or $175 per household. Chinese GDP will be curbed by 0.3%, according to the firm’s model.

Read: Trump’s trade fight with China hasn’t affected most Americans so far — here’s what could change that

Global stocks pulled back this week as previous confidence that Washington and Beijing would soon complete a trade deal was shattered by U.S. threats to follow through with tariff hikes after charging Beijing had backtracked on pledges made in earlier negotiations. The S&P 500

SPX, -0.30%

, which notched the latest in a string of all-time highs last week, is down 2.6% this week, while the Dow Jones Industrial Average

DJIA, -0.54%

 has retreated around 2.6%. China’s CSI 300 stock index has dropped over 8%.

Then there’s the potential for even further escalation.

In a scenario where Washington puts tariffs of 25% on all imports from China, with Beijing retaliating in kind, U.S. GDP would take a hit of around 0.5%, he said, leaving the economy around $45 billion smaller by 2020 than in a world without tariffs. That would push real GDP growth — growth minus inflation — dangerously close to 1% by the end of 2020, he said.

China’s GDP growth would be reduced by around 1.3% in 2020, slowing to an unprecedented 5% annual pace, while world GDP would suffer a significant 0.5% loss (see chart below).

Oxford Economics

And then there’s the “extreme scenario” of full-blown, multilateral trade war. In this scenario, Oxford Economics modeled the impact of the U.S. putting 35% tariffs on all Chinese imports and 25% auto tariffs globally, plus 10% blanket tariffs on all other goods imported from the EU, Taiwan and Japan — with all countries retaliating in kind.

The firm calculated this would result in a 2.1% hit to U.S. GDP in 2020, pushing the economy into recession later this year. China’s economy would contract by 2.5%, while Europe and Japan would see average GDP losses of 1.5% and world GDP would be reduced by 1.7%.

The damage to private-sector confidence and the accompanying plunge in stock prices would likely see central banks forced into significant rate cuts and other measures, Daco said.

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