A hot war in Ukraine, a trade war between China and the US, and Donald Trump’s threat of sweeping tariff increases raise the prospect of an accelerated rupture of international ties. For the global economy, the consequences would be significant—and negative.

Bloomberg Economics has modeled three futures: A­ “slowbalization” base case of incremental improvement in global cooperation, a division of the world into Cold War-style blocs and a less likely return to go-go globalization.1 For each case, we use a suite of models to estimate the impact on gross domestic product and debt for major economies. Our results show a second Cold War would knock $7.1 trillion from global GDP in 2035 relative to the level if the current slowbalization trend continues. Debt would be propelled higher by slower growth and increased defense spending.

Source: Bloomberg