U.S. equity investors aren’t thrilled with a recent unraveling of U.S.-China trade talks, but the situation for stocks could worsen, and ultimately lead to a recession, if President Trump follows through with recent threats to implement tariffs on the Chinese imports that haven’t yet been hit with duties.

If a fresh round of duties are put in place, “the potential cost” of these duties could represent a decline of 1% to 1.5% of S&P 500 SPX, +0.17% companies’ net income. Even worse, “the demand destruction and ailing confidence increase the potential impact well beyond just higher costs, and would likely lead to an economic recession in our view,” wrote Mike Wilson, Morgan Stanley’s chief investment officer, in a Monday note to clients.