1 big thing: The road to recession

Look for global stock markets to crater and economies to dive into recession if President Trump proceeds with his desire to withdraw from another international accord — this time the World Trade Organization, economic experts tell me.

The big picture: Thus far, Trump has mostly damaged U.S. prestige with his anti-globalization actions — withdrawing from the Trans-Pacific Partnership, the trade accord with 11 Pacific-facing nations, and the Paris climate agreement, as well as threatening to pull out of NAFTA. He's also caused global stock markets to gyrate by threatening tariffs against Europe, Canada, and China, and oil prices to rise by pulling out of the Iran nuclear deal.

But "the financial shock would be very, very large" should he withdraw from the WTO, a pillar of the global economy since its founding 71 years ago, said Gary Hufbauer of the Peterson Institute for International Economics.

What they're saying:

"Business confidence in the system would be severely shaken," he told Axios, and there would be "quite a hit" to long-term investment in plants and equipment.

the system would be severely shaken," he told Axios, and there would be "quite a hit" to long-term investment in plants and equipment. "You don't need much of a slowdown in these areas, and you have recession," Hufbauer said. Said Brookings' David Wessel, "If he persists, if this is more than bluster or a negotiating ploy, he is putting the prosperity of the world at risk."

The backdrop: Last week, Axios' Jonathan Swan was leaked draft legislation, ordered by Trump, that would abandon key tenets of the WTO. Swan's sources tell him that Trump routinely vows to withdraw entirely, and on Monday, the president publicly threatened that "we will be doing something" should the WTO not "treat us properly."

But but but: While Eswar Prasad, a professor at Cornell University, expects a huge fallout, he suggests it will be more muted than a full-scale economic reversal.

"Trump’s repudiation of the WTO could prove a body blow to the rules underpinning the global trading system," he tells me. "The prospect of that and further disruption could hurt the stock market, but is unlikely to derail U.S. growth momentum sufficiently to tip the economy into recession."

What to watch: The first signal of what's to come will be Friday, when stiff tariffs ordered by Trump on China take effect, following tariffs already enacted on Europe and Canada, along with reciprocal tariffs on the U.S. That is, unless he halts U.S. action at the last moment, which some suspect he will.

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