Morgan Stanley analysis says China tariffs would lead to recession: report

If President TrumpDonald John TrumpTrump: 'I will not let Iran have nuclear weapons' Rocket attack hits Baghdad' s Green Zone amid escalating tensions: reports Buttigieg on Trump tweets: 'I do not care' MORE With 25 percent tariffs on $ 300 billion of Chinese imports, he said he would be thinking about the global economy into recession, according to a Reuters Morgan Stanley analysis.

Last week, Trump is a $ 250 billion worth of Chinese imports for a new trade deal hit a road block.

"If talks stall, no deal is agreed upon and the US imposes 25% tariffs on the remaining US $ 300 billion of imports from China, we see the global economy heading towards recession," the Morgan Stanley analysis says, according to Reuters.

That would mean 2.5 percent of the global economy.

The analysis said the Federal Reserve would respond to such an event by dropping rates down to mid-2020, while China would ramp up stimulus to 3.5 percent of gross domestic product.

Trump strike has a favorable deal with China, it could boost the economy – and his chances of reelection.

But if no bargain is reached, the pressure of the strategy is high, and the costs are high.

Earlier this month, Trump increased the tariff rate on $ 200 billion of Chinese imports, saying Beijing had backed off agreed-upon positions in the negotiations. China responds with an increase of its own tariffs on $ 60 bililon of U.S. goods, which will be set to go into effect on June 1.

Trump is scheduled to meet with President Xi Jinping at the forthcoming Group of 20 summit in Japan next month.