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After the last big trade war — NY dockworkers, 1934. Photo: Lewis Hines / National Archives

Europe is preparing 25% tariffs on U.S. goods from Levi's to Harley Davidson bikes in a sign of brewing retaliation for President Trump's imposition of a levy on foreign steel, and economists are warning of a sharp hit to the global economy and markets.

Why it matters: Economists tell Axios that, should Trump proceed with his 25% steel tariffs, and tit-for-tat retaliation cascade, there is serious risk of a blow to global GDP growth, which the International Monetary Fund had forecast at 3.9% for 2018 and 2019.

Already, U.S. metals prices have surged since Trump's announcement. Aluminum, for instance, soared to a three-year high this morning, up by 11.8% since the president spoke, report the FT's Henry Sanderson and Neil Hume.

John Ferguson, director of global forecasting for the Economist Intelligence Unit, tells Axios that, even short of a full-fledged trade war, a low-grade exchange of high tariffs could trigger prolonged stock market declines such as happened yesterday and today.

That could cascade this way:

  1. Companies pull back capital spending plans
  2. Consumers, with less money in their pocket than expected, curtail their spending
  3. Global GDP growth, reliant on capital and consumer spending, suffers.

In one example of this already happening, Sweden's Electrolux announced it will hold off on a $250 million expansion of its appliance manufacturing plant in Springfield, TN., because of the tariffs, reports Rick Rothacker of the Charlotte Observer.

"The impacts could add up to a meaningful slowdown in global GDP," Ferguson said.

Go deeper: Winners and losers in the trade crisis

This post has been updated with the postponement of Electrolux's investment.

Go deeper

California to remove word "alien" from state laws

Gov. Gavin Newsom during a September news conference in Oakland, California. Photo: Jane Tyska/Digital First Media/East Bay Times via Getty Images

California is removing the word "alien" from its state laws and replacing it with words such as "noncitizen" and "immigrant," Gov. Gavin Newsom (D) announced.

Why it matters: The word "alien" began to be used in the 1990s "as a political dog whistle to express bigotry and hatred without using traditionally racist language," per a statement from Newsom's office.

6 hours ago - Health

Axios AM Deep Dive: Covid forever

Illustration: Aïda Amer/Axios

It was 563 days ago that the WHO declared Covid-19 a pandemic. This Axios AM Deep Dive, led by healthcare reporter Caitlin Owens, looks at our Covid future.

Federal judge blocks vaccine mandate for NYC teachers

Students are dismissed from the first day of school at PS 133 in Brooklyn on Sept. 13. Photo: Michael Nagle/Xinhua via Getty Images

A federal appeals court judge on Friday temporarily blocked New York City schools from enforcing a vaccine mandate for school employees, days before it was set to take effect, AP reports.

Driving the news: The vaccine mandate was set to begin on Monday, prompting concerns over staffing shortages in schools across the nation's largest school system.