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Photo: Wang Zhou/AFP/Getty Images

Bank of America-Merrill Lynch's global research team predicted that "a trade war could cause a global recession" should "across-the-board tariffs on US-China trade" come to pass, analysts said in a note to clients Friday morning.

Driving the news: President Trump raised tariffs on $200 billion of Chinese goods from 10% to 25% overnight, following through on his threat from earlier this week, and could move to impose new tariffs on all Chinese exports to the U.S.

  • The trade war also would likely bring major changes to the policies of the Federal Reserve and European Central Bank.
  • Fund managers have taken notice and pulled $20.5 billion out of equities in the week ending Wednesday, according to BAML's data, and $116 billion out of equity funds so far this year. That matches outflows seen in 2016 and 2008.

Yes, but: Analysts also note an imminent trade deal should allow the global economy to continue to grow above trend — and the market outlook remains that a deal will get done, likely in the next few weeks.

  • Investors have largely been pricing in a positive resolution to the trade war, pushing the S&P 500 up by 15% so far this year. The index rose to an all-time high just last week.

Go deeper: The world can't afford a trade war right now

Go deeper

8 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

9 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."

Updated 9 hours ago - World

In reversal, Pentagon now says drone strike killed 10 Afghan civilians

Caskets for the dead are carried towards the gravesite as relatives and friends attend a mass funeral for members of a family that is said to have been killed in a U.S. drone airstrike, in Kabul on Aug. 30. Photo: Marcus Yam/Los Angeles Times via Getty Images

A U.S. drone strike launched on Aug. 29 killed 10 civilians in Afghanistan, including seven children, rather than the Islamic State extremists the Biden administration claimed it targeted, the Pentagon said Friday.

Why it matters: U.S. Central Command said at the time that officials "know" the drone strike "disrupted an imminent ISIS-K threat" to Kabul's airport, and that they were "confident we successfully hit the target."