Tedeschi, who was a Treasury Department economist before joining Evercore, tells me he estimates the president’s expanded version of the China trade war would cut U.S. economic output by one-half to one percentage point, compared to a counterfactual where the U.S. and China had maintained their pre-Trump trade policies. And he says the recent declines in stock prices and long-term interest rates reflect market participants deciding that scenario has become significantly more likely in recent weeks.

A one-half to one-point hit to the GDP is not enough, on its own, to push the U.S. economy into recession. But it would constitute a significant slowdown, which would likely result over time in slower job growth and weaker wage growth, not to mention slower growth in corporate profits. And Tedeschi notes there could be a snowball effect: If the expectation of a trade-related slowdown in growth encourages corporations to cut their capital expenditures, that could lead to reductions in domestic demand.