Fears of a global trade war are rattling stock markets around the world after President Trump imposed tariffs on China on Thursday. China’s commerce ministry responded immediately with tariffs on US imports. If trade restrictions escalate, there will be a price to pay in economic growth and so this evolving news story deserves close attention for monitoring macro risk. For the moment, however, using data published to date, US recession risk remains virtually nil.

The first round of the February economic profile is nearly complete and the numbers show that the macro trend was solidly positive. As a result, it’s highly likely that Monday’s February update (March 26) of the Chicago Fed National Activity Index will confirm that the economic expansion remained intact through last month.

Looking into the immediate future still paints an upbeat outlook. It’s unclear how or if the trade-war factor will change this calculus, but for now the US economy still enjoys a moderate tailwind.

Keep in mind, however, that the growth estimates for first-quarter GDP growth have been downgraded recently, even before trade risk became a real and present danger. The Atlanta Fed’s GDPNow estimate for Q1, for instance, dipped to a relatively weak 1.9% increase (as of March 16), which is below the moderate 2.5% gain in 2017’s Q4. If GDPNow’s analysis is correct, US economic activity is on track to post the softest increase in a year. The possibility of trade-related headwinds in the months ahead raises the risk that any deceleration will spill over into Q2.

Nonetheless, the rear-view mirror speaks loud and clear at this point. The Capital Spectator’s estimate of recession risk for the US points to a low probability that a new downturn started last month, based on a diversified set of economic indicators. (For a more comprehensive review of the macro trend on a weekly basis, see The US Business Cycle Risk Report.)