I want to begin with what can go wrong in 2018 because I’m optimistic about America’s prospects in the coming year, and I want to end on the optimistic scenario that should occur next year. But there are huge land mines ahead that could lead to a very different scenario.

The first and foremost is the prospect of a trade war. We are challenging China, Canada, and Mexico — our three biggest trade partners — to substantially change the terms of trade between them and us. If they don’t, we are threatening to impose tariffs and/or quotas on those countries’ goods. This in effect, would impose a tax on all of us.

Tariffs amount to taxes on imports, and since Americans are the greatest importers in the world, it is we that will be taxed. About nine out of ten economists will tell you that a trade war is a lose-lose proposition. Almost everyone agrees that the trade war of the 1930s was a contributing factor of the Great Depression and the motivation for the attack on us by Japan. So why would we risk such an irresponsible policy?

Personally, I think it’s a bluff. I think it is an attempt to get a better trade deal. And even if it is an error in judgement and we actually went the trade war route, I seriously doubt that it would last long. As soon as the Trump Administration saw the results of tariffs on the economy, I think they would reverse course. After all, Trump is first and foremost a pragmatic businessman and has a very low tolerance for economic failure. The goal of the Trump Administration is higher growth rates and lower unemployment rates, and a strong stock market. A trade war would lead to exactly the reverse.

But to the degree we ever move in that direction, expect a major market reaction. The mere threat of a trade war will lead to at least a thousand points shaved off the DOW. However, selective tariffs will not have that kind of effect. Tariffs on steel have been imposed before and they are detrimental but not large enough to affect the entire economy. We can survive those, but we cannot survive a trade war with our largest trading partners.