Global economic growth will slow in 2019 and 2020 to a little under 2.9%, from an estimated 3.3% in 2018 and 2017, says Moody's Investors Service in a new report. The report projects a slowdown in global trade amid rising trade tensions will have an adverse impact not only on growth in the U.S. and China, but also on growth in open economies such as Japan, Korea and Germany.

"Growth in advanced economies will slow but remain solid in 2019, while G20 emerging markets growth will remain weak," said Moody's Vice President Madhavi Bokil, lead author of the report. "In the U.S., waning fiscal stimulus, the ongoing removal of monetary accommodation and more restrictive trade measures will lower growth. The euro area will also see cyclical moderation to trend growth. Among G-20 emerging market countries, Turkey and Argentina will experience contractions, while China will experience a slowing economy."

Gradual removal of monetary policy accommodation by major central banks will continue to have large spillovers outside the currency areas. As major central banks start to rescind forward guidance and withdraw monetary accommodation, financial volatility, term premia and credit spreads will increase globally. Moody's baseline forecasts assume this will occur relatively smoothly, occasionally interrupted by stints of financial market volatility.

Moody's expects trade and geopolitical frictions between the US and China will likely persist for some time. This will weigh on global trade growth and will reshape trade flows and supply chains. In contrast, the new North American trade agreement, USMCA, will be ratified in 2019, with agreement on rules of origin, conflict resolution, agriculture and government procurement.