No doubt, the biggest topic in the promo market right now is the increasingly curious trade war between the U.S. and China, two nations with massive economies that are unalterably linked. Whether Washington and Beijing publicly admit it or not, they need to get along. The alternative is simply impractical.

Here’s a macro view: It’s in the best interest of the U.S. for China to remain the world’s workshop, providing low-cost labor so product prices stay in check. China, meanwhile, with its growing middle class and thirst for better infrastructure, relies on the West for oil and gas – something the U.S. has plenty of.

And yet, here we are, smack dab in the middle of an ugly staring contest as more than $200 billion in tariffs get slapped on everything from washing machines to branded baseball caps. So what’s actually going on?

“Why risk undermining what’s been working for the last decade?” — Dave Vagnoni

For starters, the Trump administration argues Chinese companies have long held a competitive advantage over U.S. businesses, as evidenced by the $323 billion trade deficit between the countries in 2018. By enacting tariffs, President Trump hopes to curb the imbalance by reducing Chinese exports and put pressure on China as it faces its lowest GDP expansion (just 6.6% in 2018) in decades.

While China’s leaders misread how far Trump would take levies early on, believing many of his campaign threats would be more bluster than bite, they’ve since gotten a better grasp on reality. Signaling a willingness to compromise, China has offered to boost its annual imports from the U.S. until its trade surplus is cut to zero by 2024.

If the U.S. can negotiate assurances that China will follow through, Trump could claim a significant political victory before 25% tariffs are scheduled to be imposed this month. Other issues important to the U.S. in the trade fight, like intellectual property protections for American companies, could be tackled later this year when the lights are lower.

If, however, this moment of opportunity passes and the nations ramp up levies, the real cost of high tariffs will become clear. Product prices, including logoed items, will surge as manufacturers try to offset shrinking margins. Company earnings will weaken and marketing spending will dip. But contrary to what many believe, the largest cost won’t be strictly financial – it’ll be fear.

Indeed, just a few months into the trade war, results of a new CNBC Fed Survey pegged the probability of a U.S. recession in the next year at 26%. The number is notable because it’s the third straight increase and the highest probability since January of 2016. Meanwhile, the Conference Board’s consumer confidence index fell to 120.2 in January, down sharply from 126.6 in December. In Europe, where Brexit worries persist, Central Bank President Mario Draghi has admitted he may need to restart a bond-buying program to boost the region’s softening economy.

While these storylines aren’t pretty, they’re not red flags that a global slump is imminent. Yet, if the U.S. and China continue to provoke and retaliate with tariffs, markets will become vulnerable. Already, there are cracks in the ground. Many don’t realize that global debt has reached a new high of 225% of world GDP, according to the IMF. The last time debt was this high was during the Great Recession. So, with much at stake, why risk undermining what’s been working for the last decade? It’s a question leaders in China, and particularly the U.S., need to ultimately answer with common sense.