Implementation of President-elect Donald Trump's proposals on international trade could unleash a trade war that would plunge the U.S. economy into recession and cost more than 4 million private sector American jobs, a review of his plans says. The analysis comes from the Peterson Institute for International Economics, a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. According to the Council on Foreign Relations, an independent, nonpartisan think tank and publisher, Trump favors trade liberalization, but he opposes several U.S. free-trade agreements because, he says, they were poorly negotiated and cost millions of American jobs. He also opposes the Trans-Pacific Partnership (TPP), the Obama administration's proposed free-trade agreement with Pacific Rim nations, because he says it was negotiated in secret and will primarily benefit other countries, particularly China (which is not a party to the TPP) and Japan (which is a party to it), as well as large U.S. corporations. The authors of the Peterson study say that if Trump raises tariffs sharply on China, Mexico and other trading partners, export-dependent U.S. industries that manufacture machinery used to create capital goods in the information technology, aerospace and engineering sectors would be the most severely affected because their costs of doing business would skyrocket. Effects on other sectors But the shock resulting from Trump's proposed trade sanctions would also damage sectors not engaged directly in trade, such as wholesale and retail distribution, restaurants and temporary employment agencies, particularly in regions where the most heavily affected goods are produced, the authors said. The closure of a local factory serving the export market or a local plant that relies on imported goods (the price of which would be higher) could create a ripple effect throughout the service economy. Millions of American jobs that appear unconnected to international trade — disproportionately lower-skilled and lower-wage jobs — would be at risk, the Peterson analysis argues. Establishments providing goods and services will cut hours or lay off employees, perhaps millions of them. Darius Dale, senior macro analyst at Hedgeye Risk Management in Stamford, Connecticut, agrees a trade war with China will ensue if Trump labels it as a currency manipulator or targets the country with special tariffs, which would ultimately be passed down to the consumer. "A trade war with China would be disastrous for import prices and quash what little consumption growth we have at this stage of the cycle," Dale said in an email. "The U.S. is a current account deficit nation due to our savings/investment imbalance, not as a result of faulty trade deals, international foreign exchange manipulation, etc. It's clear to me that Trump doesn't understand basic macroeconomics when he talks about China or Mexico." "Over the past 10 to 15 years the world has created an ecosystem where we exported manufacturing to keep costs down, which has cut the Consumer Price Index and inflation down," said Brad Lamensdorf, portfolio manager at Ranger Alternative Management in Dallas, Texas. "As exported manufacturing comes back to the U.S., we will be paying more for those goods and inflation will move higher, but on the flip side, more people will be working in the manufacturing industry." Trump card Geopolitical Futures of Austin, Texas, argues in a research report that Trump could, in fact, turn the tables on China. The U.S. and China are dependent on each other in different ways, but the oft-repeated assertion that the economies are too interconnected for the U.S. to increase protectionism does not hold up to scrutiny, it says, because the dependencies are not equivalent. The publication also says Trump will be able to deploy three main arguments in his negotiations with the Chinese: 1. U.S. dependence on Chinese goods is a matter of convenience, not China's possession of critical commodities the U.S. can't obtain anywhere else. 2. Although the manufacturing sector of the U.S. economy has been hurting for years and is significantly degraded, a great deal of unused U.S. capacity remains. 3. U.S. protectionist measures raised against Chinese goods will hurt China far more than any of China's potential retaliatory responses will hurt the U.S. While global markets have responded favorably to Trump's surprise presidential win, the big test will be Trump's first 100 days in office, when investors will see whether his rhetoric is put to practice and how businesses respond.