Global economy in 2019: Growth beginning to fray

American farmers have been forced to warehouse a bumper crop of soybeans, or sell at a loss, while a Midwest medical supply company is considering shipping production overseas amid growing uncertainty.

Surveys of US business and consumer sentiment continued to show economic optimism going into next year but cracks are beginning to form -- in the United States and around the world -- with President Donald Trump's trade conflict the major source of concern.

The International Monetary Fund is forecasting respectable global growth of 3.7 percent next year but the world's two largest economies -- the United States and China -- are starting to cool.

"The mood is that of uncertainty and the impact in China, in particular, is beginning to be noticed," Minnesota-based MedSource Labs CEO Todd Fagley told AFP.

"We have been told by some local Chinese manufacturers that it 'feels' like they're entering a slowdown and that they are being hurt already due to higher export costs and overcapacity."

Signs the US expansion may have peaked shook global stock markets in recent weeks and Wall Street's main indices have erased all the gains posted this year.

The US recovery will soon become the longest in recorded history but the boost provided from last year's tax cuts is dwindling. Rising interest rates and a shortage of workers are crimping the housing market.

At the same time, the trade conflict threatens to undercut growth, hamper investment and spur US inflation.

"Growth momentum likely peaked in the second quarter," S&P Global Ratings economists said. But the United States is "more likely to see a slowdown than a contraction in the near term."

And amid the uncertainty, worries that had been bubbling in the background, drowned out by the overwhelming good news, are now rising to the surface: the surge of borrowing by heavily indebted companies, the huge weight of US student loan debt and the impact of rising interest rates on home buying.

Meanwhile, Europe faces political and economic upheaval and Japan remains in a long-term funk.

The central danger to the global outlook is the US trade conflict with China, due to the potential to spillover to the rest of the world.

The dispute threatens to derail, halt or shift hundreds of billions of dollars in global trade but Trump also is threatening tariffs on auto imports.

Steep US tariffs on steel and aluminum already have hit the bottom line of American manufacturers.

The IMF warns a continued escalation of the tariff threats could cut 0.8 percentage points off global growth.

"It's vitally important, because trade is a major engine for growth," IMF Managing Director Christine Lagarde said in a recent television appearance.

While many officials and executives agree with the Trump administration's complaints about China's trade policies -- notably forced technology transfer -- they worry about his aggressive strategy.

And businesses, farmers and ranchers already are feeling the pain.

"Our concern is the cure is worse than the disease," Jake Colvin, a vice president of the National Foreign Trade Council, told AFP. "Tariffs are already having a negative effect on the real economy."

And the shape of any deal Washington and Beijing could agree on is unclear.