Stocks could tumble 40 per cent in global trade war, says JPMorgan boss

Analysts are concerned that a tit-for-tat exchange between the world's largest trading nations could escalate and derail buoyant global growth. Picture / AP

Stock markets could suffer a "deep correction" and plummet as much as 40 per cent in the next three years, JPMorgan co-president Daniel Pinto has warned amid concerns that Donald Trump's attacks on international trade could rattle markets.

He predicted that markets will begin to fret over future growth if Trump widens his trade tariffs to other goods.

The size of the correction would depend on how frothy stock valuations are when markets plunged, and could see equity markets fall by between 20 per cent-40 per cent, Pinto said in an interview on Bloomberg Television.

The US president has announced a 25 per cent tariff on steel imports and 10 per cent on aluminium to protect domestic industry but major trading partners, including the EU and China, have vowed to retaliate to the measures.

Analysts are concerned that a tit-for-tat exchange between the world's largest trading nations could escalate and derail buoyant global growth.

"We are probably two to three years until the end of the [economic] cycle and markets are going to be nervous about anything that relates to inflation and growth," he warned.

Pinto picked inflation, geopolitics and high valuations as possible triggers for a collapse in share prices.

The major Dow Jones and S&P 500 indices on Wall Street plunged into correction territory last month after markets were rocked by wage growth jumping well ahead of economists' expectations in the US, indicating that the Federal Reserve will have to accelerate the pace of its interest rates rises to rein in resurgent inflation.

Markets will be on edge for the latest set of wage growth figures from the US due today (Friday) after CPI also beat forecasts.