''* GLOBAL TRADE WAR * ''

SINTRA : A developing trade war between the world biggest economies is weighing on business confidence and could force central banks to downgrade their outlook, the world's most powerful policymakers argued on Wednesday.

After imposing punitive tariffs on a number of its  top trading partners, the United States earlier this week threatened China with further duties on $200 billion, escalating a conflict that has already drawn retaliatory steps from nearly all corners of the world.

Sitting side by side in Portuguese hill-top town, the heads of the US Federal reserve, the European Central Bank, the  Bank of Japan and the Reserve Bank of Australia all took a gloomy view on the escalating conflict, arguing that the consequences are already evident.

''Changes in trade policy could cause us to have to have to question the outlook,'' Fed Chair Jerome Powell said in some of his strongest remarks yet on the u=issue.

''For the first time we hearing  [from business leaders]  about decision to postpone investment, postpone hiring, postpone making decisions,'' he said.

The US could be a victim of its own policies, Deutsche Bank's analysts argued, predicting a hit to growth and corporate earnings.

''Our analysis indicates that such a further escalation of the trade dispute to include  $200 billion of imports could reduce real GDP growth by roughly  -0.2 to -0.3  percentage points,'' Deutsche said, adding that this could reduce S&P 500 earnings growth by 1 to 1.5 percent.

Such a trade war would come at an especially sensitive time for central banks, as they try to move past crisis era unconventional measures and build policy buffers for any potential downturn at the end of the current business cycle.

Appointed by  US President Donald Trump late last year, Powell took charge of the Fed in February, just as the trade dispute with China was beginning to  intensify.

While not directly criticizing the administration, the comments to a European Conference indicate that the  Fed  is already contemplating how to shape its own policy amid rising global tensions that could curtail economic expansion now in its 10th year. {Reuters}.