The US economy is growing at a steady pace, but there are potential threats that could affect it, according to the University of California Los Angeles Anderson Forecast second-quarter report for 2018.

Those threats include a trade war with US trading partners; uncertainties in Italian politics and their potential impact on the Eurozone; the potential withdrawal from NAFTA; and the likely victory of Andres Manuel Lopez Obredor in the July Mexican presidential elections.

Trade war was the biggest risk.

“A trade war implies higher tariffs and nontariff barriers that work as a tax on the American people that would raise prices and restrict output,” UCLA Anderson Forecast Senior Economist David Shulman wrote. “That is hardly the recipe for economic growth.”

The report expects US real gross domestic product to reach 3% for the balance of the year, but it will dip 2% in 2019 and 1% in 2020.

In addition, the report noted that the current strong job growth, which averaged 200,000 per month last year, is not sustainable in a full-employment economy. It expects job growth to average 133,000 per month for the rest of this year and decline to 85,000 per month in 2019 and 60,000 per month in 2020.

Also, the US unemployment rate is expected to drop to 3.4% next year but rise to 3.8% by the end of 2020.

The US trade deficit could increase to $814 billion in 2020 from $622 billion in 2017 as the US consumes more than it produces and must borrow to fund an increasing federal budget deficit.