America’s biggest and most iconic companies will be the ones to suffer if the U.S. plows ahead with trade tariffs on China, renowned economist Jim O’Neill told CNBC on Tuesday.

“I often say to people that America’s most iconic modern company, Apple, has for three years sold more iPhones to Greater China than it has to the U.S. So ultimately, if the U.S. genuinely takes this kind of belligerent stance, it’s going to be the U.S.’ best-growing companies that will suffer,” O’Neill, the chair of think tank Chatham House, told CNBC’s “Street Signs.”

He added that China and the U.S. had been the force behind the majority of global economic growth in recent years, with more and more of that growth being thanks to the Chinese consumer.

“Since the start of the decade, 85 percent of all global GDP has come from China and the U.S. and the rest of us hang off it,” O’Neill, a former chairman of Goldman Sachs Asset Management, said. “In the Chinese regard, more and more of that (growth) is coming from the Chinese consumer.”

“There’s this feeling that the U.S. is insulated,” he added. “But the U.S…. is an economy that is dominated by the absolute level of its consumer and for the U.S. to do well the rest of this decade and beyond, it’s got to connect more to the rest of the world.

“So if the U.S. is going to go attacking more and more important places in terms of trade fights, there’s no way that U.S. big multinationals are going to grow.”

O’Neill’s comments came as tensions between the U.S. and China over trade have risen since the start of 2018. Trump challenged the status quo on trade when he said earlier this year that tariffs would be imposed on steel and aluminum imports, prompting a retaliatory response from China, as well as Canada, Mexico and the European Union, who were also targeted by the levies.

Since then, however, China and the U.S. have warned each other that they were ready to implement increasingly grandiose tariffs on a wide range of each others’ imports.

Most recently, on Friday (and typifying the exchanges between Bejing and Washington) China announced a 25 percent tariff on $34 billion of U.S. goods after the U.S. slapped a 25 percent tariff on up to $50 billion of Chinese products.

Then on Monday, Trump requested the United States Trade Representative identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent. The president said the tariffs would go into effect “if China refuses to change its practices.”

On Tuesday, China’s foreign ministry said Trump had initiated a trade war — one that it didn’t want, but one it was not afraid of.

‘Crumbs of hope’

The rhetoric over tariffs have sent global markets reeling, with U.S., Chinese and European bourses all trading lower this week. U.S. stock index futures slumped ahead of Tuesday’s open with Dow futures down 352 points, indicating heavy losses at the open of -341.47 points.

O’Neill said market concerns are justified. “If this is something that has got more legs, the markets are right to be concerned about it,” he said.

For now, the trade tariffs are still threats and O’Neill offered “two crumbs of hope” that tariffs could lead to more economic reform in China and that common sense might prevail in Washington.

“A large part of me thinks that the big Chinese reformers sitting behind President Xi (Jinping) won’t be overly upset with some aspects of this because they want to do further changes — possibly more substantive than the ones that happened ten years ago, when that (financial) shock told them that they couldn’t afford to have over 10 percent of their GDP in exports to the U.S.,” O’Neill said.

“So I suspect that this will result in accelerated genuine domestic reforms in China which are good for the world.

“The second thing I would say is that it’s clear to me that there are some rational people around somewhere in Washington and there will be some point where Trump either backs off because he gets some token gesture that he can sell to his domestic voters or they know that it could end up causing a lot of damage and self-inflict problems — not just for the economy, but for the himself.”