Rising trade tensions between the United States and the rest of the world could cost the global economy $430bn (£324bn), with America “especially vulnerable” to an escalating tariff war, the International Monetary Fund has warned.
Delivering a sharp rebuke for Donald Trump, the Washington-based organisation said the current threats made by the US and its trading partners risked lowering global growth by as much as 0.5% by 2020, or about $430bn in lost GDP worldwide.
Although all economies would suffer from further escalation, the US would find itself “as the focus of global retaliation” with a relatively higher share of its exports taxed in global markets. “It is therefore especially vulnerable,” the fund said.
Issuing its latest World Economic Outlook report on Monday amid the rising tensions, the IMF said there were greater risks emerging for the global economy since its last assessment in the spring. Although world growth remains strong, the expansion is “becoming less even, and risks to the outlook are mounting”, it said.
Beyond the immediate threat from weaker levels of international trade, the IMF said greater use of protectionist measures could hinder business investment, disrupt global supply chains, slow the spread of productivity-boosting technologies and raise the price of consumer goods.
Despite highlighting greater risks for the world economy, the fund left its global growth forecast of 3.9% for both this year and next unchanged. However, it unveiled sharp slowdowns for the EU, UK and Japan amid weaker growth and increasing political tension.
Growth in the UK this year is forecast to slow to 1.4%, compared with an estimate of 1.6% made in April, as a consequence of weaker economic growth in the first quarter of 2018. The British economy ground to a halt in March amid freezing weather and heavy snowfall, although has since staged a modest rebound.
Germany, France and Italy were among European nations receiving the sharpest downgrades for growth this year, of as much as 0.3% compared with forecasts made in April, amid rising political risks in the single currency area triggered by the Italian election earlier this year. Growth across the eurozone this year is forecast to slow to 2.2%, compared with an earlier forecast for an expansion of 2.4%.
The IMF said China would continue to grow at the slower rates it forecast back in April, of about 6.6% this year. While the US faces greater risks from trade, the fund said Trump’s tax cuts would also mean the American economy continuing to grow in line with its previous estimates, of around 2.4% this year.
The Japanese economy is forecast to cool to 1%, marking the slowest growth rate among advanced nations – a downgrade of 0.2% – following weak private consumption and investment in the first quarter of the year.
Reference: The Guardian
Read more: https://www.theguardian.
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