Trade war could wipe $455 billion off global GDP next year, IMF warns
6 Jun 2019 | Economic News
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U.S.-China tariffs, that have been both implemented and proposed, could cut global economic output by 0.5% in 2020, the International Monetary Fund (IMF) warned Wednesday.
Christine Lagarde, the IMF’s managing director, said in a briefing note for G-20 finance ministers and central bank governors that taxing all trade between the world’s two largest economies would cause some $455 billion in gross domestic product to evaporate. This would be a loss larger than South Africa’s economy, it said.
“There are growing concerns over the impact of the current trade tensions. The risk is that the most recent U.S.-China tariffs could further reduce investment, productivity, and growth. The just proposed U.S. tariffs on Mexico are also of concern,” Lagarde said in the blogpost.
“Indeed, there is strong evidence that the United States, China, and the world economy are the losers from the current trade tensions,” she added.
Lagarde on Wednesday called them “self-inflicted wounds” that must be avoided “by removing the recently implemented trade barriers and by avoiding further barriers in whatever form.”
Signs of stabilizing growth
The estimates came as the IMF also gave a rare piece of good news for the world economy, suggesting that there were early signs that growth may have “firmed up” with central banks reversing their strategies.
“Going forward, the current forecast is for global growth to increase slightly from 3.3% this year to 3.6% in 2020,” the research update said.
Downside risks
However, the expected recovery came with downside risks. It said trade tensions could persist or further escalate, Brexit may end up being disorderly and China’s recent stimulus measures could delay any move to a more sustainable growth pattern in the world’s second-largest economy.
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