Worsening trade tensions and exchange of tariffs could cause "significant economic cost" to the global economy, an International Monetary Fund spokesman warned Thursday. The global lender is still assessing the impact of the duties imposed so far but the economic costs "will quickly add up," IMF spokesman Gerry Rice told reporters.
The United States is due to impose punitive tariffs on $200 billion in Chinese goods on Monday, bringing the total to $250 billion, on top of separate duties on steel and aluminum from around the globe. China has retaliated on $110 billion in US goods, the majority of all its imports from the United States. Rice said that "depending on specifics and how they play out, the imposition of tariffs could come at a significant economic cost."
The fund is due to release its latest World Economic Outlook on October 9, which will provide revised growth estimates that will incorporate the impact of the trade conflict so far. Rice noted that the impact on China would depend on how Beijing adjusted domestic policies "to dampen the negative growth effects" and compensate for the hit to its exports.
But the tariffs are expected to dent US growth as well, he said. The IMF in July forecast US growth of 2.9 percent this year and 2.7 percent in 2019, while China is seen as moderating to 6.6 percent and 6.4 percent this year and next. "Should the escalation go further the economic costs for both countries and around the world will quickly add up," Rice said.
US President Donald Trump has trumpeted - and taken credit for - the solid US economic growth figures, and dismissed the risk of trade conflict causing a slowdown. The IMF is watching the impact closely, especially for emerging markets that also are facing financial challenges as US interest rates are rising. "There are no winners in global trade war and it's critical to continue to look for agreed solutions."