IMF warns US-China trade war will ‘jeopardize’ 2019 global growth
The International Monetary Fund (IMF) has warned that an escalating trade war between the US and China, the world’s two largest economies, will “jeopardize” global growth this year, weakening confidence and pushing up prices for consumers.
“Consumers in the US and China are unequivocally the losers from trade tensions,” said Gita Gopinath, the IMF chief economist, in a statement on Thursday.
US President Donald Trump initiated what is effectively a trade war with China last year, when he first imposed unusually heavy tariffs on imports from the country. Since then, the two sides have exchanged tariffs on more than $360 billion in two-way trade.
Washington and Beijing have already held talks to settle the issues, but all to no avail so far. Their latest round of trade negotiations ended earlier this month without reaching a deal to end their months-long trade dispute.
The two sides have yet to set a date to resume trade talks, with the US president announcing an increase of tariffs from 10 percent to 25 percent on $200 billion worth of Chinese imports and Beijing hiking its own tariffs on $60 billion worth of American products.
China strongly opposes US tariff hikes, saying they are harmful not only to China and the US, but to the whole world.
Washington, for its part, says a primary goal of the aggressive tariff strategy is to decrease the trade imbalance with China, which totaled $379 billion in 2018.
Elsewhere in the statement, Gopinath said the economic damage would be even worse if the American president went through with the threat to levy steep tariffs on all products imported from China, as that “will subtract about one-third of a percentage point of global GDP in the short term.”
“While the impact on global growth is relatively modest at this time, the latest escalation could significantly dent business and financial market sentiment, disrupt global supply chains and jeopardize the projected recovery in global growth in 2019,” Gopinath warned, calling this year “a delicate year for the global economy.”
Trump has urged China to either sign a trade deal now or it will be forced to sign a far worse agreement in future. However, China says it won’t make concessions on issues of principle.
The US - a very consumer-reliant economy - imports hundreds of billions of dollars worth of goods from China, on which Washington has imposed tariffs. Many Americans complain of lost export markets, disrupted supply chains and higher costs.
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