International Monetary Fund (IMF) warns of $440bn risk to global growth from Trump’s trade war | City A.M.
A global trade war kicked off by the US has the potential to deal a $440bn (£330bn) blow to the global economy, according to a stark warning to US President Donald Trump from the International Monetary Fund (IMF).
The influential body today predicted global growth will come in at 3.9 per cent in 2018 and 2019, but warned that an escalation in international trade disputes could knock 0.5 per cent off growth projections by 2020 – equivalent to around $440bn in lost growth worldwide per year.
A trade war is the “greatest near-term threat to global growth”, said Maury Obstfeld, the director of the IMF’s research department, with the US “especially vulnerable” to tariffs on exports levied in retaliation.
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Trump’s White House has embarked on a series of tariffs which it hopes will help to reduce the trade deficits it runs with nations such as China and Germany in a bid to boost domestic industry. However, economists have been almost unanimous in their warnings that tariffs will harm growth in the US, taking a toll on job numbers and wealth.
The IMF also revised down its UK growth projection for 2018 to reflect the weakness seen in the first quarter, when the economy grew by only 0.2 per cent. UK GDP will expand by 1.4 this year and 1.5 per cent next year, the forecasts show.
The Brexit process, which remains “unsettled despite months of negotiation”, is one of the key risks to the outlook which has become “more prominent” since the last update, in April, the IMF said.
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Financial markets are “broadly complacent” about the threats to growth, Obstfeld said, with assets still richly valued and debt costs remaining low.
He said: “Asset prices are no doubt buoyed, not only by easy financial conditions, but by the generally still satisfactory global growth picture. They therefore are susceptible to sudden re-pricing if growth and expected corporate profits stall.”
Obstfeld blamed “non-inclusive growth and structural transformation” for the “political malaise” represented by Trump’s protectionism, saying that “the political future will only darken” if policies do not address issues of equity.
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