Washington: The trade war between the United States and China will drag the global economy down with the gloomiest growth forecast for 2019 and 2020 since the financial crisis, warned the International Monetary Fund on Tuesday.
The IMF added that the outlook could darken considerably if trade tensions remain unresolved.
The IMF said its latest World Economic Outlook projections show 2019 GDP growth at 3.0%, down from 3.2% in a July forecast, primarily because of increasing fallout from global trade friction.
While presenting the Global Economic Outlook, IMF chief economist Gita Gopinath, cited global trade as one of the main reasons for the lowest growth estimates in a decade.
Both China and the US have had their growth forecasts lowered. China will grow 6.1 per cent this year and 5.8 per cent in 2020, well below 6.6 per cent growth in 2018. The US will grow by 2.4 per cent in 2019 and 2.1 per cent in 2020.
The IMF report further sheds light on the economic difficulties caused by the US-China tariffs, including direct costs, market turmoil, reduced investment and lower productivity due to supply chain disruptions.
US President Donald Trump’s trade war with China has led to the imposition of tariffs on $360 billion of Chinese imports to the U.S., and more are scheduled to take hold in December. China has retaliated with tariffs on nearly all U.S. exports to China, with a special focus on agricultural products.
Hopes for de-escalating the trade war rose recently when Trump and Chinese Vice Premier Liu He announced an agreement on an initial partial trade deal. But the deal has yet to be finalized and addressed a very limited set of issues.
If these issues are not dealt with, by 2020, the commercial war between the two will reduce global GDP by 0.8 per cent, according to the IMF’s calculations.
(With agency inputs)