IMF says trade rift could hurt global growth

WASHINGTON — The International Monetary Fund warned Tuesday that rising trade tensions between the United States and China risk undermining a global economy that the IMF believes should otherwise grow solidly this year.

The lending agency has kept its forecast for worldwide growth this year at 3.9 percent, which would be its fastest pace since 2011. But the IMF’s chief economist, Maurice Obstfeld, told reporters that this bright outlook could be derailed by a major trade conflict.

Obstfeld said at a news conference that the IMF had run economic simulations about the impact of a far-reaching trade war that would include acrossthe-board tariffs of 10 percent. The computer simulations, he said, showed a “fairly substantial” impact from such tariffs.

Global financial markets would likely also be hurt by threats of tariffs, Obstfeld said. Investors have already endured stomachchurning swings this year as markets have responded to the perceived likelihood of a trade conflict, especially resulting from actions and statements by the Trump administration.

Obstfeld said that while the IMF didn’t factor in the rising trade tensions in its baseline economic forecasts, the consequences could be serious enough to lead to an economic downturn.

There aren’t “going to be any winners coming out of a trade war,” he said.

The IMF issued the update to its World Economic Outlook on the eve of spring meetings in Washington this week of the 189-nation IMF, the World Bank and the Group of 20 major economies.

In its base forecast, the IMF predicted that trade would grow 5.1 percent this year, which would be the fastest pace since 2011.

President Trump, who campaigned on a pledge to protect U.S. industries from what he argues is unfair foreign competition, has slapped tariffs on steel and aluminum imports. He has also proposed imposing tariffs on $50 billion in Chinese imports to punish Beijing for its aggressive attempts to obtain foreign technology.

China has countered by proposing tariffs on $50 billion in U.S. products, including soybeans and small aircraft. Trump has, in turn, ordered the U.S. trade representative to consider targeting up to an additional $100 billion in Chinese imports.

The prospect of a trade war between the world’s two biggest economies has rattled financial markets for weeks. For now, though, the global outlook remains sunny, thanks to low borrowing rates and increasing trade and investment. The IMF predicted that the U.S. economy will grow 2.9 percent this year, up from the 2.7 percent it had forecast in January and from the 2.3 percent growth the economy achieved last year. The U.S. economy will benefit through 2020 from tax cuts that Trump signed into law in December, the IMF predicts.

The IMF upgraded its forecast for the 19-country eurozone to 2.4 percent, which would be its best showing since 2007. China is projected to grow 6.6 percent this year, down from 6.9 percent in 2017.