The Register Citizen (Torrington, CT)
IMF: Global trade rift could imperil economy
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 IMF predicted Tuesday 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 President Donald Trump signed into law in December, the IMF predicts.
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.
Speaking at a news conference, Obstfeld said that the IMF had run economic simulations about the impact of a far-reaching trade war that would include across-the-board tariffs of 10 percent. The computer simulations, he said, showed a “fairly substantial” impact from tariffs of that magnitude.
Global financial markets could also endure damage from rising threats of tariffs, Obstfeld said. Investors have already endured stomach-churning swings this year as markets have wildly in response 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 take account of rising trade tensions in its baseline economic forecasts, the consequences could be serious enough to trigger an economic downturn.
There aren't “going to be any winners coming out of a trade war.”
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 Donald 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 — a highly valuable export for America's farm belt — 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.