IMF: A major trade rift could imperil solid global 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 lending agency has kept its forecast for worldwide growth this year at 3.9 per cent, 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 the IMF had run economic simulations about the impact of a far-reaching trade war that would include across-the-board tariffs of 10 per cent. The computer simulations, he said, showed a “fairly substantial” impact from tariffs of that magnitude.
Global financial markets would likely 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.