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IMF’s Lagarde warns of worse trade hit to global economy
WASHINGTON, Nov 29, 2018 (BSS/AFP) – The impact of escalating trade
tensions on global growth are worse than feared just one month ago, and
threatened US auto tariffs could cut a large chunk out of the world economy,
the IMF said Wednesday.
Just last month, the International Monetary Fund warned of the dangers of
the trade frictions — notably between the United States and China, which
have exchanged tariffs on hundreds of billions in products.
But IMF chief Christine Lagarde said those headwinds “could have slowed
momentum even more than we had expected.”
In a report for the Group of 20 leaders meeting in Buenos Aires, the IMF
said auto tariffs, if imposed, could cut three fourths of a percent off the
global economy.
Emerging market economies, especially China and the euro area, are already
seeing their economies slow, while a “no-deal Brexit could further dent
confidence,” Lagarde said in a blog post that accompanied the report.
The report said trade and Brexit risks “remain acute,” and the uncertainty
itself creates difficulties for companies by tightening credit conditions.
Investment would be reduced further if President Donald Trump follows
through on his threat to impose steep tariffs on auto imports from all
countries except Canada and Mexico, which would result in retaliation from
trading partners on US exports.
An IMF calculation “suggests that the resulting short-term losses could
lower global GDP by about 3/4 percent.”
Trump has threatened to impose tariffs on autos as part of his aggressive
trade strategy focused on preserving US jobs. He also has hit half of US
imports from China with steep punitive tariffs, which has drawn retaliation
from Beijing.
But he is due to meet in Buenos Aires with Chinese leader Xi Jinping, and
a White House official said Tuesday that Trump sees a “good possibility” for
a deal to defuse the trade frictions.
Lagarde warned the G20 gathering in Argentina that “the global economy
faces a critical juncture.”
“We have had a good stretch of solid growth by historical standards, but
now we are facing a period where significant risks are materializing and
darker clouds are looming.”
She again stressed that “rising trade barriers are ultimately self-
defeating for all involved. Thus, it is imperative that all countries steer
clear of new trade barriers, while reversing recent tariffs.”
BSS/AFP/HR/1010