WASHINGTON — The International Monetary Fund said on Thursday that tariffs imposed or threatened by the United States and China could reduce global economic output by 0.8 percent in 2020, and lead to more losses for years after that.
IMF spokesman Gerry Rice told a regular press briefing that rising geopolitical and trade tensions are weighing on the global economy.
“What I can say today and what we’ve said recently is that the pace of global economic activity remains subdued,” said Rice. “And indeed, that the rising trade and geopolitical tensions, of course, have increased uncertainty taking a toll on business confidence, investment and global trade.”
In a July report, IMF lowered its global growth forecast from 3.3 percent down to 3.2 percent for this year based on the rising trade and geopolitical tensions between the United States and China. IMF will release its new economic outlook at its annual meetings with the World Bank from October 14-20.
These tensions “are not only a threat but are actually now beginning to weigh down the dynamism in the global economy,” Rice said. “The U.S.-China tariffs, including those implemented and announced, could potentially reduce the level of global GDP by 0.8 percent in 2020 with additional losses in future years.”
U.S. Treasury Secretary Steven Mnuchin downplayed the new IMF forecast, saying he did not expect the tariffs to have “that big an impact,” Reuters reported.
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More organizations concerned
In June, the Bank for International Settlements issued its annual report, warning that governments must reduce trade tensions and rely on more than stimulus from central banks to avoid threats to the global economy.
Despite some apparent progress between the United States and China towards possibly resolving their trade differences, the global bank for central banks said U.S. Federal Reserve and European Central Bank stimulus measures through bond-buying or interest rate cuts are not enough of a balm.
“Monetary policy can no longer be the main engine of economic growth, and other policy drivers need to kick in to ensure the global economy achieves sustainable momentum,” the Basel, Switzerland-based BIS said in its annual economic report.
At the Group of 20 summit in Osaka, Japan, U.S. President Donald Trump met on the sidelines with China’s President Xi Jinping to discuss ways of ending their trade war. Trump has imposed new tariffs, however, seeking to lower China’s trade surplus while angling for a new trade deal.
To keep the global economy on track, BIS urged governments to adopt pro-growth measures such as reducing bureaucracy for businesses and greater spending for infrastructure.