IMF downgrades outlook for U.S., China as result of trade war

By Nicholas Sakelaris
An American flag flies on a vessel docked Monday in Ashdod Port, Israel. Photo by Debbie Hill/UPI
An American flag flies on a vessel docked Monday in Ashdod Port, Israel. Photo by Debbie Hill/UPI | License Photo

Oct. 9 (UPI) -- The unresolved trade conflict between the United States and China could lead to a prolonged impact on both nations, a study Tuesday by the International Monetary Fund said.

As Washington and Beijing trade tariffs, economic growth is slowing for both countries and others. The Trump administration has penalized nearly half of all imports from China and has threatened more for the other half. Beijing has answered with taxes on $110 billion worth of U.S. exports.


Analysts and other fiscal bodies have already warned of the trade war's impact. Tuesday, the IMF agreed in its updated world economic outlook.

"If you have the world's two largest economies at odds, that is a situation in which everyone, everyone is going to suffer," IMF chief economist Maurice Obstfeld said Tuesday.

Obstfeld spoke at the World Economic Outlook press conference in Indonesia, where the global body focused on the growth of the Asian economy. Overall, global growth will remain steady -- about 3.7 percent this year -- and exceed that of 2012-2016. That's a significant downgrade from the IMF's assessment in April, when it projected a 3.9 percent growth rate.


Trump has led the escalating trade war because of what he believes are bad policies he said have created an $800 billion U.S. trade deficit.

"Those days are over. We will no longer tolerate such abuse," Trump told the United Nations General Assembly last month. "We will not allow our workers to be victimized, our companies to be cheated and our wealth to be plundered and transferred."

The trade deficit has gone up 8.6 percent this year to $31 billion.

The IMF said Tuesday it projects continued growth in the United States, but at a slower pace next year. The U.S. economy is expected to grow 2.5 percent in 2019.

In addition to the revised outlook for the rest of this year, the IMF has downgraded expectations for China in 2019 -- from 6.6 percent to 6.2 percent.

"The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, which anecdotal evidence accumulates on the resulting harm to companies," Obstfeld said.

In addition to the trade barriers, the IMF said higher interest rates are also contributing to slowed economic growth.

If the United States and China are able to resolve the trade dispute, the global outlook would go up nearly 1 percentage point, the fiscal body said


"The possibility that China and U.S. resolve their disagreements would be a significant upside to the forecast," Obstfeld said.

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