IMF: The US trade war could cost the global economy $430 billion

  • The global economy could lose $US430 billion – or 0.5% of GDP – by 2020 if Trump’s tariffs against China continue to escalate, the International Monetary Fund warned.
  • The US could be the “focus of global retaliation” and would be especially vulnerable if Trump sanctioned a fresh $US200 billion in tariffs.
  • The comments were in the IMF’s World Economic Outlook report on Monday, which showed continuing strong global growth but greater risks.

The global economy could lose $US430 billion by 2020 if the current Sino-US trade war escalates and President Donald Trump’s new tariff threats are carried out, the International Monetary Fund has warned.

The Washington-based IMF said on Monday that the US could be the “focus of global retaliation” to Trump’s trade war and said the country is “especially vulnerable” to repercussions from an increase in tariffs.

“Our modelling suggests that if current trade policy threats are realised and business confidence falls as a result, global output could be about 0.5 per cent below current projections by 2020,” the IMF said.

“As the focus of global retaliation, the United States finds a relatively high share of its exports taxed in global markets in such a broader trade conflict, and it is therefore especially vulnerable.”

The comments were part of the IMF’s latest World Economic Outlook report, which was released on Monday. It urged countries not to look “inward” and to end the trade tensions which continue to dampen growth.

Trade tensions have remained high as President Trump has renewed threats of 10% tariffs on $US200 billion of Chinese exports, while calling Europe one of his “greatest foes” on Sunday. At the EU-China summit on Monday, EU Council President Donald Tusk called for the US and China to “prevent global Chaos” and leave the global order intact.

Despite its trade war warning, the IMF said in Monday’s report that global growth remains strong.

But the IMF said larger risks have emerged that have “clouded” the outlook for the global economy. The IMF’s global growth forecast of 3.9% remained unchanged for this year and next. Beyond that, growth in the UK, Europe, and Japan is predicted to slow, while Asian and US growth is forecast to remain relatively strong.

Maurice Obstfeld, director of research at the IMF, also warned about the cost of economic inequality, adding that many of the risks the world faces today have their roots in non-inclusive economic growth and political “malaise.”

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