IMF warns world to avoid global trade war

Image source, Reuters

  • Author, Faisal Islam
  • Role, Economics editor

The world economy could contract by the size of the combined French and German economies, if there is a broad-based trade war between the world鈥檚 major economies, the International Monetary Fund (IMF) has told the 成人快手.

It comes as concerns are heightened ahead of the possible re-election of Donald Trump.

Trump says he plans to introduce a universal tax or tariff of up to 20% on all imports into the US, while the European Union is already planning retaliation if Washington goes ahead with the new levy.

Last week, Trump said 鈥渢ariff is the most beautiful word in the dictionary鈥, and global markets and finance ministers are now beginning to take seriously the prospect of him enacting the ideas.

IMF first deputy managing director Gita Gopinath said the Fund could not yet assess the specifics of Trump's trade plans, but thinks that 鈥渋f you have some very serious decoupling and broad scale use of tariffs, you could end up with a loss to world GDP of close to 7%".

"These are very large numbers, 7% is basically losing the French and German economies. That's the size of the loss that would be," she continued.

Ms Gopinath also said tariffs worth hundreds of billions of dollars 鈥渋s very different from the world we鈥檝e lived in over the past two of three decades鈥.

The IMF鈥檚 deputy chief said another of the Fund鈥檚 main messages at its Annual Meetings was to warn on ballooning levels of global government debt.

She said the current period of steady economic growth was a 鈥渕oment to rebuild your fiscal buffers鈥 as 鈥渢his will not be the last crisis. There will be additional shocks. You will need the fiscal space to respond. And now is the time to do it鈥.

Ms Gopinath said it was also necessary to 鈥渓ook at the bright side鈥 with a resilient world economy after 鈥渟ome very tough knocks鈥.

She suggested the world economy had seen a soft landing from the multiple crises.

鈥淧ast experiences with bringing down inflation have not been with a soft landing. It was a big, big increases in unemployment. So that was a big hit, and it has turned out to be much better than many feared鈥, she said.

Ms Gopinath added that it was a 鈥済ood win鈥 for central banks everywhere that inflation has come down without high unemployment. But that now was the time to rebuild resilience in a fragile world.