Arthur J. Villasanta – Fourth Estate Contributor
Washington, DC, United States (4E) – The trade war launched by U.S. president Donald Trump against the world will impoverish countries if not immediately resolved, warns the International Monetary Fund (IMF).
The trade war between the U.S. and China risks making the world a “poorer and more dangerous place” said the IMF in its latest World Economic Outlook report. The IMF said a full-blown trade war between the world’s largest and second largest economies will cause a significant dent in the economic recovery from the Great Recession of 2018.
Trump’s trade war is affecting households, businesses and the wider economy. IMF Chief Economist Maurice Obstfeld noted that trade policy reflects politics and politics remain unsettled in several countries, posing further risks.
Because of these negative factors, the IMF lowered its forecast for global growth this year and in 2019. The IMF now estimates the global economy will grow by 3.7 percent this year and next year. The estimate for 2018 is 0.2 percent lower than its previous forecast.
The IMF warned of a permanent hit to growth if the U.S. goes ahead with a threat to impose a 25 percent tariff on all imported cars. These global tariffs will hurt business confidence, investment and borrowing costs.
The fund said risks to the short-term outlook for the world economy had “shifted to the downside.” It explained that its downgrades to global growth also reflect predictions of a slower expansion in the eurozone, as well as turbulence in a number of emerging market economies such as Argentina, Turkey and Venezuela.
The IMF acknowledged its earlier projections about world economic growth now appear to be “over-optimistic.” It noted that risks from “further disruptions in trade policies” have become more prominent.
The U.S. will suffer greatly from the unnecessary trade war it initiated. In this worst case scenario, the U.S. economy will take a significant hit. On the other hand, economic growth in China will drop below five percent in 2019 compared with a current prediction of 6.2 percent.
Obstfeld said the world will become a “poorer and more dangerous place” unless world leaders worked together to raise living standards, improve education and reduce inequality.
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