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18th of October 2018

Economy



Trade war WARNING: Global economy would take 'SIGNIFICANT hit' if tensions escalate

The IMF slashed its global growth predictions this week, and is now forecasting 3.7 percent global growth in both 2018 and 2019.

This is down from its July forecast of 3.9 percent growth for both years.

It had warned how the US and China was making the world a “poorer and more dangerous place” as the nations remain locked in a tit-for-tat trade conflict, slapping strings of tariffs on each other.

Speaking today at the IMF and World Bank annual meetings in Bali, Indonesia, Ms Lagarde said: ”The real question is: Is the economy strong enough?

“To that, my answer is 'probably not enough' because we clearly see growth has plateaued three years in a row — it is at 3.7 percent — and we also see that growth is unevenly allocated around the world.

She added: ”Moreover, some of the risks that we have highlighted at our spring meetings in April have now begun to materialise, especially from the rising trade barriers.

“If these tensions were to escalate, the global economy would take a significant hit.”

Ms Lagarde went on to suggest that countries who engage in trade and currency wars that hurt global growth would imperil "innocent bystanders”.

She said: ”We certainly hope we don't move in either direction of a trade war or a currency war.

“It will be detrimental on both accounts for all participants.”

US President Donald Trump imposed a 10 percent tariff on $200 billion (£153 billion) worth of Chinese goods in September, which would increase to 25 percent by the end of 2018.

The US simultaneously threatened to add tariffs to a further $267 billion (£205 billion) of products.

This saw China retaliate with 10 percent tariffs on $60 billion (£46 billion) of US imports.

The tariffs stem from the Trump administration's demands that China make sweeping changes to its intellectual property practices.

The US also wants Beijing to rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a $375 billion (£283 billion) US goods trade surplus.

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