IMF: A major trade rift could imperil solid global economy

Trump’s ill-advised decision to unilaterally impose trade tariffs on certain countries he deems are “treating us unfairly” will simply invite retaliation.

China has already announced it own imposition of trade tariffs back at the U.S., a tit-for-tat that shows signs of escalating exponentially.

This could be the start of a far-reaching trade war with, the IMF warns, negative outcomes for the global economy.

From AP News:

The International Monetary Fund warned Tuesday that rising trade tensions between the United States and China risk undermining a global economy that the IMF believes should otherwise grow solidly this year.

The IMF predicted Tuesday that the U.S. economy will grow 2.9 percent this year, up from the 2.7 percent it had forecast in January and from the 2.3 percent growth the economy achieved last year. The U.S. economy will benefit through 2020 from tax cuts that President Donald Trump signed into law in December, the IMF predicts.

The lending agency has kept its forecast for worldwide growth this year at 3.9 percent, which would be its fastest pace since 2011. But the IMF’s chief economist, Maurice Obstfeld, told reporters that this bright outlook could be derailed by a major trade conflict.

Speaking at a news conference, Obstfeld said that the IMF had run economic simulations about the impact of a far-reaching trade war that would include across-the-board tariffs of 10 percent. The computer simulations, he said, showed a “fairly substantial” impact from tariffs of that magnitude.

Global financial markets could also endure damage from rising threats of tariffs, Obstfeld said. Investors have already endured stomach-churning swings this year as markets have wildly in response to the perceived likelihood of a trade conflict, especially resulting from actions and statements by the Trump administration.

Obstfeld said that while the IMF didn’t take account of rising trade tensions in its baseline economic forecasts, the consequences could be serious enough to trigger an economic downturn.

“If you keep poking at the economic expansion, it could turn around and bite you,” Obstfeld said.

There aren’t “going to be any winners coming out of a trade war.”

Read the whole thing …

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