IMF estimates US-China trade war to shave 0.8 percent from global economy

The U.S.-China trade war will cut into the global economy by 0.8 percent by the end of 2020, according to a new report by the International Monetary Fund (IMF).

In the forward to the IMF’s latest World Economic Outlook report released Tuesday, IMF economic counsellor Gita Gopinath cited global trade as one of the main reasons for the lowest growth estimates in a decade.

{mosads}”A notable feature of the sluggish growth in 2019 is the sharp and geographically broad-based slowdown in manufacturing and global trade,” she wrote.

Growth for 2019 is expected to top out at 3 percent, down 0.3 points from what was expected in an April report, and the lowest level since the global financial crisis in 2008 and 2009. Next year, it is expected to pick up to 3.4 percent, a 0.2-point revision down since April.

President Trump’s trade war with China has led to the imposition of tariffs on some $360 billion of Chinese imports to the U.S., and more are scheduled to take hold in December. China has retaliated with tariffs on nearly all U.S. exports to China, with a special focus on agricultural products.

Hopes for de-escalating the trade war rose last week when Trump and Chinese Vice Premier Liu He announced an agreement on an initial partial trade deal. But the deal has yet to be finalized and addressed a very limited set of issues.

Whether Trump can work out a more comprehensive deal that would scale back the tariffs remains an open question, as does the possibility of new tariffs taking hold in December.