US-China trade war caused ‘self-inflicted’ damage to the global economy, says IMF after third 2019 forecast cut

International Monetary Fund (IMF) reduced its 2019 world growth forecast down to 3.2 per cent, 0.1 percentage point below its previous outlook released in January

Trade tensions between Beijing and Washington have continued for over a year despite the latest truce agreed by Donald Trump and Xi Jinping at the G20 summit

3-MIN READ3-MIN

China, the world’s second largest economy, has been the target of increased tariffs by US President Donald Trump for over a year, with US$250 billion Chinese goods now covered by 25 per cent levies. Photo: AFP

Published: 9:00pm, 23 Jul 2019Updated: 5:35pm, 24 Jul 2019

China’s trade war with the United States has caused “self-inflicted” damage that has already made global growth “sluggish and precarious” and could create further financial vulnerabilities by depressing both consumer and business sentiment, the International Monetary Fund has warned.

The Washington-based organisation revised its 2019 global growth forecast down to 3.2 per cent, 0.1 percentage points below its previous outlook released in January, and the third cut in its forecast for this year. In April, the International Monetary Fund (IMF) reduced its forecast by 0.2 percentage points, the same cut seen in January.

Global growth will improve to 3.5 per cent in 2020, according to the IMF, but it warned that the forecast was “precarious, presuming stabilisation in currently stressed emerging markets and developing economies and progress towards resolving trade policy differences.”

The IMF also cut China’s projection for 2019 by 0.1 percentage point to 6.2 per cent, slowing further to 6.0 per cent next year. China’s gross domestic product (GDP) growth rate slowed to a record-low 6.2 per cent in the second quarter of 2019, but still within the 6 to 6.5 per cent range set by the government.

China, the world’s second largest economy, has been the target of increased tariffs by US President Donald Trump for over a year, with US$250 billion Chinese goods now covered by 25 per cent levies.