Trade tensions will trim global growth, says International Monetary Fund

US / China trade war and Brexit threaten global growth says IMF

The ongoing trade war between the US and China could start having material effects on the economies of both countries within the coming years, according to new projections from the International Monetary Fund (IMF).

The fund downgraded its forecast for U.S. growth next year to 2.5 per cent, down 0.2 percentage point from July, after factoring in the impact of tariffs imposed by the Trump administration and retaliatory duties by other nations.

-China tariff war's impact to be felt next year, the Fund cut its 2019 US growth forecast to 2.5 percent from 2.7 percent previously, while it cut China's 2019 growth forecast to 6.2 percent from 6.4 percent.

The Breton Woods institution, which said this at the Annual General Meetings of the IMF/World Bank now going in Bali, Indonesia, also revised downwards growth prospects for Nigeria in 2018 from 2.1 per cent to 1.9 per cent.

The IMF's baseline forecast for the global economy is 3.7% growth in 2018, 2019 and 2020.

U.S. growth this year remained steady at 2.9 percent but is set to slow in 2019 as the effect of Trump's sweeping tax cuts wear off and the trade dispute with China begins to set in. And, as with the USA, the International Monetary Fund left its estimates for China's growth for 2018 unchanged at 6.6%.

Among emerging market and developing economies, the growth prospects of many energy exporters have been lifted by higher oil prices, but growth was revised down for Argentina, Brazil, Iran, and Turkey.

The IMF on Tuesday cut its global growth forecasts due to an escalating U.S.

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It sees the unemployment rate dropping to 3.9 percent in 2018 and to 3.5 percent in 2019.

IMF's forecasts for Hong Kong's economic outlook are mixed: it raises its forecast for 2018 by 0.2 percentage points to 3.8%, while cutting its forecast for 2019 by 0.3 percentage points to 2.9%. So, while debt-related risks in China are large, there are also buffers.

Asad Umar will meet International Monetary Fund officials on the sidelines of the meeting, where he will discuss the challenges confronting the Pakistani economy and the proposed International Monetary Fund loan programme.

The IMF chief met with Pakistani officials later Thursday and said afterwards that a team would visit Islamabad for talks on a possible bailout of its shaky economy. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies", said Obstfeld.

Growth of less than five percent would be unprecedented for China since it began its economic reforms in the 1970s, and complicate its efforts to move towards a more balanced economy with a greater role for services.

It noted that in South Africa, inflation had moderated to 4.8 per cent from 5.3 per cent in 2017, with the easing of drought conditions, "but is expected to edge back to 5.3 per cent in 2019 as temporary disinflationary effects subside".

Trump has repeatedly touted Wall Street record highs as proof of the success of his policies and confrontational trade strategy, and frequently criticises the Fed for gradually raising interest rates, which could squeeze the brakes on equity markets.

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