World Economic Outlook reveals global impact of US-China trade war

World Today

Workers pass by a banner of International Monetary Fund-World Bank annual meetings at a conference room in Bali, Indonesia, Monday, Oct. 8, 2018. (AP Photo/Firdia Lisnawati)

Trade tensions between Washington and Beijing, along with energy prices, are fueling an economic slowdown.

CGTN’s Chuck Tinte reports on the World Economic Outlook released by the International Monetary Fund.

Trade hostilities are taking their toll on global growth, and IMF has the numbers to back that up.

According to its updated World Economic Outlook, the global economy is predicted to grow at 3.7-percent in both 2018 and 2019. This is down from its July forecast of 3.9-percent for both years.

“We have always said at the IMF that trade war, trade tariffs are not helpful globally, and likely to have negative consequences on growth,” IMF Managing Director Christine Lagarde said.

The IMF said the downgrade reflects a confluence of factors:

  • The ongoing China-U.S. trade war
  • Weaker performances by euro-zone countries Britain and Japan
  • Rising interest rates that are pressuring emerging markets with capital flows (specifically Argentina, Brazil, Turkey, Mexico and Indonesia)

“Whenever the dollar gets stronger and U.S. interest rates rise, financial conditions tighten for emerging markets,” IMF Chief Economist Maurice Obstfeld said. “This is something that happens every once in a while. It’s therefore important for emerging markets to have strong policy frameworks which can help them deal with these pressures. One line of defense is a very flexible exchange rate, which can help buffer shocks.”

The organization also revised down China’s outlook for next year, forecasting only 6.2-percent growth in 2019 against its earlier 6.4-percent prediction. However, the IMF did stick to its projection of 6.6-percent growth for China for this year.

The U.S. economy has so far been shielded from the ill effects of the trade war, thanks to stimulus through tax cuts and spending policies. However, the IMF said that will wear off by 2020.

“We very much hope that reason will prevail, and that all players will come to the table, and will agree to improve the rules by which trade happens,” Lagarde said.

The IMF added if Beijing and Washington were to resolve their trade differences, it “would be a significant upside to the forecast.”

Brai Odion-Esene explains what the World Economic Outlook says about global growth

CGTN’s Asieh Namdar spoke about the International Monetary Fund’s outlook with Brai Odion-Esene. He’s the founder of SW4 Insights, a public policy advisory firm.