IMF's Lagarde warns against trade, currency wars, urges fix to global rules

IMF's Lagarde warns against trade, currency wars, urges fix to global rules

IMF's Lagarde warns against trade, currency wars, urges fix to global rules

The International Monetary Fund has warned a trade war between the USA and China risks making the world a "poorer and more risky place" in its latest assessment of the global economy.

In September 2018 Donald Trump imposed tariffs worth $200 billion on Chinese goods and threatened to sign off on a further $267 billion - an escalation in a tariff war that, at that point, had only seen both countries levy tit-for-tat duties on each other's imports.

But China's involvement could also bring potential risks, he said.

"The forecast does not incorporate the impact of further tariffs on Chinese and other imports threatened by the United States, but not yet implemented, due to uncertainty about their exact magnitude, timing, and potential retaliatory response", according to the International Monetary Fund. The acceleration relative to 2016-17 reflects a more supportive external environment, including stronger global growth, higher commodity prices, and improved capital market access, following efforts to improve fiscal balances in the aftermath of the commodity price slump.

The global organisation warned a full-blown trade war between the United States and China could have wider implications for the financial growth around the world.

"Overall, compared with six months ago, projected 2018-19 growth in advanced economies is 0.1 percentage point lower, including downgrades for the euro area, the United Kingdom, and Korea".

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About three months (in July) after the International Monetary Fund gave a 3.9 percent global growth prediction, the organisation today downgraded its forecast on the global economy to 3.7 percent for both 2018 and 2019. German growth was revised down to 1.9 percent in both 2018 and 2019 due to a slowdown in exports and industrial production.

Considering developments since then, however, that number appears over-optimistic: "rather than rising, growth has plateaued at 3.7 per cent", IMF Chief Economist Maurice Obstfeld said as the world body released the World Economic Outlook, its annual flagship report.

The numbers presented in the IMF report were drastically below what the fund had predicted just last April when it said that Argentina's economy would expand by about two percent over the next year.

The possible failure of Brexit negotiations also dampened the eurozone's growth outlook.

"An intensification of trade tensions and the associated further rise in policy uncertainty could dent business and financial market sentiment, trigger financial market volatility, and slow investment and trade", the report said. "This is not true in emerging and developing economies, where financial conditions have tightened markedly over the past six months", he said.

On Wednesday, the Prime Minister of Pakistan, Imran Khan vowed to eliminate the economic crisis out of the country, and said it only needs $10-12 billion to fix it.

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