Global economic growth will slow to 3 percent this year, the lowest since the Great Recession began a decade ago, said the International Monetary Fund in a semi-annual report, and the China-U.S. trade war is a factor in this year’s weakening outlook.
Chief economist Gita Gopinath told reporters that IMF estimated the trade war will reduce global GDP by 0.8 percent by 2020, assuming the United States carries out tariff increases scheduled for October 15 and December 15, reported the Xinhua news agency.
As part of a mini-deal last week, President Trump suspended the increases scheduled for this week. The package calls for China to buy up to $50 billion of U.S. agricultural exports over two years. “The agreement will probably take until” November to finalize, said the president on Tuesday. Trump expects a signing ceremony with Chinese President Xi Jinping at an international meeting in Chile in three weeks.
Bloomberg reported, citing unnamed sources, that China wants a rollback of retaliatory U.S. tariffs as part of ramping up its purchases of American farm exports. Otherwise, agriculture imports are not likely to reach the levels announced last week at the White House.
In its World Economic Outlook, the IMF lowered its forecast of global growth by 0.3 percent, to 3 percent, from its April forecast. It projected growth of 3.4 percent in 2020, down by 0.2 percent in April because of “uncertainty about prospects for several countries, a projected slowdown in China and the United States, and prominent downside risks … Further escalation of trade tensions and associated increases in policy uncertainty would weaken growth relative to the baseline projection.”
To read the IMF report, click here.