Business

No threat of global recession due to US-China trade war: IMF chief

WASHINGTON : The International Monetary Fund (IMF) does not see the threat of a global recession brought on by a widening US-China trade war and potential US tariffs on Mexican goods and autos, IMF Managing Director Christine Lagarde said on Wednesday.

But she said that such escalating tariff threats were sapping business and market confidence, and could slow growth that is currently expected to improve next year.

"We don't see a recession," Ms Lagarde said when asked whether US President Donald Trump's threatened tariff actions could turn global growth negative.

"Decelerating growth, but growth nonetheless - 3.3 per cent at the end of this year, and certainly a strong US economy. We do not see at the moment, in our baseline, a recession."

Earlier on Wednesday, the IMF said current and threatened US-China tariffs could cut 2020 global gross domestic product by 0.5 per cent, or about US$455 billion (S$621 billion) - a loss larger than G20 member South Africa's annual economic output.

The estimate includes a recent US tariff increase to 25 per cent on a US$200 billion list of Chinese imports as well as Mr Trump's threat to tax another US$300 billion worth of consumer imports, representing nearly all trade between the world's two largest economies.

The IMF's estimate does not include Mr Trump's threatened 5 per cent tariffs on goods from Mexico starting on Monday over immigration issues and ratcheting up monthly. Mexico has overtaken China this year as the largest US trading partner.

Ms Lagarde called such actions "self-inflicted wounds" that must be avoided, a message she will take to a G20 finance ministers and central bank governors meeting in Fukuoka, Japan, this weekend.

"One more tariff here, one more threat there, one more negotiation that has not yet started, add to a global uncertainty which is not conducive to additional growth," she said.

In a briefing note for G20 finance leaders, the IMF said that US tariffs and Chinese retaliatory measures currently in place could cut 2020 output 0.3 per cent, with more than half of that impact coming from negative effects on business confidence and financial market sentiment. - REUTERS

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