The trade war has escalated beyond expectations and the stakes are high for the global economy, said Moody’s Analytics Asia-Pacific - Photo: Special

JAKARTA (TheInsiderStories) – The International Monetary Fund (IMF) sees tariffs imposed by the United States (US) and China could shave 0.8 percent off global economic output in 2020 and trigger more losses in future years, global media reported yesterday (09/12).

According to the spokesman Gerry Rice, the trade tensions were beginning to affect a world economy already facing challenges including a weakening of manufacturing activity not seen since the global financial crisis of 2007 – 2008. He also rated that the trade tensions not only a threat but beginning to weigh down the dynamism in the global economy.

Rice went on by saying that the global lender is to release a new revised economic outlook next month but provided no details. World economic activity remained subdued, with trade and geopolitical tensions causing uncertainty and eroding business confidence, investment, and trade, he adds.

That forecast is more gloomy than one earlier this year when the IMF said tariffs already imposed and those planned could shave 0.5 percent off global economic output in 2020.

The IMF had previously forecast that the US-China trade war and other trade disputes threatened future global growth, but Rice said the impact was now being felt.

Asked if the IMF anticipates a global recession, Rice said that was not in the fund’s baseline at the moment. He noted that the IMF had used words such as “very precarious,” “very fragile,” and “delicate” to describe the economic outlook.

He said, noting the forthcoming world economic outlook would provide greater clarity. Rice stressed he was not hinting that the IMF planned to forecast a recession.

The global lender this week unveiled a new “World Trade Uncertainty” index for 143 countries based on its country reports, using data back to 1996. In the past year, the index jumped 10-fold from the previous high in the wake of escalating tensions between Washington and Beijing, it said.

Commenting this, the US Treasury Secretary Steven Mnuchin said he had not seen the new IMF forecast but did not expect the impact to be as significant in the American market.

“I don’t see it in the US as that big an impact,” he said when asked about the IMF forecast after an event hosted by the New York Times.

On the same occasion, Mark Hamrick, the economic analyst at Bankrate, a New York-based consumer financial services company, said the new forecast reflected skepticism that Washington and Beijing would end the trade war.

“Trade tensions have only grown. There is no agreement that is in sight,” Hamrick said, noting that growing concerns in the business sector were starting to bleed into consumer sentiment.

Hamrick said the IMF assessment could fuel concerns about a US recession after 11 years of expansion. Economists polled by Bankrate see a 41 percent chance of a recession by the time of the November 2020 presidential election, he said.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com