The International Monetary Fund warned on Thursday that US President Donald Trump’s new import tariffs threaten to undermine the global trading system, prompt retaliation by other countries and damage the American economy, Reuters reports.
“Let us not understate the macroeconomic impact,” IMF Managing Director Christine Lagarde was quoted as saying.
The IMF, in a review of US economic policy, also took a much less optimistic view on America’s economic growth potential than that of the Trump administration.
While US economic growth is expected to be strong this year and next, recent tax and spending measures could cause greater risks from 2020 onwards, according to the IMF report.
Trump has riled key allies by pursuing protectionist trade policies, including the imposition of steel and aluminum tariffs on the EU, Canada and Mexico.
“These measures … are likely to move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the US economy and for trading partners,” the IMF said.
Germany has said the EU will implement counter-measures against US tariffs.
The IMF said a cycle of retaliation on trade will likely dampen national and international investment, interrupt global and regional supply chains and undermine a system that has supported US growth and job creation.
Elsewhere in its analysis, the IMF stuck to its April forecast that the US economy will grow at a 2.9 percent pace in 2018.
The economy is getting a boost from the Trump administration’s tax cuts and higher government spending, but the IMF expects growth to slow considerably in coming years.
It forecasts economic growth rates over the long term of 1.7 percent while the Trump administration sees them closer to 3 percent.
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