ECONOMY

Trade 'tensions' threaten global economic stability, IMF warns

TRADE TENSIONS THREATEN GLOBAL ECONOMIC STABILITY, IMF WARNS

International Monetary Fund chief economist Maurice Obstfeld has said that the "escalating tensions" over trade present a growing risk to the world economy, and urging to avoid a trade war through multilateral negotiations.

The International Monetary Fund foresees strong, stable growth in the world economy for 2018-19 but is warning that a souring political climate for trade could weaken one of the engines of global prosperity for years to come.

The Washington-based crisis lender on Tuesday predicted global growth for both this year and 2019 at 3.9 per cent.

The update to the IMF's quarterly World Economic Outlook was unchanged from January.

The 2018-19 growth forecast is the fastest since a 5.1-per-cent global rate in 2010, as the world briefly rebounded from the 2008 financial crisis.

"The world economy continues to show broad-based momentum," IMF chief economist Maurice Obstfeld said. "Against that positive backdrop, the prospect of a similarly broad-based conflict over trade presents a jarring picture."

US President Donald Trump, who took office in January 2017, has repudiated Washington's long-standing consensus in support of multilateral trade, withdrawing from the Trans-Pacific Partnership (TPP) trade pact and threatening the North American Free Trade Agreement while forcing renegotiations with Mexico and Canada.

His announcement of tariffs on imported steel and aluminium unnerved global markets before temporary waivers were issued to the European Union, Canada, Mexico and South Korea, but not China or Japan.

China has since announced a series of retaliatory measures, while Trump has continually demanded that Beijing act to reduce its trade surplus with the United States.

Japanese Prime Minister Shinzo Abe was due to hold two days of talks with Trump starting Tuesday in Florida, with trade on the agenda.

The "escalating tensions" over trade present a growing risk to the world economy, Obstfeld said.

Meanwhile, advanced economies face slowing long-term growth potential from ageing populations, while many emerging and developing countries need to diversify to reduce dependence on commodity exports.

Around the world, both governments and the private sector remain debt-ridden, and risk a reckoning with key central banks raising interest rates.

The IMF repeated its long-standing exhortation for governments to use the "window of opportunity" of current growth to plant the seeds for future prosperity.

"All countries have room for structural reforms and fiscal policies that raise productivity and enhance inclusiveness," the report said.

NO WINNERS IN TRADE WAR
The trade confrontation between the United States and China is spreading fear in financial markets, International Monetary Fund chief economist Maurice Obstfeld says.

Even if the Washington-Beijing tiff is settled without major long-term impacts, uncertainty over trade policy "could have significant knock-on effects," he said Tuesday in Washington.

"There's not going to be any winners coming out of a trade war," Obstfeld told reporters in a press conference.

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