(Bloomberg) — Global economic growth may be slowing more
than forecast only a month ago, underscoring the urgency for
countries to pull back from a damaging trade war, the
International Monetary Fund warned.
The IMF downgraded its forecast for world growth last
month, and recent data suggest the outlook has gotten worse
since then, the fund said Wednesday in report ahead of the Group
of 20 leaders’ summit this week in Buenos Aires.
Financial conditions have tightened, especially in emerging
markets, while trade tensions have increased, said the
Washington-based fund. Since the IMF’s latest World Economic
Update on Oct. 9, global stocks have slumped on concerns that
rising interest rates and the U.S.-China trade war could
undermine growth.
“We have had a good stretch of solid growth by historical
standards, but now we are facing a period where significant
risks are materializing and darker clouds are looming,” IMF
Managing Director Christine Lagarde said in a blog post
accompanying the report.
Investors will be watching closely for signs of a
breakthrough when President Donald Trump and President Xi
Jinping meet Saturday on the sidelines of the G-20 summit. The
U.S. has slapped tariffs on $250 billion in Chinese imports,
while Beijing has retaliated with duties on $110 billion in U.S.
In an interview this week, Trump said he’ll likely increase
tariffs on $200 billion of Chinese goods to 25 percent from 10
percent next year, and that he may extend duties to cover all
Chinese imports. The president is hopeful for a breakthrough in
the meeting with Xi but is ready to apply new tariffs, White
House economic adviser Larry Kudlow said on Tuesday.
Without naming specific countries, Lagarde urged leaders to
lift recently applied import duties.
“We know that rising trade barriers are ultimately self-
defeating for all involved,” she said. “Thus, it is imperative
that all countries steer clear of new trade barriers, while
reversing recent tariffs.”
Lagarde urged countries to cut spending where possible, so
they have more room to respond if the economy weakens further.
Central banks should take a “gradual, well-communicated, and
data-dependent path” toward higher interest rates, she said.
She singled out several countries as capable of doing more
to boost growth and relieve trade imbalances. Germany could use
its budget surplus to raise its growth potential, while the U.S.
could cut its budget deficit and China could press ahead with
“economic rebalancing,” she said.

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