China trade war and Brexit threaten global growth says International Monetary Fund

Jermaine Castillo
October 11, 2018

With record exports to China, the US and Germany all helping grow the overall value of Swiss exports by 4.8 billion Swiss francs (€4.1 billion) since the first quarter of 2017.

Following a sharp Wall Street sell-off on Wednesday, Trump said the Federal Reserve "is making a mistake".

Mainland China and Hong Kong stock markets fell sharply on Thursday after a rout in U.S. shares overnight caused by factors including anxiety about global trade tensions.

The IMF said that trade policy tensions and the imposition of import tariffs were taking a toll on commerce while emerging markets struggle with tighter financial conditions and capital outflows.

The Washington-based organisation said its prediction of 3.9% global growth for 2018 and 2019 made earlier this year needed to be trimmed to 3.7% in both years after the USA imposed tariffs on imported Chinese goods.

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The IMF said the high downside risks in the medium-term are driven by relatively elevated United States interest rates, a strong U.S. dollar and a strong global risk appetite, which "tends to boost portfolio flows in the near term but foreshadows weaker inflows in the medium term".

Formally launching the International Monetary Fund and World Bank annual meetings on the Indonesian resort island of Bali, Lagarde urged countries to "de-escalate" trade conflicts and fix global trading rules instead of abandoning them.

It predicted 2.9 percent US growth this year, dropping to 2.5 percent next year, and to 1.8 percent in 2020, as the effect of USA tax cuts wears off and the trade war with China inhibits growth.

Growth in the 19-nation zone is forecast to slow further to 1.9 percent in 2019, unchanged from the July estimate.

In addition to the trade barriers, the International Monetary Fund said higher interest rates are also contributing to slowed economic growth.

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Yi also said China would continue to open up its financial markets, including to foreign ratings agencies and bond investors, the attendees said.

The IMF said Tuesday it projects continued growth in the United States, but at a slower pace next year.

Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation seeing forecast upgrades.

The IMF in its World Economic Outlook 2018 noted that "Nigeria's projected economic growth in the sub-Sahara Africa from 3.1 percent this year to 3.8 percent in 2019 is not enough to create the needed jobs for the growing population of the region".

He said the talks would be held for "such a programme, a stabilisation, a recovery programme, on which basis we could overcome this financial crisis". In September, Trump imposed tariffs on almost $200 billion of Chinese imports, with China responding with higher tariffs on about $60 billion of USA imports.

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US President Donald Trump has accused China of deliberately manipulating its currency to gain a trade advantage, claims Beijing consistently rejected.

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