IMF says US-China trade war will have 'real spillover effects' for EMs

Trade tensions between the United States and China — the world’s two largest economies — are a significant source of risk for the global economy, with “real spillover effects” for emerging markets, top IMF officials said on Wednesday.

Tobias Adrian, director of the monetary and capital markets department of the International Monetary Fund, told reporters the tit-for-tat trade war between Washington and Beijing had a significant impact on financial markets over the past two years.

The fight could set up a "domino effect" for smaller economies, according to a second IMF official.

"We urge policymakers around the world to continue to work together in order to resolve those trade tensions as that is significant source of uncertainty and a significant source of creation of downturn risks," he said. "There are real spillover effects for emerging markets."

The IMF's chief economist, Gita Gopinath, on Tuesday welcomed a preliminary and partial trade agreement reached last week by Washington and Beijing and urged continued work by both sides to end trade tensions that have weighed on global growth and business confidence. She said global gross domestic product would be reduced by 0.8 per cent if Washington and Beijing imposed the additional tariffs in October and December, but only 0.6 per cent if the two countries forgo the additional increases. reuters