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US-China trade war: Additional tariffs may lower Chinese growth, warns IMF

The International Monetary Fund trimmed its growth forecast for China to 6.2 percent this year, assuming no new tariffs are imposed

AFP | PTI  |  Washington 

trade war
Illustration by Ajay Mohanty

China's already is slowing amid the trade conflict with the United States, but if Washington were to ramp up tariffs even further it could cut Chinese growth sharply, the warned Friday.

The Monetary Fund trimmed its growth forecast for China to 6.2 percent this year, assuming no new tariffs are imposed, but additional US tariffs of 25 percent on remaining Chinese goods would cut GDP growth in the following year, the said in a report.

The annual review of China's -- known as the Article IV report -- was completed before President Donald Trump announced plans to impose 10 percent punitive tariffs on USD 300 billion in imports, which means that starting September 1 all products from China will be subject to duties in the intensifying trade war.

The Washington-based global crisis lender once again called for a quick resolution to the trade conflict between the world's economic superpowers.

"A further escalation of the trade tensions, for example the US raising tariffs to 25 percent on remaining imports from (China) , could reduce growth by around 0.8 percentage points over the following 12 months," the said.

The impact would have "significant negative spillovers globally." However, Trump earlier Friday cast doubt on the chances for a deal, and signaled he might cancel talks planned for September.

Relations have soured further in the past week after Trump announced a new round of punitive tariffs on Chinese goods, despite a truce agreed with President Xi Jinping in May, and Beijing responded by halting all purchases of US agricultural goods.

The US Treasury then declared China a currency manipulator, after the yuan lost value in the face of the new round of tariffs due to take effect September 1.

Trump again Friday accused Beijing of trying to keep its currency weaker to gain a trade advantage against the United States.

But the IMF in its policy prescriptions for Beijing should economic conditions deteriorate and cause the yuan to depreciate rapidly, said China might need to use "FX intervention to counter disorderly market conditions.

First Published: Sat, August 10 2019. 02:30 IST