The IMF’s damning assessment of the global consequences of a US-led global trade war come as the White House prepares to announce another $50 billion (£38 billion) volley of tariffs on US goods, later today.
China is expected to retaliate in turn while the EU and Mexico are also preparing a slew of expensive like-for-like measures on US goods.
The IMF report, published on its website, warns that, although there is a “broad agreement” in the US that the global economy needs to be able to rely on an “open, fair, and rules-based international trade system” it says there has been a rise in public concern over the side-effects of open trade.
Although the report admitted that it is incredibly hard to predict the direct economic repercussions of individual tariffs, IMF Director Christine Lagarde is sending out a clear warning on the grave economic consequences that retaliation from trading partners like Canada and the EU could bring.
The report warns various steps have been taken by the Trump administration to impose new tariffs or otherwise restrict imports and US-imposed punitive import duties could harm the current world economic recovery by “catalysing a cycle of retaliatory responses” and throwing global supply chains into chaos.
The IMF said: “These measures are likely to move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the US economy and for trading partners.”
The IMF report adds: “The US and its trading partners should work constructively together to reduce trade barriers and to resolve trade and investment disagreements without resorting to tariff and non-tariff barriers.”
However, President Trump is seemingly unconcerned by the threat of EU retaliatory action.
In March, the President tweeted: “If the EU wants to further increase their already massive tariffs and barriers on US companies doing business there, we will simply apply a Tax on their Cars which freely pour into the US They make it impossible for our cars (and more) to sell there. Big trade imbalance.”
The $50 billion in new tariffs on Chinese goods is due to be revealed today and Beijing has promised to retaliate against any US tariffs with Wang Yi, China’s top diplomat, warning US secretary of state Mike Pompeo against any decision that would involve “confrontation and mutual loss”.