WASHINGTON - The new head of the International Monetary Fund warned Tuesday that America's trade war with China could cost the global economy around US$700 billion by 2020 - a loss equivalent to the size of Switzerland's entire economy.
The warning comes at a potential turning point in the trade conflict between the world's two largest economies. Economists have debated how much of the global economic slowdown is a result of trade tensions and how much stems from other factors, including sluggish growth in Europe and a credit slowdown in China. The Trump administration has blamed weak growth overseas, as well as a relatively tight monetary policy from the Federal Reserve.
Major international institutions have also slashed their expectations for global growth. In a report last week, the World Trade Organisation halved its forecast for growth in the global trade of goods to only 1.2 per cent during 2019, in what would be the weakest year since 2009. She added that, even if growth picked up in 2020, trade tensions were leading to changes that might last a generation. Supply chains have been broken as companies that once manufactured products in China have tried to find alternatives in order to avoid the tariffs.
"We are still suffering the aftermath of severe monetary restraint in 2018," Mr Larry Kudlow, one of the White House's top economic advisers, said in an interview Friday on Fox Business."And the eurozone in general is in a virtual recession."
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