WASHINGTON, June 14 (KUNA) -- The International Monetary Fund warned Thursday the Trump administration's move to impose new trade tariffs on the Europe Union, Mexico, Canada and China could potentially undermine the global trading system.
"Let us not understate the macroeconomic impact," said IMF Director Christine Lagarde cautioning that a trade war between the US and its trading partners would lead to "losers on both sides."
"Unilateral trade actions can be disruptive and may even prove counterproductive to the functioning of the global economy and trading system," she noted as the Trump administration prepares to levy new tariffs on USD 50 billion worth of Chinese imports.
The US has already imposed foreign steel and aluminium tariffs on the EU and North American trading partners. In retaliation, these countries announced billions in trade tariffs on American products.
"What is more critical and more difficult to factor in at the moment ... is the actual impact on confidence," she said at a press conference in Washington.
After reviewing US economic policy, the IMF says it expects the country's economic growth to be strong this year and next, but offered a less optimistic outlook from 2020 onwards due to recent spending and tax measures.
"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," according to the IMF.
The IMF stuck to its April forecast that the US economy will grow at a 2.9 percent pace in 2018 but indicated it expects growth rates over the long term of 1.7 percent, while the Trump administration sees them closer to 3 percent.
US Treasury department said in a statement that Washington and the IMF "differ significantly on the medium and long term projections."
"The Treasury Department believes that our policies, including the productivity-boosting mix of tax reform and regulatory relief, will result in more sustainable economic growth," the Treasury Department said. (end)