The International Monetary Fund has warned that growing trade tensions between the US and the rest of the world could ultimately cost the global economy $430 billion (£324 billion).
In a recent report, the IMF revealed that the escalating trade war between Donald Trump and the US’ trade partners could leave the US “especially vulnerable”.
Trump announced last week plans to impose 10 percent tariffs on $200 billion of Chinese goods entering the country. This is in addition to the $34 billion worth of tariffs imposed on Beijing at the start of July.
China was quick to retaliate against the US and imposed similar tariffs.
As well as increase tensions with China, the US President also labelled the EU a trading “foe” on Sunday.
“Well, I think we have a lot of foes,” Trump told CBS News whilst in Scotland. “I think the European Union is a foe, what they do to us in trade. Now you wouldn’t think of the European Union but they’re a foe.”
Maurice Obstfeld, the IMF’s economic counsellor, said: “Countries must resist inward-looking thinking and remember that on a range of problems of common interest, multilateral cooperation is vital.”
Trump’s new trade tariffs also affect countries including Canada and Mexico.
As well as the tension sparked by the US, the IMF report also discussed political uncertainty in Europe surrounding Brexit.
“Financial markets seem broadly complacent in the face of these contingencies, with elevated valuations and compressed spreads in many countries,” said Obstfeld.
“Asset prices are no doubt buoyed, not only by easy financial conditions, but by the generally still satisfactory global growth picture. They therefore are susceptible to sudden re-pricing if growth and expected corporate profits stall.”
The IMF’s global growth forecast for 2018/9 remains 3.9 percent despite the growing risks for the global economy.