IMF warns of trade tensions in global outlook downgrade

With uncertainty on the horizon, the IMF has downgraded its outlook for the world's economic output. It warned that US tariffs on European cars, a no-deal Brexit or a trade war with China could tank the global economy.

The International Monetary Fund (IMF) on Tuesday downgraded its global growth outlook, citing trade tensions between the two largest economies.

The organization said it expects the world economy to expand by a "sluggish" 3.2% in 2019 after it expanded by 3.6% in 2018.

"The projected growth pickup in 2020 is precarious," the IMF said, noting that that an ongoing trade conflict between the US and China has dragged down growth for the global economy.

For China, the "negative effects of escalating tariffs and weakening external demand have added pressure" on its economy. The US, which received a modest boost in the outlook, is on track to slow from 2.9% GDP growth in 2018 to 2.6% in 2019.

The IMF urged countries to take steps to resolve trade disputes and strengthen systems for international trade.

EU in the crosshairs

The organization also identified US tariffs on European products, including threatened tariffs on cars, as having a destabilizing effect. Last year, Washington slapped tariffs on European steel and aluminum, triggering retaliatory tariffs on some American products exported to the EU.

US President Donald Trump has threatened to impose tariffs on European vehicles, in a move that would particularly hurt German automakers.

There is an abundance of "potential triggers" that could further drag down the global economy, including auto tariffs, a no-deal Brexit and high debt levels, it added.

Germany's economy is expected to grow by 0.7% this year before picking up in 2020 with a projected 1.7% increase, the IMF said.

Trump's tariffs and who they target

Solar panels and washing machines

The first round of tariffs in 2018 were on all imported washing machines and solar panels — not just those from China. A study by economists from the Federal Reserve Bank of New York, Columbia University, and Princeton University found that the burden of Trump's tariffs — including taxes on steel, aluminum, solar panels falls entirely on US consumers and businesses who buy imported products.
Trump's tariffs and who they target

China hike

On Friday May 10, 2019 President Donald Trump imposed sanctions on $200 billion (€178 billion) worth of Chinese goods. The move raised tariffs from 10% to 25% on a range of consumer products, including cell phones, computers and toys. China's Commerce Ministry said it "deeply regrets" the US decision.
Trump's tariffs and who they target

Issues with the EU

In April 2019, the United States said it wanted to put tariffs on $11.2 billion worth of goods from the EU. The list includes helicopters and aircraft from Airbus as well as European exports like famous cheeses such as Stilton, Roquefort and Gouda, wines and oysters, ceramics, knives and pajamas.
Trump's tariffs and who they target

EU fights back

The EU imposed import duties of 25% on a $2.8 billion range of imports from the United States in retaliation for US tariffs on European steel and aluminum. Targeted US products include Harley-Davidson motorcycles, bourbon, peanuts, blue jeans, steel and aluminum.
Trump's tariffs and who they target

European automakers next?

May 17, 2019 is the deadline for President Trump to decide on imposing tariffs on vehicle imports from the EU. According to diplomats, Germany, whose exports of cars and parts to the United States are more than half the EU total, wants to press ahead with talks to ward off tariffs on automakers Volkswagen, Mercedes and BMW.
Trump's tariffs and who they target

India not exempt

India, the world's biggest buyer of US almonds, on June 21, 2018 raised import duties on the nuts by 20% and increased tariffs on a range of other farm products and US iron and steel, in retaliation for US tariffs on Indian steel. Trump said last month that he would end preferential trade treatment for India, which would result in US tariffs on up to $5.6 billion of imports from India.
Trump's tariffs and who they target

North American neighbors in tariff spat

Mexico on June 5, 2018 imposed tariffs of up to 25% on American steel, pork, cheese, apples, potatoes and bourbon, in retaliation for US tariffs on Mexican metals. While to the north, Canada on July 1 imposed tariffs on $12.6 billion worth of U.S. goods, including steel, aluminum, coffee, ketchup and bourbon whiskey in retaliation for US tariffs on Canadian steel and aluminum.