Higher levels of tariffs and increased geopolitical threats are a “major risk” to the global economy, the International Monetary Fund (IMF) has said.
It comes as US President Donald Trump is once again threatening to raise taxes imposed on imports, this time against eight European countries for not supporting his plan to take over the semi-autonomous Danish territory of Greenland.
Tariffs of 10% would take effect on 1 February for Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland, a rate that would then climb to 25% on 1 June if no deal was in place to purchase Greenland.
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On the day that Washington-based UN financial agency the IMF published its six-monthly analysis of economic trends, called the World Economic Outlook (WEO), its chief economist Pierre-Olivier Gourinchas was asked about the latest trade threats from the US.
“This volatility is bad for business decisions. It’s bad for investment. It’s bad for consumption. It leads to a state of uncertainty. And for the increased precautionary saving. So it affects global activity downward,” Mr Gourinchas said.
“So, going forward, this is a major risk. This is something that could mature and impact growth if we have higher levels of tariffs, if we have higher levels of geopolitical tension.”
The harms could come to both the US and countries hit with the tariffs, he said.
“Who stands to lose more, that’s the right way to frame it, because as we all know, there are no winners in a trade war and that’s the thing to remember.”
“Of course, it’s also hurting other countries, so this is a situation where tariffs and retaliation, that increase in tariffs, would put downward pressure on global activity”.
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