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The International Monetary Fund has warned that Donald Trump’s trade tensions could cost the global economy $430 billion (£324 billion).
IMF’s economic counsellor, Maury Obstfeld, said on Monday that the US would be “especially vulnerable” to the escalating trade war that is considered “the greatest near-term threat to global growth”.
Trump has continued to escalate the potential trade war over recent weeks. Last week the US President proposed ten percent tariffs on $200 billion of Chinese goods entering the country.
On Sunday, Trump continued to create tensions by labelling the EU as one of his greatest “foes” over trade.
“Well, I think we have a lot of foes,” Trump said to 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.”
As well as China, Trump has also imposed large steel and aluminium tariffs on the EU, Canada and Mexico. He is also threatening to impose new levies on EU car imports.
Liam Fox, the international trade secretary in the UK, called the decision by the US “absurd” and signalled Britain could impose retaliatory measures.
Obstfeld also discussed the current political uncertainty in Europe around Brexit.
“Financial markets seem broadly complacent in the face of these contingencies, with elevated valuations and compressed spreads in many countries,” he said.
“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.”
Despite discussing the broad risks for the world economy, the IMF did not change its global growth forecast of 3.9 percent for both this year and next.