IMF details likely negative effects of US-China tensions

   The latest escalation of U.S.-China trade tensions could “significantly dent” international business and financial market sentiment and disrupt global supply chains, according to an International Monetary Fund (IMF) report released Thursday.
   Recently raised tariffs between the U.S. and China and potential new tariffs to cover all trade between the two countries will subtract about 0.3% of global GDP in the short term, the report said.
   The Trump administration recently raised tariffs from 10% to 25% on $200 billion worth of goods from China in yearly import value exported and entered into U.S. commerce after May 9.
   The Office of the U.S. Trade Representative on May 13 announced a public comment period for another potential round of Section 301 tariffs to cover essentially all imports from China not currently subject to Section 301 measures. The potential tranche could include tariffs as high as 25%, USTR said.
   Failure to resolve bilateral trade differences and further escalation in other areas, such as the auto industry, which would cover several countries, could weaken business and financial market confidence, hurt emerging market bond spreads and currencies and slow trade and investment, the IMF said.
   “In addition, higher trade barriers would disrupt global supply chains and slow the spread of new technologies, ultimately lowering global productivity and welfare,” the report says. “More import restrictions would also make tradable consumer goods less affordable, harming low-income households disproportionately. This type of scenario is among the reasons why we referred to 2019 as a delicate year for the global economy.”