IMF: Rising trade tension risks eroding confidence

WASHINGTON • Escalating trade tensions between the US and China risk derailing the global economy by undermining business confidence and increasing the cost of living for consumers, the International Monetary Fund’s (IMF) MD Christine Lagarde (picture) said.

“Trade, if it is damaged, if it is threatened, is going to affect growth,” Lagarde said on CBS’ “Face the Nation” on Sunday. “People suddenly who are in the business of investing, who are in the business of creating jobs, will lose confidence, will be concerned as to what the rules of the road will be, and they need that.”

The IMF cut its global growth forecast in October for the first time in more than two years, blaming intensifying trade tensions and threats to emerging markets. The lender projected a global expansion of 3.7% this year and next, down from the 3.9% forecast three months prior.

The former French finance minister said she doesn’t see indications of recession in the near term and described 3.7% growth as “not bad, actually”.

Still, she cautioned “it is true that if there are more tensions, if trade is under threats, if people sort of wonder where should I invest and should I completely change my supply chain, that will have an impact.”

Consumers, especially those with lower incomes, have benefitted from cost of living declines, in the form of cheaper goods produced in countries like China and Vietnam, Lagarde said. “If we lose the benefit of that, then it will have an impact on consumers,” she said. — Bloomberg