IMF issues warning over cost of tariff war

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The global economy could lose billions thanks to the seeds of trade wars being sown, the IMF has warned.

The flurry of trade tensions that have been escalating between the US and the rest of the world could prove financially costly in the long term, according to a new report from the International Monetary Fund (IMF).

The organization said the threats being made of additional tariffs and costs on imports and exports may lower global growth by as much as 0.5 per cent by 2020, amounting to some $430 billion (€370 billion).

Despite the Trump administration being behind many of the disagreements, it is the US itself that is "especially vulnerable" to an escalating tariff war and that could find the country the "focus of global retaliation", the IMF's World Economic Outlook report warned.

This may mean that a higher share of its exports are taxed in global markets relative to other countries, something that could prove costly for manufacturing in the nation.

The IMF said that although there has been overall economic growth globally, there are now greater risks for the economy than was the case when the previous assessment was published in the spring.

"Countries must resist inward-looking thinking and remember that on a range of problems of common interest, multilateral cooperation is vital," said IMF economic counsellor Maurice Obstfeld.

It advised against using protectionist measures that could hinder business investment, raise the price of consumer goods and disrupt global supply chains.

This comes in a month when the US president Donald Trump stunned world leaders by naming the European Union as one of the US's greatest foes, calling it "very difficult" and claiming that "in a trade sense, they've really taken advantage of us".

President of the European Council Donald Tusk responded by tweeting his insistence that America and the EU are "best friends".

Meanwhile, senior fellow at the Center for American Progress Action Fund Max Bergmann admitted the Washington foreign policy community is "utterly terrified" about the discord Mr Trump has been sowing in Europe that threatens to undermine traditional alliances, the Guardian reported.