Virendra Pandit
New Delhi: The International Monetary Fund (IMF) has warned of “significant downside risks” to global growth because of renewed trade-and-tariff frictions between the US and China, the world’s two largest economies.
After months of tentative stability in US-China relations, tensions flared in recent weeks when Washington expanded technology restrictions and proposed tariffs on Chinese ships entering American ports. China responded with similar actions, outlining tighter export controls on rare earths and other critical materials, the media reported.
Krishna Srinivasan, IMF’s Director of the Asia and Pacific Department, was quoted as saying on Friday that: “If these risks materialize in greater tariffs and disruption in supply chains, then growth could be lower by 0.3 points.”
“If there are further tensions, that would also mean downside risks for China.”
This week, amid rising tensions, US Treasury Secretary Scott Bessent criticized a top Chinese trade official, Li Chenggang, accusing him of arriving in Washington uninvited and acting like an “unhinged” wolf warrior.
Despite bearing the brunt of US tariffs and facing elevated policy uncertainty, economic activity in the Asia-Pacific region remains resilient. Still, Srinivasan said, the IMF worries how trade tensions have yet to be resolved.
“The great tensions are still pretty much predominant,” he said.
The IMF expects Asia’s economic growth to slow down from 4.6 percent in 2024 to 4.5 percent this year, representing a 0.6 percentage point upgrade from its April prediction when President Donald Trump first announced import levies. Growth is projected to further slow further to 4.1 percent next year.
Earlier, he highlighted three factors supporting Asian growth: strong exports, a technology boom, and easier macroeconomic policies bolstered by favourable financial conditions.
However, he also cautioned that risks to the outlook remain. The impact of tariffs is still unfolding and could escalate, as could risk premiums and interest rates, particularly if trade policy uncertainty or geopolitical tensions rise.