IMF presents analysis results assuming Trump wins
“Policies that harm everyone and the world”
The International Monetary Fund (IMF) has defined U.S. Republican presidential candidate Donald Trump‘s tariff policy as the biggest threat to the global economy.
According to the New York Times (NYT) and the Financial Times (FT) on the 22nd (local time), the IMF reported this in its ‘October World Economic Outlook’ report.
Specifically, the report warned, “The aftermath of protectionist industrial policies and heightened trade tensions could hinder global economic growth and disrupt supply chains.”
This policy is what candidate Trump is declaring as a major pledge in this presidential election.
In fact, candidate Trump has pledged to impose a universal tariff of 10-20% on all imported goods and an additional 60% tariff on Chinese products in order to improve the trade deficit and promote domestic production. At one talk event, tariffs of up to 1000% were also mentioned.
In addition, he has stated that when he returns to power, he will implement an expansionary fiscal policy through the issuance of large amounts of government bonds and tax cuts, as well as a policy of forcibly deporting illegal immigrants.
As a result of an analysis assuming that candidate Trump’s tariff policy will affect a significant portion of world trade by the middle of next year, the IMF predicted that the global economic growth rate will decline by 0.8% next year and 1.3% the year after.
The report said candidate Trump’s “retaliatory” tariffs would affect a quarter of global trade in goods, causing global economic growth next year to fall below the IMF’s initial forecast.
Economists are warning that candidate Trump’s tariff policy is likely to trigger a trade war, which could lead to rising prices, slowing growth, and an economic recession.
Pierre Olivier Gorrinchas, IMF chief economist, said of the risk of higher trade barriers, “It is a policy that is fundamentally harmful to everyone and the world.”
He said, “The IMF’s scenario may not be the worst because it simply assumes a one-time tariff increase,” and added, “The risk to global economic growth will further increase due to (candidate Trump’s) additional retaliatory measures.”
Mark Sobel, U.S. chairman of the British financial think tank the Forum for Monetary and Financial Institutions (OMFIF), said, “Policymakers around the world believe that candidate Trump’s return to the White House will have a negative effect on multilateralism, the global ramifications of the U.S.-China conflict, and global trade and finance. “We are concerned about what impact it will have,” he said.
The report said that the battle against inflation has been largely won so far, but diagnosed that “a ‘triple policy axis’ is needed to reform interest rates, government spending, and productivity.”
Gorinchas also pointed out that “now is the time for fiscal transformation,” and that “many countries, especially the United States, need to rebuild their fiscal buffers.”
However, he made an exception for China, urging Beijing to spend more to support the economy and “treat the real estate sector very comprehensively.”
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