Trump's China Trade War Could Cost 'Around $700 Billion' by Next Year, IMF Chief Warns

The International Monetary Fund (IMF) managing director Kristalina Georgieva warned that the ongoing trade war launched by President Donald Trump against China last year could lead to "around $700 billion" in global losses by next year.

Georgieva, who took over the top post at the IMF this month, presented an overview of the financial institution's global outlook in remarks at annual meetings on Tuesday. She warned that the global economy was heading for a "synchronized" slowdown, with the IMF expecting "slower growth in nearly 90 percent of the world" this year.

"Two years ago, the global economy was in a synchronized upswing. Measured by GDP [gross domestic product], nearly 75 percent of the world was accelerating," the IMF chief explained, according to prepared remarks published on the institution's website. "Today, even more of the world economy is moving in synch but, unfortunately, this time growth is decelerating."

"This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade," she said.

On her speech ahead of the 2019 #IMFMeetings, Managing Director @KGeorgieva summarized the economic outlook, called on policy makers to build a better trading system, and reminded nations of the power of collaboration in challenging times. Full speech 👇

— IMF (@IMFNews) October 8, 2019

Explaining some of the factors leading to the global slowdown, Georgieva dwelt heavily on the impact on trade tensions and tariffs, specifically pointing to the international impact of Trump's trade war with China. The international financial expert displayed a graphic, showing the financial losses caused by the U.S.-China trade tensions in 2018 and 2019, as well as the project losses moving forward into 2020.

"The results are clear. Everyone loses in a trade war," she said. "For the global economy, the cumulative effect of trade conflicts could mean a loss of around $700 billion by 2020, or about 0.8 percent of GDP. As a reference, this is approximately the size of Switzerland's entire economy."

The prediction from the head of the IMF came after the National Association for Business Economics (NABE) released the results of a survey on Monday that showed that economic experts believe America's GDP growth will drop below 2 percent in 2020. "The consensus forecast calls for real GDP growth to slow from 2.9 percent in 2018 to 2.3 percent in 2019, and then to 1.8 percent in 2020," Constance Hunter, NABE's president, said in a press statement.

The majority of the economists surveyed for the study also pointed to trade policy as the biggest risk factor leading to economic decline. In total, 53 percent pointed to trade tensions as the key issue behind predicted slower GDP growth.

Donald Trump and Xi Jinping
President Donald Trump and China's President Xi Jinping meet business leaders at the Great Hall of the People on November 9, 2017 in Beijing, China Thomas Peter-Pool/Getty

Trump and his supporters have repeatedly touted his administration's economic success as a key reason to back his presidency. The president has exaggerated, however, arguing that he has created the "greatest" economy in the history of the country. While economists generally agree that the economy has been good overall during Trump's presidency, some have explained that it is not the "greatest," while also pointing to warning signs of economic slowdown. Many also see the sustained GDP growth as in line with the economic recovery that began under former President Barack Obama, following the 2008 economic crisis his administration inherited.

The principal success of Trump's economic policy has been historically-low unemployment, which now stands at just 3.5 percent. (December of 1969 was the last time the U.S. saw such low official unemployment numbers). At the same time, Trump has overseen a massive increase in the national deficit, which he promised to eliminate when he was campaigning for the presidency. Thus far, it is expected to increase by about $400 billion–from $585 billion when he took office to a projected $984 billion by the end of 2019, according to the Congressional Budget Office. That is an increase of 68 percent.