The International Monetary Fund (IMF) has warned against the prospects of a renewed US-led trade war, just days before Donald Trump prepares to begin his second term in the White House.
The world’s lender of last resort used the latest update to its World Economic Outlook (WEO) to lay out a series of consequences for the global outlook in the event Mr Trump carries out his threat to impose tariffs on all imports into the United States.
Canada, Mexico, and China have been singled out for steeper tariffs that could be announced within hours of Monday’s inauguration.
Mr Trump has been clear he plans to pick up where he left off in 2021 by taxing goods coming into the country, making them more expensive, in a bid to protect US industry and jobs.
He has denied reports that a plan for universal tariffs is set to be watered down, with bond markets recently reflecting higher domestic inflation risks this year as a result.
While not calling out Mr Trump explicitly, the key passage in the IMF’s report nevertheless cautioned: “An intensification of protectionist policies… in the form of a new wave of tariffs, could exacerbate trade tensions, lower investment, reduce market efficiency, distort trade flows, and again disrupt supply chains.
“Growth could suffer in both the near and medium term, but at varying degrees across economies.”
In Europe, the EU has reason to be particularly worried about the prospect of tariffs, as the bulk of its trade with the US is in goods.