IMF Managing Director Christine Lagarde said U.S. President Donald Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half of one percent.
This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented traded barriers and by avoiding further barriers in whatever form,” she added.
The warning came as G-20 finance ministers and central bankers prepare to meet in Japan this weekend. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.
Lagarde urged governments to adopt polices that support economic growth to avoid a global economic decline. “Should growth substantially disappoint,” she wrote, policymakers must do more, including “making use of conventional and unconventional monetary policy and fiscal stimulus.”
The GDP is a monetary measure of the value of all goods and services produced in an economy during a specific period of time.