WASHINGTON (AP) - The International Monetary Fund warned Tuesday that rising trade tensions between the United States and China risk undermining a global economy that the IMF believes should otherwise grow solidly this year.
The lending agency has kept its forecast for worldwide growth this year at 3.9 percent, which would be its fastest pace since 2011. But the IMF's chief economist, Maurice Obstfeld, told reporters that this bright outlook could be derailed by a major trade conflict.
Speaking at a news conference, Obstfeld said the IMF had run economic simulations about the impact of a far-reaching trade war that would include across-the-board tariffs of 10 percent. The computer simulations, he said, showed a "fairly substantial" impact from tariffs of that magnitude.
Global financial markets would likely also endure damage from rising threats of tariffs, Obstfeld said. Investors have already endured stomach-churning swings this year as markets have wildly in response to the perceived likelihood of a trade conflict, especially resulting from actions and statements by the Trump administration.
Obstfeld said that while the IMF didn't take account of rising trade tensions in its baseline economic forecasts, the consequences could be serious enough to trigger an economic downturn.
"If you keep poking at the economic expansion, it could turn around and bite you," Obstfeld said.
There aren't "going to be any winners coming out of a trade war."
The IMF issued the update to its World Economic Outlook on the eve of spring meetings in Washington this week of the 189-nation IMF, the World Bank and the Group of 20 major economies.
In its base forecast, the IMF predicted that trade would grow 5.1 percent this year, which would be the fastest pace since 2011.