The 15-month long trade war between the U.S. and China could cost an increasingly fragile global economy about $700 billion, or 0.8 percent of GDP, by 2020, Kristalina Georgieva, the new chief of the International Monetary Fund, said in her first speech on Tuesday.
“The results are clear,” she said. “Everyone loses in a trade war.”
Georgieva’s speech, which precedes the release of the Washington-based organization’s World Economic Outlook on Wednesday, highlighted the dangers that trade tensions pose to the global economy.
“Even if growth picks-up in 2020, the current rifts could lead to changes that last a generation — broken supply chains, siloed trade sectors, a ‘digital Berlin Wall’ that forces countries to choose between technology systems,” she said.
So far, the trade war between the world’s two largest economies, which began in March 2018, has culminated in hundreds of billions of dollars in tariffs on each other’s products.
“The results are clear. Everyone loses in a trade war.”
According to research from the National Foundation for American Policy, by the end of 2019, the burden on American consumers from the tariffs will hit $167.7 billion, or roughly $1,315 over a two-year period.
“If all tariffs threatened by the Trump administration are imposed, combined with the current tariffs in place, the annual cost to U.S. consumers would be $461.1 billion and the cost for the average household would be $3,614,” the study found.
Georgieva stressed there are legitimate qualms with the global trade system -- including intellectual property theft -- that need to be fixed, but said that access to new marks is “essential to raise living standards.”
“The key is to improve the system, not abandon it,” she said.