IMF lashes out at China and US over trade war as tariff turmoil takes toll on corporate titans
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The US and China were last night urged to end their damaging trade war or risk plunging the world into recession.
As companies across the globe laid bare the impact of tariffs on their businesses, the International Monetary Fund warned tensions between Washington and Beijing were hitting investment and spending.
It came amid mounting speculation that Donald Trump is preparing to water down some levies, even cutting those on Chinese imports by more than half from the current rate of 145 per cent.
‘It is most urgent for countries to work constructively to resolve trade tensions as swiftly as possible,’ said IMF managing director Kristalina Georgieva at the Fund’s annual meetings in Washington.
‘I cannot stress this strongly enough: without certainty, businesses do not invest, households prefer to save rather than to spend, and this further weakens prospects for already weakened growth.’
Having this week sharply downgraded the outlook for the global output, Georgieva last night called on countries ‘to address the imbalances that fuel many of the tensions among major economies’.
She attacked China over its state subsidies and huge trade surpluses, and called on Beijing to modernise its economy, saying it must ‘pull back from too much intervention’ and ‘let the private sector function to its full capacity’.
She added: ‘China needs to act to boost private consumption and embrace a shift to services. The US needs to reduce fiscal deficits. Get it done.’
The comments came as:
- Governor Andrew Bailey said the Bank of England is ‘certainly quite focused on the growth shock’;
- The German government lowered its growth forecast for this year from 0.3 per cent to zero;
- US titans PepsiCo, Procter & Gamble and Thermo Fisher Scientific blamed trade turmoil as they slashed profits forecasts;
- American Airlines ditched its 2025 forecasts as the industry faces levels of uncertainty not seen since the Covid pandemic;
- South Korean carmaker Hyundai shifted some production from Mexico to the US and expects ‘a challenging outlook to continue’;
- The boss of Swiss group Nestle warned ‘some political decisions have rather undermined already soft consumer confidence’ as the KitKat and Nespresso maker pushed through price hikes;
- German pharma company Merck said it expects to lose £150million this year due to tariffs while Finnish phone maker Nokia pencilled in a £25million hit in the second quarter.
US President Trump has long accused Beijing of manipulating its currency to make exports cheaper – boosting its economy at the expense of others.
He this month hiked tariffs on Chinese imports to the US to 145 per cent, prompting Beijing to retaliate with a 125 per cent levy on certain American goods.
While many tariffs have been paused for now, a 10 per cent universal rate and extra duties on aluminium, steel and cars remain in place.
