Why has the IMF downgraded global growth?published at 14:28 British Summer Time
Michael Race
Senior economics reporter
The introduction of tariffs, and the escalating trade war between the US and China, is set to upend the long-established order of trade.
This will have a big impact on the economic growth of many countries.
The disruption, and the potential negative impact on the trade of goods that this could cause, is the reason the influential International Monetary Fund (IMF) has downgraded its growth forecasts for many countries.
Tariffs – taxes on imports from abroad – can be a barrier to trade, as businesses are put off by higher charges.
This creates uncertainty in modern supply chains, which are very interlinked.
As the IMF puts it, this increased uncertainty will lead many firms to pause and cut investment. If businesses don’t invest, they are less likely to grow and hire more workers, which will hit economic growth.
The global economy is being “severely tested”, as its chief economist Pierre-Olivier Gourinchas puts it.
