The International Monetary Fund reduced its growth forecasts for the US and China Tuesday, citing the series of tariffs the two nations have imposed on each other, CNN Business reports.
"When you have the world's two largest economies at odds, that's a situation where everyone suffers," Maurice Obstfeld, the IMF's chief economist, said at a news conference.
Despite the jump in the US economy following the passage of US President Donald Trump's tax reform package, the tariff wars have undermined much of the positive trends, reducing expected GDP growth from 2.9 percent this year to 2.5 percent next year. China's growth is expected to fall from 6.6 percent this year to 6.2 percent next year, IMF report says.
As of now, the US has imposed tariffs on half of all the goods that China exports to the US, and threatens to extend this measure to the entirety of Chinese exports. Beijing has already responded with its own tariffs on $110 billion worth of US products.
The IMF also said the trade war will damage global economic growth, not just affecting the US and China. Citing higher interest rates and trade barriers, the Fund cut its global growth forecast for next year by 0.2 percent, down to 3.7 percent, and predicted a downward trend for several years to come.
"The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies," the IMF said.
"An intensification of trade tensions, and the associated rise in policy uncertainty, could dent business and financial market sentiment, trigger financial market volatility and slow investment and trade," the organization added.