The US and China have been embroiled in a lengthy argument over alleged unfair trade practices aimed at Washington which prompted US President Donald Trump to hit Beijing with a series of tariffs and trade barriers. The tensions have caused widespread economic damage worldwide due to the commercial links most world traders have with China and the United States. The International Monetary Fund (IMF) warned continued tit-for-tat retaliation between the world’s two biggest economies could cost global traders to lose as much as $700bn (£532bn) by next year.
Speaking to Euronews, IMF’s Managing Director Kristalian Georgieva said: “This year, we assess trade to grow only by 1.1 percent. This is basically saying the trade engine of growth is idle.
“We actually put a price tag on how costly trade tensions are and we concluded that, by 2020, the cost on the world economy would be $700bn (£532bn) – this is 0.8 percent of the global GDP. Not trivial.”
Ms Georgieva said the estimates showed the uncertainty surrounding relations between Washington and Beijing poses the “biggest” threat to the world’s economy.
She continued: “When we disaggregate what is in that cost, the smallest part comes from tariffs directly, the bigger party is uncertainty.
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“What we are advocating for is bringing closer the US and China on an agreement that would lift confidence but a longer-term trade truce is not enough.
“We need a sustainable trade peace and we believe that Europe has a very strong stake in that because Europe is primarily an open export entity.”
But asked whether the world will soon be facing another recession, Ms Georgieva remained upbeat as she added: “We don’t see the conditions to get that bad but we are worried that a prolonged period of trade uncertainty is going to be very bad for growth.”
Donald Trump issued a first round of tariffs on Chinese solar panels and washing machines in January 2018.
READ MORE: Trump plotting to retaliate to French tech tax with crippling tariffs
Mr Le Maire urged the US earlier this week to “give a clear answer” and say whether it would fight the so-called GAFA tax.
French sparkling wines, handbags, cosmetics and several kinds of cheeses are on the list of goods that could be hit with tariffs of up to 100 percent as early as mid-January, after a report from the US Trade Representative’s office found that the tax would harm US tech behemoths such as Google, Apple, Facebook and Amazon.
US Trade Representative Robert Lighthizer said in a statement: “The decision sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.”
Mr Lighthizer added that the US would likely investigate similar taxes in other EU countries: “The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets US companies.”
The French tax imposes a three percent levy on revenues from digital services earned by companies with more than 25 million euros (£21 million) in revenue from France and £636 million (€750m) worldwide.