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International Monetary Fund projects India's growth at 7.4% in 2018

20 April 2018

"The clear interest of third countries is in avoiding a trade war between the U.S. and China, but none of them seem to have enough clout to push Washington toward a more conciliatory approach", he added.

"In our view, the risk of an imminent, all-out trade war seems limited". Such a festering could act as a damper on global stock markets and the world economy by making investors and businesses more cautious about the outlook. But it has then backed away, entering Nafta renegotiation, granting exceptions to the steel and aluminum tariffs to many countries, and delaying tariffs on Chinese imports.

The IMF has warned that these risks are inter-related and are very likely to hit the world economy hard.

US President Donald Trump has called for the imposition of tariffs and points to Germany's trade imbalance.

The Federal Reserve is getting staffed up with Pimco economist Rich Clarida nominated to serve as Vice Chairman, another example of Trump picking mainstream figures for the central bank. There will be interest rate risks, market risks and large interest burdens that will squeeze out spending priorities.

The IMF said it raised its US growth forecast by 0.2 percentage point for both years, to 2.9 percent for 2018 and 2.7 percent for 2019. "But when you're already at a strong level, growing at the same almost three per cent rate that we saw previous year is tough". "Greater protectionism would also lower consumer welfare by making tradable consumer goods more expensive". Financial markets that are volatile - and vulnerable to an unexpectedly steep uptick in interest rates. The European Central Bank is expected to end its 30 billion euros of monthly asset purchases by the end of the year and raise rates in second quarter of 2019.

Because of the increased government spending and borrowing required by President Donald Trump's tax cuts and two-year budget deal, the US will take on deficits above $1 trillion over the next three years, according to the International Monetary Fund.

"Our growth risk analysis which links financial conditions to the distribution of future global growth indicates that, under a severely adverse scenario, growth could be negative three years from now".

"An increase in tariffs and nontariff trade barriers could harm market sentiment, disrupt global supply chains, and slow the spread of new technologies, reducing global productivity and investment", the International Monetary Fund said.

But a year-long wave of optimism over Brazil's long-term economic prospects were fading on scepticism over the fate of structural reforms after this year's presidential elections.