Frankfurt – Three weeks after US President Donald Trump effectively declared a trade war with the whole world, new economic forecasts and surveys will point to the initial fallout.
A few blocks from the White House, the International Monetary Fund (IMF) is set to lower its outlook for economic growth in new projections to be released on April 22.
On April 23, purchasing manager indexes from Japan to Europe to the United States will offer the first coordinated glimpse of manufacturing and services activity since Mr Trump’s global tariffs – now partly on hold – were unleashed on April 2. Business surveys from major economies are also on the calendar.
The combined picture is set to offer finance ministers and central bankers assembled in Washington a chance to make initial damage assessments on Mr Trump’s attempt to rewire the global trade system.
“Our new growth projections will include notable markdowns, but not recession,” IMF managing director Kristalina Georgieva said on April 17. “We will also see mark-ups to the inflation forecasts for some countries. We will caution that protracted high uncertainty raises the risk of financial-market stress.”
Bloomberg Economics analysts Alex Isakov and Adriana Dupita said: “The IMF’s projections tend to skew optimistic during potentially disruptive crises. In the four large crises we studied, the fund’s initial assessment of the immediate impact on global growth understated it by 0.5 percentage points. However much the IMF may downgrade the growth forecasts to start, history suggests the ultimate blow will be worse.”
Those clouds shrouding the global economy are unlikely to lift for a while. Federal Reserve chair Jerome Powell said on April 16 that the US central bank is “well positioned to wait for greater clarity” before considering changes to monetary policy, while European Central Bank chief Christine Lagarde could not say whether uncertainty has peaked.
In the meantime, Ms Georgieva is hoping that the coming days, which also feature a meeting of Group of 20 finance chiefs, might lower the temperature in global trade relations.
“We need a more resilient world economy, not a drift to division,” she said. The Washington gatherings “provide a vital forum for dialogue at a vital time”.
Meanwhile, Mr Trump is again raising questions about whether he will seek to limit the Fed’s independence, as new tensions flare in his contentious relationship with the central bank. Appearing on April 20, Chicago Fed president Austan Goolsbee warned against any such efforts. BLOOMBERG
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