The International Monetary Fund sees “significant downside risks” to global growth due to renewed frictions between the US and China, the fund’s Director of the Asia and Pacific Department Krishna Srinivasan said on Friday.
After months of tentative stability in US-China relations, tensions flared in recent weeks when Washington expanded tech restrictions and proposed tariffs on Chinese ships entering US ports. China responded with similar actions, outlining tighter export controls on rare earths and other critical materials.
“If these risks materialise in greater tariffs and disruption in supply chains, then growth could be lower by 0.3 points,” Srinivasan told Bloomberg TV’s Haslinda Amin on Friday. “If there are further tensions that would also mean downside risks for China.”
Policymakers are closely watching renewed trade tensions between the world’s two biggest economies. This week, US Treasury Secretary Scott Bessent criticised a top Chinese trade official, accusing him of arriving in Washington uninvited and acting in an “unhinged” manner.
Economic activity in the Asia-Pacific region remains resilient despite bearing the brunt of US tariffs and facing elevated policy uncertainty. Still, Srinivasan said the IMF worries how trade tensions have yet to be resolved resolved.
“The great tensions are still pretty much predominant,” he said.
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The IMF expects Asia’s economic growth to slow to 4.5% this year, from 4.6% in 2024, representing a 0.6 percentage point upgrade from its April prediction when US President Donald Trump first announced import levies.
Growth is projected to further slow to 4.1% next year.
At a briefing earlier in Washington, Srinivasan highlighted three factors supporting Asian growth: strong exports, a tech boom and easier macroeconomic policies bolstered by favorable financial conditions.
However, he cautioned that risks to the outlook remain to the downside, noting that the impact of tariffs is still unfolding and could escalate, as could risk premiums and interest rates, particularly if trade policy uncertainty or geopolitical tensions rise.
