IMF: China Would Suffer More In All-out Trade War

An all-out trade war would severely damage Chinese and US economies but could also be a boon to countries like Canada and Mexico, the International Monetary Fund said on Wednesday.

The world's top two economies themselves would be the biggest losers in the event of a 25 per cent hike in duties on all trade in goods, the IMF said in a report released ahead of next week's spring meetings, to be held jointly with the World Bank.

Bilateral US-China trade could fall by up to 30 percent in the short-term as a result and by as much as 70 percent later on – taking sizable chunks out of both countries' economies.

The 2019 spring meetings fall just as US and Chinese officials say they are in the home-stretch of negotiations to resolve their eight-month trade war, in which Beijing has put tariffs on all its US merchandise imports while Washington has slapped duties on about half of its Chinese imports – more than US$360 billion in two-way goods trade.

Citing success in the talks, US President Donald Trump has suspended plans to raise duties on a US$200 billion tranche of Chinese goods to 25 per cent, keeping them at the current 10 per cent.

According to a range of models cited by the report, the hypothesis showed annual growth in China could be 1.5 per cent lower, while such a scenario could shave as much as 0.6 perc ent off growth in the United States.

"The effect on China is typically larger across all models, as exports to the United States represent a larger share of the Chinese economy (than vice versa)," the report said.

Under the scenario explored by the IMF, Canada and Mexico could ultimately benefit as they export more to the United States, making up for the shortfall in US imports from China. (AFP)