The International Monetary Fund again reduced its global economic growth forecast for 2019 on Tuesday, referring to risks such as rising trade tensions and tighter monetary policy by the Federal Reserve.
USMCA b le signed November 30, but has not yet received the congressional approval and get it through the legislature will be tough for the administration. The deal must come through the democratically controlled house and was criticized by Republican Senator Chuck Grassley. The Senate noted that tariffs on Mexican and Canadian goods should be offset when an agreement is ratified. However, Trump has not shown that he is willing to do so.
If the agreement between the three countries falls, the consequences for the US economy will be enormous. Canada and Mexico are two of US & # 39; Three major trading partners accounted for 30% of US world trade by 201
"Higher commercial uncertainty and concerns about escalation and retaliation will reduce business investment, disrupt supply chains and slow productivity growth," the IMF said. "The resulting depressed outlook for business profitability can destroy the financial market and further dampen growth."
The United States also attempts to enter into an agreement with China, the largest trading partner. China alone accounted for nearly 16% of US world trade last year, according to the number states. But while negotiations between the two countries are still ongoing, the outlook appears to be promising.
27. March, Reuters said China had made outstanding progress on issues such as forced technology transfers, which have suffered during negotiations with US Trump, also said Thursday "we will know over the next four weeks" whether an agreement between the world's largest economies can be hit.
The apparent increase in trade negotiations between the United States and China increased the stocks of world stocks this year. IShares MSCI World Exchange-traded Fund (URTH) has increased more than 15% in 2019. The S&P 500 has also rallied more than 15%.
But the failure to find an agreement would hurt the US financially and will also track China's efforts to revive its economy, warns the IMF. China's economy expanded by 6.6% in 2018, which was the slowest pace for nearly 30 years.
Another risk of global economic growth, according to the fund, is a change in monetary policy by central banks, especially the Federal Reserve. 19659003] The Federal Reserve reversed its stance on politics earlier this year, eliminating all expectations of a single rate hike for 2019. This follows four interest rate increases by the US central bank in 2018. Fed reversal contributed to the market's warm start to 2019 with S & P 500 listing its biggest first quarter gain since 1998.
However, the IMF said: "The market trend of expected interest rates is below the Federal Open Market Committees estimate, which increases the possibility of market reassessment of the expected policy path if US economic data remains strong. higher US interest rates, renewed dollar valuation and tighter economic conditions for emerging markets and developing economies with vulnerabilities in the balance sheet. "
Other risks highlighted by the IMF include non-contractual, political uncertainty as several countries around the world hold elections and geopolitical tensions in east Asia.
CNBCs Jacob Pramuk contributed to this report.
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