IMF Warns on Tariffs Impacting Asia's Economic Prospects

CEBU, Philippines (Reuters) – The International Monetary Fund (IMF) cautioned on Tuesday that retaliatory tariffs could detrimentally affect Asia's economic outlook, increasing costs and disrupting supply chains, despite the region's role as a vital growth driver globally.

IMF Asia-Pacific Director Krishna Srinivasan stated at a forum in Cebu that "tit-for-tat" tariffs are jeopardizing growth across Asia, leading to extended and inefficient supply chains.

These comments follow apprehensions regarding U.S. President-elect Donald Trump's intentions to impose a 60% tariff on Chinese products along with at least a 10% tax on other imports.

Such tariffs could stifle global trade, hinder growth in exporting countries, and potentially escalate inflation in the U.S., compelling the Federal Reserve to adopt stricter monetary policies, in light of a lackluster global growth outlook.

In October, the European Union announced an escalation of tariffs on Chinese-made electric vehicles to nearly 45.3%, which prompted Beijing to retaliate.

The latest IMF World Economic Outlook projects global growth at 3.2% for both 2024 and 2025, below its more optimistic estimates for Asia, which are 4.6% this year and 4.4% the next.

Asia is undergoing a significant transition, creating increased uncertainty, which includes the acute risk of rising trade tensions among key trading nations, Srinivasan noted. He also emphasized that uncertainties in monetary policy in major economies and the implications for market expectations could impact Asian monetary decisions, affecting global capital flows, exchange rates, and other financial markets.