The International Monetary Fund (IMF) warned today that the trade war that started last year has caused the Chinese economy to slow down. If the United States imposes tariffs, it will lead to a sharp decline in China’s growth rate.

The IMF today announced the annual report on China’s economy, pointing out that if the US side imposes a 25% tariff on exports of US goods that have not yet been subject to tariffs, it will lead to a slow economic development in China in the coming year. The IMF has recently revised China’s economic growth forecast to 6.2% this year, provided that the United States will not impose additional tariffs.

The report pointed out that if the tension between the US and China trades further, for example, the US decided to impose a 25% tariff on the remaining Chinese goods, which may reduce China’s growth rate in the next 12 months by about 0.8 percentage points.

Before the completion of this report, US President Trump has not announced that it will impose a 10% tariff on the remaining US$300 billion for US goods from September 1. After the latest round of punitive tariffs on the road, the United States will be subject to tariffs on all Chinese goods that are sold to the United States.

The IMF also once again called on the two economies to resolve the trade disputes between the two countries as soon as possible, and warned that the trade war would cause “a major global negative spillover effect.”

James Daniel, head of the IMF China Consultation Delegation, pointed out today that Trump’s new round of 10% tariffs is expected to reduce China’s economic growth by 0.3 percentage points in the coming year.

Although Daniel is not willing to comment on the current situation of the trade war, he told reporters that the IMF’s suggestion to China is that if the US-China trade situation deteriorates, the Beijing government should propose more fiscal stimulus plans and let the renminbi freely float with the market. Help absorb tariff shocks.”

He said that although the current situation needs countermeasures, China should let the renminbi “maintain flexibility and let the market drive”, which means “reducing intervention.”

However, after the US announced a new round of punitive tariffs, Beijing immediately let the yuan smash the 7 yuan to 1 dollar checkpoint. The Trump administration accused it of deliberately using currency depreciation to gain a trade advantage and officially recognized China as a currency manipulator.

The Central Bank of China subsequently took action to support the renminbi and prevented it from depreciating again.

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