The intensifying trade war between China and the United States could “shock” emerging markets that are already in danger, the head of the International Monetary Fund said in an interview published Tuesday, AFP reports.
As a result, crises in Turkey and Argentina could spread, IMF managing director Christine Lagarde told the Financial Times.
After imposing steep tariffs on Chinese industrial goods in July, president Donald Trump is poised to slap 25 per cent tariffs on a further $200 billion in imports from China.
Last week, Trump warned he was ready to impose yet more duties on all remaining US imports from that country.
Beijing has so far imposed counter-tariffs in equal measure and has vowed to retaliate in kind, even though it exports more to the United States than it imports.
If the world’s largest two economies continue on this course, it could have a “measurable impact on growth in China” and could “trigger vulnerabilities” in neighboring Asian economies whose supply chains are closely linked to Chinese industry, Lagarde told the newspaper.
Some emerging economies find themselves in precarious situations, with currencies weakening in part due to the strong US dollar and investors looking instead to the United States, where benchmark lending rates are steadily rising.
Weakening emerging market currencies could also affect eurozone exporters such as Germany and Spain.
Earlier in the year, Lagarde had already warned against the dangers of a global trade war, hammering the argument that trade in goods and services was a driver of global growth.
She also said a key risk was weakening investor confidence.