WASHINGTON (Reuters) - Removal of all U.S. and Chinese tariffs imposed since early 2018 would boost global economic output by 0.8% by the end of 2020, Gita Gopinath, chief International Monetary Fund economist, said on Tuesday.
Gopinath welcomed news that a preliminary and partial trade agreement was reached last week and urged continued work by both sides to end trade tensions, which have weighed on global growth.
She said much would depend on the details of the agreement and that global gross domestic product would be reduced by 0.8% if Washington and Beijing impose the additional tariffs due to take effect on Oct. 15 and Dec. 15, but only 0.6% if the two countries forgo the increases.
“Based on what we have right now, if all the tariffs would come off - the ones that were put in place in 2018 and 2019, including those announced - we would be talking about a boost to the level of global GDP by 0.8% by the end of 2020,” Gopinath said.
The IMF last month said global GDP would be reduced by 0.8% if all the tariffs imposed or threatened since 2018 were implemented. This was the first time the global lender made clear the positive effect of removing tariffs.
The tariffs continued to weigh heavily on business confidence, Gopinath said, adding, “It’s very important that these changes - the trade truce - has a feature of being permanent and durable.”
U.S. President Donald Trump on Friday said the world’s two largest economies had reached the first phase of a trade deal that covered agriculture, currency and some aspects of intellectual property protections, and would ease the reciprocal trade restrictions they have been imposing for 15 months.
Officials on both sides have said, however, more work is needed to finalize the accord, and Trump acknowledged the agreement could still collapse.
U.S. Treasury Secretary Steven Mnuchin said the December tariffs would take effect unless the agreement was in place, although he said he expected a deal to happen.
Mnuchin said more trade negotiations at various levels would take place over the coming weeks, including a phone call between himself, Lighthizer and Chinese Vice Premier Liu He, and talks between Trump and Chinese leader Xi Jinping.
Reporting by Andrea Shalal and David Lawder; editing by John Stonestreet and Steve Orlofsky