EDITORIAL: The International Monetary Fund (IMF) has revised global growth downward to 2.8 percent, 0.5 percentage points lower than the earlier forecast of 3.3 percent pre-Trump tariffs in January this year in its report titled World Economic Outlook.
This projection maybe completely off the mark as the duration of US tariffs on about 60 trading partners/blocs remains unclear, given the ongoing 90-day pause on tariffs on countries other than China, though Trump continues to impose tariffs on some items including car imports and steel.
Trump’s earlier prognosis that China would quickly capitulate and begin negotiations on a new trade deal, as was the case previously when US administrations compelled China to take a U-turn when the yuan was reportedly manipulated to make Chinese products more competitive, appears to be ineffective.
Lowy Institute, a Sydney-based think tank, produced the following disturbing conclusion for the US: (i) China benefited from relocation of supply chains, turbocharged by inflows of foreign direct investment, cheaper labour and an undervalued currency and today dominates global manufacturing; one may conclude from this that a reversal of this process, Trump’s stated objective of his tariff regime, is likely to take three to four years; (ii) China is the largest economy today in terms of purchasing power parity; (iii) in 2023 about 70 percent of the countries imported more from China than the USA and it is the largest trading partner for 60 countries, twice as many as the US; and (iv) in 2023, 112 economies traded more than twice as much with China as with US — up from 92 in 2018.
President Xi’s recent visit to three neighbouring countries — Vietnam, Malaysia and Cambodia — with the message that the old system of globalisation remains in force for trade with China even if the US has clearly abandoned it coupled with a Chinese airline returning the second Boeing jet to the US reflects escalation rather than a diminishing trade war. Additionally, the Chinese have warned countries against making a trade deal with the US at China’s expense, further upping its rhetoric in an intensifying trade war. In this scenario, it is relevant to note that some countries offer to end tariffs on all US imports. Vietnam, as a case in point, has been rejected by the US negotiators arguing that all non-tariff barriers must also end.
Pakistan’s growth rate has, like for other countries, been downgraded to 2.6 percent for the current year. The jury is out whether this downgrade is attributable to the overstated growth rate in the budget, a normal practice in this country that allows the government to then project higher tax revenue based on the growth rate. This view no doubt is strengthened by the fact that as repeatedly pointed out by Business Recorder the severely tightened fiscal and monetary policies under the ongoing IMF programme, with implementation critical to secure the 16 billion-dollar roll-overs by friendly countries for another year as well as the country partnership agreements with other multilaterals, presaged a growth rate of no more than between 2 to 2.5 percent. The Fund’s projection of 2.6 percent therefore may have to be further downgraded by the end of the current fiscal year, especially as the US has imposed a 29 percent tariff on Pakistani imports.
Copyright Business Recorder, 2025