The shock from trade war brings differential effects for central banks in emerging markets, in contrast with the COVID pandemic, when they could quickly ease monetary policy, the International Monetary Fund's (IMF) Gita Gopinath said.
In an interview with the Financial Times newspaper, the fund's first deputy managing director said the unpredictable impact of tariffs on developing economies and global markets would make the task of their central bankers harder.
"This time the challenge is going to be greater for them, compared to the pandemic," she said.
Gopinath said emerging markets were “steering through the fog” due to the unpredictability of Trump’s trade policy, making the situation even more precarious.
Trump’s unpredictable trade policy
Trump hit imports from almost every country in the world with a 10 percent baseline tariff in April, plus 25 percent duties on the steel, aluminium and car sectors.
He also unveiled steeper tariffs on dozens of countries, but has paused them until July to give space for negotiations.
The US and China last month agreed to lower tariffs temporarily after talks in Geneva, but Trump subsequently accused Beijing of violating the truce.
On Friday, Trump told a rally in West Mifflin, Pennsylvania, that he would double steel and aluminium tariffs to 50 percent, in a fresh escalation of his global trade war.
While Trump believes his trade war will boost the US economy, the OECD slashed its forecast for US growth to 1.6 percent -- down from 2.2 percent in its previous outlook and the biggest revision among wealthy nations.
