The International Monetary Fund is warning that global output would fall by a half percentage point by 2020, if trade tensions aren't resolved. It also warned the escalating trade tensions could derail the global recovery, and is urging countries to resolve differences within the conventional multilateral trading system. From Washington, CGTN's Daniel Ryntjes reports.

For now the International Monetary Fund is sticking to its forecasts of 3.9 percent global growth for this year and for 2019.

Americans are continuing to spend as job growth continues. But because of that spending, the U.S. is buying more goods from overseas.

That's leading to higher trade deficits, the opposite of what Donald Trump is trying to achieve.

MAURY OBSTFELD CHIEF IMF ECONOMIST "The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment globally is the greatest near-term threat to the world's growth. Global current account imbalances are set to widen, owing to the United States' relatively high demand growth, possibly exacerbating frictions."

The IMF's Chief Economist says the United States is very vulnerable if the trade conflict escalates simply because it is fighting with most of its major trading partners. By contrast, the European Union could shift its exports further toward Asia and other trading partners.

MAURY OBSTFELD CHIEF IMF ECONOMIST "The United States has initiated trade actions affecting a broad group of countries and faces retaliation or retaliatory threats from China, the European Union, its NAFTA partners and Japan, among others. Our modeling suggests that if current trade policy threats are realized and business confidence falls as a result, global output could be about 0.5 percent below current projections by 2020. That's a half a percentage point."

The IMF says China is vulnerable because of its export-led economy. But as it transitions to more domestic consumption, China also has financial resources to provide support during times of vulnerability.

DANIEL RYNTJES WASHINGTON "By contrast, the United States has chosen to reduce taxes to further stimulate the economy during a period of growth. That means higher levels of public debt, and a reduced ability to stimulate its economy during the next downturn. Daniel Ryntjes, CGTN, Washington."