IMF downgrades growth forecast

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The International Monetary Fund (IMF) has lowered expectations for US growth, citing ongoing trade tensions as the key reason.

The IMF now projects the US economy will grow at a rate of 2.5 percent in 2019, down from April's forecast of 2.7-percent growth, despite a booming US stock market and low unemployment driven in part by a massive tax cut passed late last year.

"In the US, momentum is still strong as fiscal stimulus continues to increase, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariffs imposed on 200 billion US dollars of US imports from China," the IMF report reads.

The IMF also lowered China's growth forecast for 2019 from 6.4 down to 6.2 percent, as US tariffs and Chinese countermeasures weigh the world's two largest economies.

Global growth has been downgraded to 3.7 percent in 2019, off 0.2 percentage points from April's forecast.

"If you have the world's two largest economies at odds, that is a situation in which everyone, everyone is going to suffer,” said Maurice Obstfeld, IMF's economic counselor and director of the research department.

Analysts who have monitored the growing trade tensions say the lowered forecasts have been expected, and should be taken seriously.

"This is no surprise to anyone who has been watching the economy for the last six months. Between the trade tensions between the US and China, plus the vulnerabilities emerging market economies are going through right now – plunging currencies and rising debt levels – so this is confirmation of what we've all suspected has been happening for a while," said Brai Odion-Esene, founder of SW4 Insights Inc.

"The concern here is that these factors we are seeing will continue into 2020," Odion-Esene said. "The worst case scenario if there is no resolution reached any time soon… We could see another two or three years of this."

The Trump administration has not officially responded to the report.