The US economy is still seen growing by 2.9 per cent this year, and the estimate for China remains 6.6 per cent, with little impact expected near term from the tariffs on tens of billions of dollars in exports the countries have imposed on each other so far.
"But the risk that current trade tensions escalate further - with adverse effects on confidence, asset prices, and investment - is the greatest near-term threat to global growth," IMF Chief Economist Maurice Obstfeld said.
The fund warns growth could be cut by a half point by 2020 if tariff threats are carried out.
The report comes as US President Donald Trump has imposed steep tariffs duties on USD 34 billion in imports from China, with another USD 200 billion coming as soon as September, on top of duties on steel and aluminum from around the world including key allies.
China has matched US tariffs dollar for dollar and threatened to take other steps to retaliate, while US exports face retaliatory taxes from Canada, Mexico and the European Union.
"An escalation of trade tensions could undermine business and financial market sentiment, denting investment and trade," the IMF report said.
In addition, "higher trade barriers would make tradable goods less affordable, disrupt global supply chains, and slow the spread of new technologies, thus lowering productivity."
However, without steps to "ensure the benefits are shared by all, disenchantment with existing economic arrangements could well fuel further support for growth-detracting inward-looking policies."
And while the fiscal stimulus will boost US demand, is also will increase inflationary pressures, the WEO warned.
China's growth also is seen slowing in 2019 to 6.4 per cent.
After upgrading growth projections for the euro area in the April WEO, the IMF revised them down by two-tenths in 2018 to 2.2 per cent, due to "negative surprises to activity in early 2018," and another tenth in 2019 to 1.9 per cent.
The estimates for Germany, France and Italy were cut by 0.3 points each, with Germany seen expanding by 2.2 per cent this year and 2.1 per cent in 2019. France's GDP is expected to grow 1.8 per cent and 1.7 per cent.
Japan's GDP is seen slowing to 1.0 percent this year, two-tenths less than previously forecast, "following a contraction in the first quarter, owing to weak private consumption and investment." It should grow 0.9 per cent the following year.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)