Differences between U.S.-led Western nations and China-aligned economic blocs pose a threat to global trade cooperation and economic growth, as a top official from the International Monetary Fund (IMF) cautioned.
Per CNBC, IMF Deputy Managing Director Gita Gopinath stated that escalating tensions between Washington and Beijing, compounded by events like the global pandemic and Russia's invasion of Ukraine, risk undoing the gains from economic integration.
The IMF estimates that failure to bridge these divisions could cost the world's GDP up to 7%.
Besides that, the decline in trade and foreign direct investments between the US and China blocs since the Ukraine invasion further shows the gravity of the situation.
Despite the stability in the ratio of total goods trade to global GDP, low-income countries may face severe impacts due to their heavy reliance on agricultural imports and foreign investments.
In her statement, Gopinath acknowledged the importance of neutral countries like Mexico and Vietnam in maintaining global integration as the escalating tensions between major economic powers continue.
What is the conflict between China and America?
Recently, the US and China conflict largely revolved around trade disputes, tariffs, sanctions, and diplomatic strains.
While key points of contention include territorial disputes in the South China Sea and differing views on Taiwan's status, both nations managed to keep a healthy list of commerce negotiations.
However, both nations have sought to assert dominance in the market, leading to imposing restrictions on products or services from either side. In fact, VCPost recently reported a call from the US Secretary of State urging China to ensure fair treatment of US products.
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