The International MonetaryFund warned world economic leaders on Saturday that arecent wave of trade tariffs would significantly harm global
growth, a day after U.S. President Donald Trump threatened amajor escalation in a dispute with China.

IMF Managing Director Christine Lagarde said she wouldpresent the G-20 finance ministers and central bank governorsmeeting in Buenos Aires with a report detailing the impacts ofthe restrictions already announced on global trade.

“It certainly indicates the impact that it could have on GDP [gross domestic product], which in the worst case scenario undercurrent measures … is in the range of 0.5 percent of GDP on aglobal basis,” Lagarde said at a joint news conference withArgentine Treasury Minister Nicolas Dujovne.

In the briefing note prepared for G-20 ministers, the IMFsaid global growth might peak at 3.9 percent in 2018 and 2019,while downside risks have increased because of the growing tradeconflict.

Her warning came shortly after the top U.S. economicofficial, Treasury Secretary Steven Mnuchin, told reporters inthe Argentine capital there was no “macro” effect yet on theworld’s largest economy.

Long-simmering trade tensions have burst into the open inrecent months, with the United States and China — the world’s largest and second-largest economies — slapping tariffs on $34billion worth of each other’s goods so far.

The weekend meeting in Buenos Aires comes amid a dramaticescalation in rhetoric on both sides. Trump on Friday threatenedtariffs on all $500 billion of Chinese exports to the UnitedStates.

Mnuchin said that while there were some “micro” effects, such as retaliation against U.S.-produced soybeans, lobsters andbourbon,he did not believe that tariffs would keep the UnitedStates from achieving sustained 3 percent growth this year.

“I still think from a macro basis we do not see any impacton what’s very positive growth,” Mnuchin said, adding that he wasclosely monitoring prices of steel, aluminum, timber andsoybeans.

G-7 allies

The U.S. dollar fell the most in three weeks on Fridayagainst a basket of six major currencies after Trump complainedagain about the greenback’s strength and about Federal Reserveinterest rate increases, halting a rally that had driven the dollarto its highest level in a year.

Mnuchin will try to rally G-7 allies over the weekend to jointhe United States in more aggressive action against China, butthey may be reluctant to cooperate because of U.S. tariffs onsteel and aluminum imports from the European Union and Canada,which prompted retaliatory measures.

Mnuchin said he would tell G-7 allies that the Trumpadministration was ready to make a trade deal with them and hadplaced a high priority on completing the North American FreeTrade Agreement (NAFTA) with Mexico and Canada.

“If Europe believes in free trade, we’re ready to sign afree-trade agreement,” he said, adding that a deal would requirethe elimination of tariffs, nontariff barriers and subsidies.

“It has to be all three issues.”

French Finance MinisterBruno Le Maire, however, said at the G-20 meeting thatthe European Union could notconsider negotiating a free-trade agreement with the United States unless Washington withdrew its steel
and aluminum tariffs first.

Le Maire saidthere was no disagreement between France and Germany over howand when to start trade talks with the United States. Bothagreed Washington needs to take the first step by eliminatingtariffs, he said.

Previous session

The last G-20 finance meeting in Buenos Aires in late Marchended with no firm agreement by ministers on trade policy, exceptfor a commitment to “further dialog.”

German Finance Minister Olaf Scholz said he would use themeeting to advocate for a rules-based trading system, but thatexpectations were low.

“I don’t expect tangible progress to be made at thismeeting,” Scholz told reporters on the plane to Buenos Aires.

The U.S. tariffs will cost Germany up to 20 billion euros($23.44 billion) in income this year, according to the head ofGerman think-tank IMK.

Bank of Japan Governor Haruhiko Kuroda said he hoped thedebate at the G-20 gathering would lead to an easing ofretaliatory trade measures.

“Trade protectionism benefits no one involved,” he said. “Ithink restraint will eventually take hold.”

Protests

Host country Argentina is one of the world’s most closedeconomies, after a string of populist leaders implementedtariffs and restrictions on foreign capital to protect domesticindustry. Market-friendly President Mauricio Macri has removedmany of those barriers, generating popular backlash as factory
employment has nosedived.

A currency crisis this year prompted Argentina to seek IMFfinancing, a political risk for Macri since many Argentinesblame Fund-imposed austerity for making its 2001-02 economiccollapse worse. Opposition politicians led a protest againstLagarde’s presence on Saturday.

“This deal will mean a tougher, more severe adjustment forworking people,” said Nicolas del Cano, a lawmaker for theSocialist Workers’ Party, calling for a national strike to”defeat” the IMF deal.

Lagarde said on Saturday that Argentina was “unequivocally”making progress on its deficit reduction targets agreed to as partof the $50 billion deal.

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