The International Monetary Fund (IMF) cautioned on Tuesday that retaliatory tariffs may negatively impact Asia’s economic outlook, increasing expenses and causing disruptions in supply chains, despite anticipating the region to continue being a crucial driver of global economic growth.

These observations were made by IMF Asia-Pacific Director Krishna Srinivasan during a systemic risk forum in Cebu. Srinivasan’s remarks arise amid apprehensions concerning US President-elect Donald Trump’s plans to impose a 60% tariff on Chinese exports and 10% on other nations.

The levies could obstruct global trade, stifle growth in exporting nations, and potentially stimulate inflation in the United States. This, in turn, could precipitate tighter monetary policy by the U.S. Federal Reserve despite a mediocre global growth forecast.

This assessment follows the European Union’s decision to hike tariffs on Chinese-manufactured electric vehicles to as much as 45.3%, triggering retaliatory measures from Beijing.

The IMF’s latest World Economic Outlook estimates a less optimistic 3.2% global economic growth for both 2024 and 2025, compared to its brighter projections of 4.6% and 4.4% for Asia for the same periods.

Srinivasan stressed the “acute risk” of escalating trade tensions across principal trading partners due to Asia’s ongoing significant transition. He mentioned that uncertainty around monetary policy in advanced economies could impact Asian monetary decisions, affecting global capital flows, exchange rates, and other financial markets.