The United States (US) economy is expanding faster than any other advanced nation, and in weeks will hit a historic milestone, but the International Monetary Fund (IMF) is warning it could be weakened by escalating trade wars or a sudden downturn in global financial markets.
The intensifying trade disputes have rocked financial markets over the last few weeks, and analysts at the IMF said the direction of US policy did not bode well.
For now, US data is showing little impact on the overall economy but global financial markets have been shaken by the trade conflict and the US Federal Reserve this week opened the door to cutting interest rates to salvage growth.
The IMF upgraded its forecast for US growth this year to 2.6%, while growth in 2020 is seen slowing to just under 2.0%.
In its annual review of the US economy, the IMF warned that “material risks” overshadow the outlook, including trade uncertainty, rising debt levels, and growing inequality. In contrast to the upgrade for the US, the IMF this week trimmed the outlook for China to 6.2% this year.
The IMF raised concerns that the US financial system was increasingly vulnerable to a reversal in easy financial market conditions, saying corporate leverage was historically high and underwriting standards were weakening.