US, China in 'phony war' over trade: International Monetary Fund

With China and the US locked in difficult trade relations with President Trump threatening an all-out trade war, the International Monetary Fund(IMF) said it more of a "phony" trade war.

Maurice Obstfeld, Economic Counsellor and Director of the Research Department at the IMF said," I am not sure anyone has a formal definition of a trade war. It is certainly the case that shots have been fired and negotiations are going on on a largely bilateral basis."

Trump has often lashed out at China for following "unfair trade practices" focussing on "trade imbalances" with the Communist state. Last month the US president imposed tariffs worth $60 billion on Chinese imports.

"You know, at this point, although some warning shots have been fired, it is more of a phony war," Obstfeld said.

"But, again, no formal definition. I think if we get into a cycle of very widespread actions and counteractions, we would begin to see significant economic effects, and that would be, whether you call it a trade war or not, would be very worrisome," Obstfeld observed.

China has insisted it does not want to get into a trade war, however, in retaliatory action itimposed tariffs of upto 25 per cent on 128 US products including frozen fruits and nuts.

"There are not going to be any winners coming out of a trade war," Obstfeld said.

"While some governments are, indeed, pursuing substantial economic reforms, trade disputes risk diverting others from the constructive steps they would need to take now to improve and secure growth prospects," he said.