IMF Warns Asia Faces ‘Stagflationary’ Economic Outlook

Customers wearing face masks line up to weigh their purchases at a supermarket following the coronavirus disease (COVID-19) outbreak in Beijing, China April 26, 2022. (Reuters)
Customers wearing face masks line up to weigh their purchases at a supermarket following the coronavirus disease (COVID-19) outbreak in Beijing, China April 26, 2022. (Reuters)
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IMF Warns Asia Faces ‘Stagflationary’ Economic Outlook

Customers wearing face masks line up to weigh their purchases at a supermarket following the coronavirus disease (COVID-19) outbreak in Beijing, China April 26, 2022. (Reuters)
Customers wearing face masks line up to weigh their purchases at a supermarket following the coronavirus disease (COVID-19) outbreak in Beijing, China April 26, 2022. (Reuters)

The Asian region faces a "stagflationary" outlook, a senior International Monetary Fund (IMF) official warned on Tuesday, citing the Ukraine war, spike in commodity costs and a slowdown in China as creating significant uncertainty.

While Asia's trade and financial exposures to Russia and Ukraine are limited, the region's economies will be affected by the crisis through higher commodity prices and slower growth in European trading partners, said Anne-Marie Gulde-Wolf, acting director of the IMF's Asia and Pacific Department.

Moreover, she noted that inflation in Asia is also starting to pick up at a time when China's economic slowdown is adding to pressure on regional growth.

"Therefore, the region faces a stagflationary outlook, with growth being lower than previously expected, and inflation being higher," she told an online news conference in Washington.

The headwinds to growth come at a time when policy space to respond is limited, Gulde-Wolf said, adding that Asian policymakers will face a difficult trade-off of responding to slowing growth and rising inflation.

"Monetary tightening will be needed in most countries, with the speed of tightening depending on domestic inflation developments and external pressures," she said.

The US Federal Reserve's expected steady interest rate hikes also present a challenge to Asian policymakers given the region's huge dollar-denominated debt, Gulde-Wolf said.

In its latest forecast issued this month, the IMF said it expects Asia's economy to expand 4.9% this year, down 0.5 percentage points from its previous projection made in January.

Inflation in Asia is now expected to hit 3.4% in 2022, 1 percentage point higher than forecast in January, it said.

A further escalation in the war in Ukraine, new COVID-19 waves, a faster-than-expected Fed rate hike trajectory and prolonged or more widespread lockdowns in China are among risks to Asia's growth outlook, Gulde-Wolf said.

"There is significant uncertainty around our baseline forecasts, with risks tilted to the downside." she said.



Trump Threatens Canada with 35 Percent Tariff Rate Starting Aug 1

US President Donald J Trump participates in a cabinet meeting in the Cabinet Room of the White House in Washington, DC, USA, 08 July 2025.  EPA/AARON SCHWARTZ / POOL
US President Donald J Trump participates in a cabinet meeting in the Cabinet Room of the White House in Washington, DC, USA, 08 July 2025. EPA/AARON SCHWARTZ / POOL
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Trump Threatens Canada with 35 Percent Tariff Rate Starting Aug 1

US President Donald J Trump participates in a cabinet meeting in the Cabinet Room of the White House in Washington, DC, USA, 08 July 2025.  EPA/AARON SCHWARTZ / POOL
US President Donald J Trump participates in a cabinet meeting in the Cabinet Room of the White House in Washington, DC, USA, 08 July 2025. EPA/AARON SCHWARTZ / POOL

Canada will face a 35 percent tariff on exports to the United States starting August 1, President Donald Trump said Thursday in a letter to Prime Minister Mark Carney.

It was the latest of more than 20 such letters issued by Trump since Monday, as he continues to pursue his trade war threats against dozens of economies.

Canada and the US have been locked in trade negotiations in hopes of reaching a deal by July 21, but the latest threat appeared to have shifted that deadline, AFP said.

Both Canada and Mexico are trying to find ways to satisfy Trump so that the free trade deal uniting the three countries -- known as the USMCA -- can be put back on track.

"Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses. We will continue to do so as we work towards the revised deadline of August 1," Carney posted on social media platform X Thursday night.

The United States-Mexico-Canada Agreement replaced the previous NAFTA accord in July 2020, after Trump successfully pushed for a renegotiation during his first term in office.

It was due to be reviewed by July next year, but Trump has thrown the process into disarray by launching his trade wars after he took office in January.

Canadian and Mexican products were initially hard hit by 25 percent US tariffs, with a lower rate for Canadian energy.

Trump targeted both neighbors, saying they did not do enough on illegal immigration and the flow of illicit drugs across borders.

But he eventually announced exemptions for goods entering his country under the USMCA, covering large swaths of products.

The letter on Thursday came despite what had been warming relations between Trump and Carney, who has been faced with his counterpart's regular musings that Canada should become the 51st US state.

Reciprocity

The Canadian leader came to the White House on May 6 and had a cordial meeting with Trump in the Oval Office.

They met again at the G7 summit last month in Canada, where leaders pushed Trump to back away from his punishing trade war.

Canada also agreed to rescind taxes impacting US tech firms that had prompted Trump to retaliate by calling off trade talks.

Separately, Trump announced in an interview with NBC that he was also thinking of slapping blanket tariffs of between 15 and 20 percent on August 1 on countries that had not yet received one of his letters.

The letters announce tariff rates of as much as 50 percent in the case of Brazil to kick in on August 1 unless better terms can be found before then.

Trump told NBC that the letter to the 27-country European Union, the US's biggest trading partner, would be sent "today or tomorrow (Friday)."

Brazilian President Luiz Inácio Lula da Silva said on Thursday that he is willing to negotiate with the United States after Trump said he would hit the country with his tough tariff.

He however reiterated that the Brazilian government is evaluating reciprocity measures.

In his letter addressed to Lula, Trump criticized the treatment of his right-wing ally Jair Bolsonaro.