Currently, the biggest threat to the development and growth of the global economy is the ongoing trade war between the United States and China, believes the incoming European Central Bank President Christine Lagarde.

The head of the International Monetary Fund since 2011, Lagarde was appointed to the post in July this year and will be replacing the current European Bank chief Mario Draghi from November 1.

About 0.8 per cent would be wiped off the off global economic growth in 2020 because of the tit for tat tariffs that the US and China have imposed on each other’s goods worth billions of dollars, Laragde said.

“That’s a massive number,” Lagarde said in an interview in a television program. “It’s fewer jobs. It’s less business going on. It’s less investment. It’s more uncertainty. It weighs like a big, dark cloud on the global economy,” she added.

“I think trade — threat against trade at the moment — is the biggest hurdle for the global economy, yes, indeed,” she said.

Following a face to face meeting between the deputy trade representatives meeting of the US and China last week in Washington, trade representatives of the two countries are expected to meet for further talks on a possible trade agreement in Washington in early October. The trade war with the tit for tat tariffs have been ongoing since June last year and it has severely impacted global financial markets and raised serious concerns about the world wide economic recession because of slowing global trade.

“The longer this lingers, the more uncertainty sinks in. And if you’re an investor, if you’re an enterprise, whether small, medium size or big, you’re not going to invest, you’re going to wait. You’re going to sit and wonder where the supply chains are going to be organized,” Lagarde said during the television interview.

In addition to being engaged in the direct trade war with China, US president Donald Trump has also threatened to slap import tariffs on Europe and has criticized the so called protectionist policies of Europe. However following a recent meeting with trade leaders of the European Union, Trump made some positive comments and presented an upbeat tone over the possibilities of a fair trade agreement without the need for slapping of threatened tariffs on car imports into the US form Europe.

“Europe and the United States have been friends for decades and centuries, have often, you know, been on the same side of the battlefield and have rescued each other on many occasions,” Lagarde said. “And I’m very grateful to the United States for that. It’s not a relationship that should turn into any kind of trade war at all.”

The tenure as IMF chief had seen Lagarde successfully implement bailout schemes for Greece, Portugal and Ireland when the countries were pushed into a sovereign debt crisis which was prevalent between that peaked in 2001 and 2012.

(Adapted from CNBC.com)

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