IMF: World trade tensions can cause shares collapse
High geopolitical risks, including world trade tensions, can cause serious corrections to stock prices, warns the International Monetary Fund (IMF) in a partial report published on Monday and quoted by Reuters.
| The report does not mention specific events such as the changes in dutiesdeclared by US President Donald Trump. The IMF notes that risk measurements based on conflict, wars, terrorist attacks, military expenses and commercial restrictions have increased sharply since 2022. |
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According to the Fund’s report, major events such as wars, diplomatic tensions or terrorist acts lead to an average monthly decline of 1% in global shares prices, and in the emerging markets – up to 2.5%.
International military conflicts, such as the Russian invasion of Ukraine in 2022, have an even stronger effect, causing an average of 5% per month, which is twice as much as a drop in other geopolitical events.
The full report is expected to be published during the IMF spring meetings and the World Bank after April 21. The Trump duties will probably be among the main topics.
| Last week Wall Street markets They noted the strongest fluctuations since the beginning of the pandemic in 2020. The main S&P 500 index fell by over 10% of Trump’s office on January 20, and the price of gold reached record values. |
A study among US consumers found that inflation concerns have been at the highest level since 1981, while a number of financial institutions warn of a growing risk of recession.
Trump’s duties have stressed more stress on the sick world economy
The IMF also emphasizes that economic uncertainty increases « end risks » – the likelihood of unexpected, major losses in investment portfolios. This, in turn, increases the risk of stock markets.
In addition, increased geopolitical risks lead to the increase in risk premiums in government debt, ie. The price of credit derivatives. They are a precaution against bankruptcy, and can also be spread to other economies through commercial and financial connections.
In its blog, the IMF also analyzes the influence of duties between the US and China between 2018 to 2024, noting that major changes in the rates have led to a decline in shares in both countries.
