Technological fragmentation could lead to losses of around 5 percent of global GDP, research by the IMF shows.
Technological decoupling between the US and China, and possibly Europe, would reduce global gross domestic product by an order of magnitude larger than the recent trade war, a senior International Monetary Fund official warned.
“The world is such an integrated place,” said Helge Berger, head of the fund’s China mission, in an interview with Bloomberg Television Friday. “If you stop sharing knowledge across countries or borders, you end up paying a price, and it could be quite high.”
The IMF estimates that technological fragmentation could result in losses of around 5% of GDP in many countries, roughly 10 times the estimated cost of US and China-imposed trade tariffs.
The warning comes after the Biden government earlier this month added seven Chinese supercomputer companies to the list of companies US companies cannot sell to without special permission. It was an extension of what President Donald Trump began by restricting exports to companies like Huawei Technologies Co.
The Biden team is still reviewing Trump-inherited China policies – including tariffs on annual imports of more than $ 300 billion and a partial trade deal – but has indicated that its strategy will be broadly similar.
“The tension related to US-China relations is one of the risk factors we are looking at,” said Berger. “This is an ongoing concern.”
Tariffs between the two countries were pulled from growth last year and would do so again this year, he said, estimating the global impact at around 0.4% of GDP.
“But it could be more difficult if we allow technological decoupling between the US and China and between other countries like Europe,” he said. “So it’s important that these two big, very important economies that make up so much of the global economy find a way to work together.”
