For the first time in two years, the International Monetary Fund expressed skepticism for global growth in the coming years as the organization cut its forecast for economic growth in 2018 and 2019, citing escalating trade wars as the prime disruptor.

“There are clouds on the horizon. Growth has proven to be less balanced than we had hoped,” said IMF Chief Economist Maurice Obstfeld. “Not only have some downside risks we identified in the last WEO been realized, the likelihood of further negative shocks to our growth forecast has risen.”

According to the IMF, both the United States and China would feel the implications of the tit-for-tat tariff war between the two economic superpowers starting next year. Furthermore, rising interest rates will also divert investment capital from emerging markets, causing further pain abroad.

The IMF is expected to meet this week in Bali, Indonesia for its annual meetings with trade wars and the Federal Reserve’s tightening monetary policy being main topics of discussion. The IMF’s global growth outlook comes as U.S. equities have been feeling downward pressure as of late with rising Treasury yields dominating the financial news.

“A catalyst like earnings will give investors something to look forward to but right now it’s just a continuation of negative news for equities, with higher yields and slowing global growth,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

China Prepping for Lengthy Trade War

A white paper published by China last month revealed that the country can economically withstand the effects of a long, drawn-out trade war with the United States, but it took extra measures for preparation when the Chinese central bank cut the amount of reserves held by banks.

The move was announced on Sunday when the People’s Bank of China instituted a 100 basis points cut to the reserve requirement ratio for a majority of banks, resulting in a capital injection of 750 billion yuan or $109.2 billion to help shore up the banking system. The central bank confirmed that this latest policy move was done in accordance with the pace of the economy as opposed to an accommodative move.

Nonetheless, the words alluding to resiliency may be just that, according to some experts and that the situation is more dire than China is leading the markets to believe.

“China is probably facing its worst period since the global financial crisis. All news is against it,” said Fraser Howie, an independent analyst who has covered China and its financial system.

“They certainly want to play down any talks of panic or near panic … but they’re clear it’s not business as usual in China,” Howie added.

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