The IMF says trade barriers are rising or investment costs are rising.
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Recent studies by the International Monetary Fund (IMF) show that escalating trade tensions, tariffs and other trade barriers will erode a key benefit of trade integration - lower capital investment costs - especially for emerging markets.
The findings were released Wednesday as part of the IMF's latest World Economic Outlook report. The study finds that the prices of machinery and capital goods have dropped dramatically over the past 30 years, benefiting from the efficiency gains brought about by globalization, productivity improvement and deepening trade integration.
These price declines have prompted investment to become an engine for the expansion of emerging market economies. Because of the need to import goods and technology, investment costs in emerging markets tend to be higher than in developed economies. Trade provides a often overlooked "boost" to such investment, according to the study.
"Rising tariff and non-tariff barriers could undermine cross-border supply chains, reduce production efficiency, slow or even reverse the downward trend in capital prices," the IMF said.
The disruption of the supply chain may increase the cost of goods. Tariff measures in the United States have led to the transfer of production activities of some products from China, which has caused damage to the supply chain.
The impact may be more pronounced in emerging markets and developing economies. These economies have paid relatively high prices for products such as computers and machinery, partly because they are inefficient in their production and require imports.
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