Concerns are mounting about a potential trade war as Donald Trump gears up for a possible re-election, with his proposal for a universal import tax of up to 20% raising alarms.

Trump has recently referred to tariffs as 'the most beautiful word in the dictionary,' a statement that has captured the attention of global markets and finance ministers.

In response to Trump's tariff proposals, the European Union is preparing to retaliate, which could escalate existing trade tensions.

Global investors are increasingly worried about Trump's tariff rhetoric and its implications for U.S.-China trade relations, which are reportedly on the decline.

During a speech at the Economic Club of Chicago, Trump reiterated his belief in tariffs as essential for protecting American jobs and industries.

Gita Gopinath, the IMF's Deputy Managing Director, warned that a tariff war between the United States and China would be 'costly for everybody,' emphasizing the need for stable economic relations.

The IMF has cautioned that a broad-based trade war could shrink the global economy by nearly 7%, an economic loss equivalent to the combined GDP of France and Germany.

Despite these challenges, Gopinath highlighted a resilient global economy, noting that central banks have successfully reduced inflation without causing significant job losses.

The IMF also pointed out rising global government debt levels, stressing the importance of rebuilding fiscal buffers during this period of steady economic growth.

Gopinath believes the current economic climate presents an opportunity for countries to prepare for future crises and shocks.

She emphasized the critical importance of maintaining good working relations between the U.S. and China for global economic stability.

Gopinath acknowledged the shifting dynamics of global trade, with U.S.-China trade rerouted through other countries due to geopolitical factors.