BUENOS AIRES (REUTERS) - The International Monetary Fund (IMF) warned world economic leaders on Saturday (July 21) that a recent wave of trade tariffs would significantly harm global growth, a day after US President Donald Trump threatened a major escalation in a dispute with China.

IMF managing director Christine Lagarde said she would present the Group of 20 finance ministers and central bank governors meeting in Buenos Aires with a report detailing the impacts of the restrictions already announced on global trade.

"It certainly indicates the impact that it could have on GDP (gross domestic product), which in the worst case scenario under current measures... is in the range of 0.5 per cent of GDP on a global basis," Lagarde said at a joint news conference with Argentine Treasury Minister Nicolas Dujovne.

In the briefing note prepared for G-20 ministers, the IMF said global growth may peak at 3.9 per cent in 2018 and 2019, while downside risks have increased due to the growing trade conflict.

Her warning came shortly after the top US economic official, Treasury Secretary Steven Mnuchin, told reporters in the Argentine capital there was no "macro" effect yet on the world's largest economy.

Long-simmering trade tensions have burst into the open in recent months, with the United States and China - the world's largest and second largest economies - slapping tariffs on US$34 billion (S$46 billion) worth of each other's goods so far.

The weekend meeting in Buenos Aires comes amid a dramatic escalation in rhetoric on both sides. Trump on Friday threatened tariffs on all US$500 billion of Chinese exports to the United States.

Mnuchin said that - while there were some "micro" effects such as retaliation against US-produced soybeans, lobsters and bourbon - he did not believe that tariffs would keep the United States from achieving sustained 3 per cent growth this year.

"I still think from a macro basis we do not see any impact on what's very positive growth," Mnuchin said, adding that he is closely monitoring prices of steel, aluminium, timber and soybeans.

G-7 ALLIES

The US dollar fell the most in three weeks on Friday against a basket of six major currencies after Trump complained again about the greenback's strength and about Federal Reserve interest rate rises, halting a rally that had driven the dollar to its highest level in a year.

Mnuchin will try to rally G-7 allies over the weekend to join the United States in more aggressive action against China, but they may be reluctant to cooperate because of US tariffs on steel and aluminium imports from the European Union and Canada, which prompted retaliatory measures.

Mnuchin said he would tell G-7 allies that the Trump administration is ready to make a trade deal with them and has placed a high priority on completing the North American Free Trade Agreement (Nafta) with Mexico and Canada.

"If Europe believes in free trade, we're ready to sign a free trade agreement," he said, adding that a deal would require the elimination of tariffs, non-tariff barriers and subsidies. "It has to be all three issues."

The last G-20 finance meeting in Buenos Aires in late March ended with no firm agreement by ministers on trade policy except for a commitment to "further dialogue."

German Finance Minister Olaf Scholz said he would use the meeting to advocate for a rules-based trading system, but that expectations were low.

"I don't expect tangible progress to be made at this meeting," Scholz told reporters on the plane to Buenos Aires.

The US tariffs will cost Germany up to €20 billion (S$32 billion) in income this year, according to the head of German think-tank IMK.

Bank of Japan Governor Haruhiko Kuroda said he hoped the debate at the G-20 gathering would lead to an easing of retaliatory trade measures.

"Trade protectionism benefits no one involved," he said. "I think restraint will eventually take hold."

PROTESTS

Host country Argentina is one of the world's most closed economies, after a string of populist leaders implemented tariffs and restrictions on foreign capital to protect domestic industry. Market-friendly President Mauricio Macri has removed many of those barriers, generating popular backlash as factory employment has nosedived.

A currency crisis this year prompted Argentina to seek IMF financing, a political risk for Macri since many Argentines blame Fund-imposed austerity for making its 2001-02 economic collapse worse. Opposition politicians led a protest against Lagarde's presence on Saturday.

"This deal will mean a tougher, more severe adjustment for working people," said Nicolas del Cano, a lawmaker for the Socialist Workers' Party, calling for a national strike to"defeat" the IMF deal.

Lagarde said on Saturday that Argentina was "unequivocally"making progress on its deficit reduction targets agreed as part of the US$50 billion agreement.