Chinese President Xi Jinping stands by national flags. Johannes Eisele | AFP | Getty Images

The International Monetary Fund is urging the world's two largest economies to resolve the escalating trade war quickly and fairly. In a new report published Friday by the executive board at the IMF, directors recommended a "comprehensive" agreement on trade that avoids "undermining the international system." "China and its trading partners should work cooperatively and constructively to settle their disputes in a rules-based multilateral framework and make joint efforts to reform the WTO in a good faith and win-win approach," Jin Zhongxia, executive director for China at the IMF, said in a press release. "That is not only good for China and the U.S., but also for the international community as a whole."

The report outlined tariff-related headwinds for China's economy. Directors emphasized that China would benefit from "further opening up of the economy and other reforms that enhance competition." The country's GDP growth slowed to 6.6 percent in 2018 and is projected to moderate to 6.2 percent this year, according to the IMF. China's planned stimulus was offset by the U.S. imposing tariffs on $200 billion of Chinese goods. The IMF said trade tensions have "inevitably affected" the Chinese economy, "but the impact is manageable." "While a moderate slowdown is expected in 2019, uncertainty around trade tensions remains high and risks are tilted to the downside," the IMF directors said.

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