The International Monetary Fund warned on Thursday that US President Donald Trump's new import tariffs threaten to undermine the global trading system, prompt retaliation by other countries and damage the US economy.

"Let us not understate the macroeconomic impact," IMF Director Christine Lagarde said, saying the tariffs will have a larger economic toll if they prompt retaliation from trading partners like Canada and Germany.

Angela Merkel, IMF chief Christine Lagarde and Donald Trump Credit:AP

The IMF, in a review of US economic policy, also took a much less optimistic view on America's economic growth potential than that of the Trump administration.

While US economic growth is expected to be strong this year and next, recent tax and spending measures could cause greater risks from 2020 onwards, the IMF said in its report.