Christine Lagarde has warned that the escalating US-China trade war could deliver a “shock” to already struggling emerging markets, raising the prospect that a crisis ripping through Argentina and Turkey could spread across the developing world.  The IMF managing director told the Financial Times that her staff does not yet see “contagion” spreading to multiple countries beyond those currently fighting investor flight. But she warned that “these things could change rapidly” and cited the “uncertainty [and] lack of confidence already produced by the threats against trade, even before it materialises”, as one of the main dangers facing the developing world.

Ms Lagarde’s comments came as Donald Trump, US president, is preparing to slap new tariffs on $200bn of Chinese imports, sharply ratcheting up the US trade war with Beijing. China vowed to retaliate and Mr Trump has said he is prepared to impose levies on a further $267bn in Chinese products in response.  The brinkmanship has intensified just as emerging markets are struggling to win back market confidence after a sharp sell-off triggered by a rising US currency, which has raised questions about whether governments and companies can pay off billions in dollar-denominated debt.

So far, the developing world crisis has focused on Argentina and Turkey, both of which have specific fiscal or political issues that have raised investor concern. But countries as diverse as South Africa, Indonesia and Brazil have in recent weeks seen outflows, raising the risk of a broader crisis. Turkey’s central bank is due to meet on Thursday after signalling that it was prepared to raise rates to restore investor confidence, and Argentina has asked the IMF to speed up a $50bn bailout loan to shore up its finances.