The Fund says the global economy's growth target has dropped by 2 percent from the initial 3.9 percent.
As Washington and Beijing trade tariffs, economic growth is slowing for both countries and others.
The outlook for world trade overall also darkened: The fund expects global trade to grow 4.2 percent this year, down from 5.2 percent in 2017 and from the 4.8 percent it expected in July.
The government is seeking to curb spending, while the central bank has raised interest rates to the highest in three years to help shore up confidence in the economy.
Compared to the medium-term risks, near-term risks have risen in the past six months but are "relatively limited" and subdued, relative to historical norms, with financial conditions still broadly accommodative and supportive of growth in the near-term, said the International Monetary Fund.
New IMF research shows emerging market countries excluding China could face debt portfolio outflows of up to $100 billion, a level last seen during the global financial crisis.
"So to address this challenge there is a need for countries to create the necessary fiscus space notably by increasing the domestic resource mobilisation, in other words, broadening their tax base so that they can capture a lot more revenues that are needed to address this challenge".
Citing the impact of USA taxes on Chinese imports, however, the International Monetary Fund shaved the outlook for China next year to 6.2 percent, which would be the country's slowest growth since 1990.
The Treasury's currency report will be released just a few weeks after the U.S. currency manipulation guidelines were included in the new United States-Mexico-Canada Agreement.
"US growth will decline once parts of its fiscal stimulus go into reverse", Mr Obstfeld said in a statement.
China and the United States have slapped tit-for-tat tariffs over the past few months, rattling financial markets as investors anxious the escalating trade war could knock global trade and investment.
The model also includes the effects of a reduction in business confidence that reduces investment and leads to a tightening of financial conditions.
The Briton Woode institution is also projecting growth of 1.9 and 0.8 percent for Nigeria and South Africa while it is predicting contraction of 0.1 percent for Angola.
The effects on the USA and China would be particularly severe, with 2019 GDP losses of more than 0.9% in the United States and 1.6% in China in 2019.
The latest of these exchanges saw US President Donald Trump impose a 10 percent tariff on $200 billion (£153 billion) worth of Chinese goods in September, which would increase to 25 percent by the end of 2018.