The International Monetary Fund(IMF) has warned that a growing risk of a trade war is weighing on the global economy, calling for efforts to reduce imbalances without distorting trade. 

The IMF issued the warning on Wednesday in its "External Sector Report," an annual assessment of currencies and external surpluses and deficits of major economies.

The report said that recent trade policy actions are weighing on global trade flows, eroding confidence and disrupting investment.

The Fund said that instead of tit-for-tat tariffs, surplus and deficit countries should work to revive liberalization efforts and strengthen the rules-based multilateral trading system that has been in effect for the past 75 years.