LET US NOT UNDERSTATE THE MACROE­CO­NOMIC IM­PACT (OF TRUMPS’ IM­PORT TAR­IFFS) — CHRIS­TINE LAGARDE Trump’s tar­iffs global trade risk, IMF says

National Post (Latest Edition) - - FINANCIAL POST - Lind­say dun­smuir

WASH­ING­TON • The In­ter­na­tional Mone­tary Fund warned on Thursday that U.S. Pres­i­dent Don­ald Trump’s new im­port tar­iffs threaten to un­der­mine the global trad­ing sys­tem, prompt re­tal­i­a­tion by other coun­tries and dam­age the U.S. 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.

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

While U.S. 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.

Trump has riled key by pur­su­ing pro­tec­tion­ist trade poli­cies, in­clud­ing the im­po­si­tion of steel and alu­minum tar­iffs on the Eu­ro­pean Union, Canada and Mex­ico.

“These mea­sures ... are likely to move the globe fur­ther away from an open, fair and rules-based trade sys­tem, with ad­verse ef­fects for both the U.S. econ­omy and for trad­ing part­ners,” the Wash­ing­ton-based in­ter­na­tional lender said.

Trump stunned his coun­ter­parts by back­ing out of a joint com­mu­nique agreed by Group of Seven lead­ers in Canada last week­end that men­tioned the im­por­tance of free, fair and mu­tu­ally ben­e­fi­cial trade.

Ger­many has said the EU would im­ple­ment coun­ter­mea­sures against U.S. tar­iffs.

The IMF said a cy­cle of re­tal­i­a­tion on trade would likely dampen na­tional and in­ter­na­tional in­vest­ment, in­ter­rupt global and re­gional sup­ply chains and un­der­mine a sys­tem that has sup­ported U.S. growth and job cre­ation.

The Trump ad­min­is­tra­tion’s trade dis­pute with China has also yet to be re­solved. The United States is ex­pected on Friday to un­veil re­vi­sions to an ini­tial tar­iff list tar­get­ing US$50 bil­lion of Chi­nese goods.

China on Thursday urged the United States to make a “wise choice,” say­ing it was ready to re­spond if Wash­ing­ton chose con­fronta­tion.

Else­where in its anal­y­sis, the IMF stuck to its April fore­cast that the U.S. econ­omy will grow at a 2.9-per­cent pace in 2018.

The U.S. econ­omy is get­ting a boost from the Trump ad­min­is­tra­tion’s tax cuts and higher gov­ern­ment spend­ing, but the IMF ex­pects growth to slow con­sid­er­ably in com­ing years.

It fore­casts eco­nomic growth rates over the long term of 1.7 per cent while the Trump ad­min­is­tra­tion sees them closer to three per cent.

U.S. Trea­sury Sec­re­tary Steven Mnuchin said in a state­ment that Wash­ing­ton and the IMF “dif­fer sig­nif­i­cantly on the medium- and long-term pro­jec­tions.”

AN­DREW HARRER/BLOOMBERG

Chris­tine Lagarde, man­ag­ing di­rec­tor of the In­ter­na­tional Mone­tary Fund, says U.S. ac­tions are mov­ing the world away from an open, fair and rules-based trade sys­tem.

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