Trade war threat­ens global growth: IMF

China Daily (USA) - - ACROSS AMERICA -

NUSA DUA, In­done­sia — In­ter­na­tional Mone­tary Fund Man­ag­ing Di­rec­tor Chris­tine La­garde on Thurs­day warned coun­tries of the per­ils of a trade or a cur­rency war, say­ing they could be detri­men­tal to global growth and hurt “in­no­cent by­standers”.

La­garde, at the out­set of the World Bank’s an­nual meet­ing with the IMF, urged coun­tries to “de-es­ca­late” trade fric­tions and fix global trad­ing rules, rather than aban­don them.

“We cer­tainly hope we don’t move in ei­ther di­rec­tion of a trade war or a cur­rency war. It will be detri­men­tal on both accounts for all par­tic­i­pants,” La­garde told a news con­fer­ence dur­ing the an­nual meet­ings of the IMF and World Bank on the In­done­sian re­sort is­land of Bali.

“And there would also be lots of in­no­cent by­standers.”

She also de­fended cen­tral bank rate hikes in a veiled re­buke to Don­ald Trump af­ter the US pres­i­dent blamed “crazy” Fed poli­cies for con­tribut­ing to fi­nan­cial mar­ket tur­moil. A global mar­ket sell-off rolled on fol­low­ing Trump’s com­ments.

La­garde said cen­tral bank rate in­creases such as those by the pol­icy-set­ting US Fed­eral Re­serve were jus­ti­fied by fun­da­men­tals.

“It is clearly a nec­es­sary devel­op­ment for those economies that are show­ing much im­proved growth, in­fla­tion that is pick­ing up ... un­em­ploy­ment that is ex­tremely low,” she said. “It’s in­evitable that cen­tral banks make the de­ci­sions that they make.”

Fol­low­ing a sharp Wall Street sell-off on Wednesday, Trump said the Fed­eral Re­serve “is mak­ing a mis­take”.

“I think the Fed has gone crazy,” he said.

In the shadow

Threats to growth and the trade that helps drive it are over­shad­ow­ing the gath­er­ing of fi­nance of­fi­cials, cen­tral bankers and other lead­ers on Bali, a trop­i­cal tourist des­ti­na­tion that re­flects In­done­sia’s own rapid devel­op­ment over the past three decades.

World Bank Pres­i­dent Jim Yong Kim said es­ca­lat­ing trade ten­sions be­tween the US and China could undo global progress in help­ing end ex­treme poverty.

He joined La­garde and oth­ers in warn­ing of the risks to world growth and eco­nomic devel­op­ment from threats to world trade af­ter the US im­posed tar­iffs on tens of mil­lions of dollars of Chi­nese ex­ports and China re­sponded with sim­i­lar re­tal­ia­tory taxes on im­ports of US goods.

“We’re very con­cerned about trade ten­sions,” Kim said. “Trade is very crit­i­cal be­cause that is what has lifted peo­ple out of ex­treme poverty.

“I am a glob­al­ist. That is my job. That is our only chance of end­ing ex­treme poverty. We need more trade not less trade.”

He said the World Bank was work­ing with coun­tries to pre­pare for a wors­en­ing si­t­u­a­tion be­cause if tar­iffs were im­posed to the most ex­treme lim­its there would be a “clear slow­down and the im­pact on the de­vel­op­ing coun­tries would be greater”.

La­garde said she would ad­vise Wash­ing­ton and Bei­jing to cool down.

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