Lagarde: Trade threats clouding growth outlook
WASHINGTON: Countries need to avoid being sucked into a protectionist spiral that undermines the momentum of the global economy, International Monetary Fund managing director Christine Lagarde said.
The IMF remains optimistic about global growth prospects, Lagarde said in a speech in Hong Kong ahead of next week’s annual spring meetings of the fund’s 189 member nations here.
The world economy is benefiting from surging investment, rebounding trade and favourable financial conditions, all of which are encouraging companies and households to step up spending, Lagarde said.
The IMF will update its global forecast on April 17. The fund said in January it expects the global economy to grow 3.9% this year and next.
Still, she warned that threats loom, most notably a surge in protectionism. “Yes, the current global picture is bright. But we can see darker clouds looming.”
Lagarde said the rise of the global trading system reduced extreme poverty, cut living costs and created millions of high-paying jobs. “But that system of rules and shared responsibility is now in danger of being torn apart,” she said. “This would be an inexcusable, collective policy failure.”
The IMF’s warning comes as the US and China engage in a war of words over trade that has unsettled financial markets and raised doubts about the broadest global growth surge in years. President Donald Trump has threatened to impose tariffs on US$150bil in Chinese imports to punish Beijing for what the US sees as abuse of its intellectual-property rights. China has responded by threatening to slap tariffs on everything from American soybeans to planes.
Without referring directly to the US or China, Lagarde warned that import restrictions hurt everyone, especially poor consumers. Such barriers prevent trade from playing its “essential” role in boosting productivity and diffusing new technologies, she said.
Lagarde said unfair trading practices have little effect on a country’s overall trade deficit. “That imbalance is driven by the fact a country spends above its income.”