IMF members pledge to avoid using currencies in trade war

US Treasury Secretary Steve Mnuchin reiterated his concern over weakening yuan

■

The International Monetary Fund (IMF) said yesterday its members pledged to refrain from competitive currency devaluations and step up dialogue on trade, as escalating trade frictions and higher borrowing costs threatened to knock global growth.

The agreement came as US Treasury Secretary Steve Mnuchin reiterated his concern over the yuan’s weakening against the dollar — a drop that Washington suspects may be aimed at giving Chinese exports a trade advantage and offsetting US tariffs.

In a communique issued by the IMF’s steering committee, member countries also agreed to debate ways to improve the World Trade Organisation to better address trade disputes.

“We acknowledge that free, fair, and mutually beneficial goods and services trade and investment are key engines for growth and job creation,” the International Monetary and Financial Committee (IMFC) said in the statement.

“We’ll refrain from competitive devaluations and will not target exchange rates for competitive purposes,” it added.

Fears that escalating global trade tensions and rising US interest rates could dent growth have roiled global markets in recent days and prompted warnings of heightened risks by finance leaders gathering for the IMF and World Bank annual meetings on Indonesia’s Bali island.

“The recovery is increasingly uneven, and some previously identified risks have partially materialised,” the communique said, referring to threatened tariffs.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months, sparked by US President Donald Trump’s demands for sweeping changes to China’s intellectual property, industrial subsidies and trade policies.

Bilateral tensions flared over to currencies, with the United States voicing concern about a weakening of the yuan to close to 7 to the dollar in recent months, a level not seen in a decade. Trump has accused China of cheapening its currency to gain trade advantage.

IMF’s steering committee also agreed to debate ways to better address trade disputes, and to refrain from competitive devaluations of exchange rates.

Bloomberg Steve Mnuchin (second from right) with Nicolas Dujovne, Argentina’s economy minister (left), Taro Aso, Japan’s finance minister (second from left), and Perry Warjiyo, governor of the Bank Indonesia at the IMF and World Bank Group annual meetings in Nusa Dua, Indonesia, yesterday.