IMF boss warns against trade, currency wars
Print Edition
The head of IMF appealed yesterday to the US and China to cool their dispute over technology policy and play by world trade rules, as tumbling share prices drove home potential perils from a clash between the world鈥檚 two biggest economies.
Global economic growth is slowing but remains strong, Christine Lagarde, managing director of the International Monetary Fund, said on the sidelines of the IMF-World Bank annual meeting, being held this week on the Indonesian island of Bali.
Countries are mostly in a 鈥渟trong position,鈥 she said, 鈥渨hich is why we believe we are not seeing what is referred to as 鈥榗ontagion.鈥欌
But the gyrations that rocked Wall Street the day before and Asia and Europe yesterday, taking the Shanghai Composite index down 5.22 percent and Japan鈥檚 Nikkei 225 nearly 4 percent, do partly reflect rising interest rates in the US and some other countries and growing uncertainty over trade, she said.
鈥淚t鈥檚 the combination of the two that is probably showing some of the tensions that we see in terms of indices, short-term indicators as well as possibly market volatility,鈥 Lagarde said.
The US and Chinese exchanges of penalty tariffs in their dispute isn鈥檛 helping, she said.
Her advice was threefold: 鈥淒e-escalate. Fix the system. Don鈥檛 break it.鈥
She acknowledged that the World Trade Organization, based in Geneva, has made scant headway in recent years toward a global agreement on trade rules that can address issues like complaints over Chinese policies US President Donald Trump says unfairly extract advanced technologies and put foreign companies at a disadvantage in a quest to dominate certain industries.
鈥淥ur strong recommendation is to escalate work for a world trade system that is stronger, that is fairer and is fit for the purpose,鈥 she said in opening remarks.
Somewhat obliquely, she said policies aimed toward an excessively 鈥渄ominant position鈥 were not compatible with free and fair trade.
The IMF has downgraded its forecast for global economic growth to 3.7 percent this year from its earlier estimate of 3.9 percent.
It also issued reports this week on government finance and financial stability that warn of the risks of disruptions to world trade.
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