IMF says tariffs not the answer to trade question

The IMF said more work is needed to further reduce global trade imbalances amid increasing tensions, while issuing a fresh warning that such conflicts are weighing on the global economy.

“It is imperative that all countries avoid policies that distort trade,” the IMF said in its annual External Sector Report released in Washington.

“Against a backdrop of escalating trade tensions, greater urgency is needed in tackling persistent excess imbalances,” the fund said.

The report comes as the Washington-based fund confronts a surge in protectionism around the world that’s seen dragging on global growth, with output slowing in major economies from China to Europe and Mexico. IMF leadership also is in flux with managing director Christine Lagarde set to succeed Mario Draghi as president of the ECB.

While the US trade war with China has cooled with a recent truce and talks, the world’s second-largest economy has slowed amid US president Donald Trump’s tariffs.

China’s government said this week that the economy eased to the weakest pace since quarterly data began in 1992, highlighting effects of the ongoing trade dispute with the US.

"With prolonged trade uncertainty, it’s weighing on business sentiment everywhere in the world, which then has implications for global demand,” IMF chief economist Gita Gopinath said at a press conference.

“We welcome the trade truce between the US and China that came toward the end of June at the G20 meetings, and we would hope the world would continue to work co-operatively to not only not trigger these trade tensions but also to address the issues with the multi-lateral trading system,” she said.