Arrow-right Camera
News >  World

IMF’s Lagarde: Trade tensions threaten global economy

Christine Lagarde, International Monetary Fund managing director, speaks during a news conference at the World Bank/IMF Spring Meetings in Washington, on Thursday, April 19, 2018. (Associated Press)
Christine Lagarde, International Monetary Fund managing director, speaks during a news conference at the World Bank/IMF Spring Meetings in Washington, on Thursday, April 19, 2018. (Associated Press)

WASHINGTON – The head of the International Monetary Fund warned Thursday that the healthiest global economy in years is threatened by rising debt levels, volatile financial markets and a simmering trade dispute between the world’s two biggest economies.

IMF Managing Director Christine Lagarde told reporters a U.S.-China trade war “will not be something that will affect only the two countries because the world is so interconnected. It will affect the global economy.”

For now, the IMF expects the global economy to grow 3.9 percent this year, the fastest since 2011. But Lagarde says “we are seeing more clouds accumulating on the horizon.” She cited trade tensions and rising global debts, which have hit a record $164 trillion. She noted that government debt in advanced economies is at the highest level since World War II.

Lagarde’s comments came at a news conference to open the spring meetings of the 189-nation IMF and its sister lending organization, the World Bank.

The three days of talks will also include discussions among the Group of 20 major economies, which account for more than 80 percent of global economic output. The United States is being represented by Treasury Secretary Steven Mnuchin and Federal Reserve Chairman Jerome Powell.

Mnuchin insisted Thursday that the administration’s imposition of tariffs on steel and aluminum imports and its consideration of penalty tariffs on up to $150 billion of Chinese imports were part of a strategy to level the playing field on trade and reduce America’s huge trade deficits with China and other nations.

“Our objective with China is to have free and fair and reciprocal trade,” Mnuchin said in an interview with the Fox Business Network.

The spring meetings are occurring as the global economy enjoys a broad-based rebound – with most regions recording growth – for the first time since the 2008 financial crisis sent the world into a deep recession.

But Lagarde said the expansion was vulnerable. Stock prices are unusually high but have been battered recently over growing concerns about President Donald Trump’s aggressive America First trade policies. The turbulence comes as the Federal Reserve ratchets up U.S. interest rates from the record low levels where they had been in the decade after the financial crisis.

While the Fed has been raising rates at a gradual pace, Lagarde expressed concern about the consequences if the Fed had to accelerate the pace of its rate hikes. A rapid succession of rate hikes could push down stock prices and potentially hurt developing countries that have come to rely on foreign investment, she said.

To guard against these risks, Lagarde called for countries to take advantage of the current good times to reduce their debt, giving them room to ramp to combat a downturn.

She called on all countries “to steer clear of all protectionism measures.” Lagarde did not directly criticize Trump’s hardball trade policies. But she urged countries not to abandon seven decades of international cooperation that she credited with “helping to reduce poverty and deliver more progress for more people than at any time in history.”

Lagarde, also interviewed on the Fox Business Network, said that the United States and China should emphasize negotiations rather than imposing tit-for-tat tariffs on each other. She said advice given long ago by Winston Churchill was still valid that “chat-chat” was better than “war-war.” She said “her strong recommendation” was that both countries should emphasize quiet negotiations.


Subscribe to the Morning Review newsletter

Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter

There was a problem subscribing you to the newsletter. Double check your email and try again, or email webteam@spokesman.com

You have been successfully subscribed!


Top stories in World

Saudi prosecutor seeks death penalty in Khashoggi killing

UPDATED: 10:19 a.m.

updated  Saudi Arabia’s top prosecutor said Thursday he’s seeking the death penalty for five suspects charged with ordering and carrying out the killing of dissident Saudi writer Jamal Khashoggi at the kingdom’s consulate in Istanbul.