Don’t rock the boat, IMF warns policymakers on trade

The International Monetary Fund warned governments not to rock the boat with trade wars and other disruptions at a time when the global economy is already sailing through choppy waters.

“We see downside risk and that means one has to be very careful,” IMF First Deputy Managing Director David Lipton told Bloomberg Television on Friday. “With trade tensions, not knowing where monetary policy is going to go, not knowing how Chinese growth will turn out, it’s time to make sure policymakers do no harm.”

He urged the US and other nations to resolve their trade conflicts -- a key downside risk the IMF has repeatedly warned about since President Donald Trump began imposing tariffs last year. “The last thing we want is another downturn,” Lipton said, on the sidelines of the fund’s spring meetings in Washington.

The threat of political missteps is looming over the global economy amid a backlash against free trade that has fueled the rise of populist governments around the world. The IMF this week downgraded its outlook for world growth in 2019 to the lowest since the financial crisis a decade ago, as conditions worsened in most major advanced economies.

The US and China are locked in tense negotiations aimed at ending their nine-month trade war. Even if they do come to an agreement, a trade deal between the world’s two biggest economies could have unintended consequences if China commits to purchases of US goods that crowds out imports from other countries in Asia, the head of the IMF’s Asia-Pacific department Changyong Rhee said Friday.

There’s also a risk of new fronts breaking out in the trade war. The European Union is considering hitting 10.2 billion euros (Sh1.1 trillion) of US goods with retaliatory tariffs over subsidies to Boeing Co, according to a draft list seen by Bloomberg News.