International Monetary Fund Managing Director Christine Lagarde on Thursday warned countries against engaging in trade and currency wars that hurt global growth and imperil “innocent bystanders.”
Formally launching the IMF and World Bank annual meetings on the Indonesian resort island of Bali, Lagarde urged countries to “de-escalate” trade conflicts and fix global trading rules instead of abandoning them.
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, rattling financial markets as investors worry that the escalating trade conflict could knock global trade and investment.
The tariffs stem from the Trump administration’s demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a $375 billion US goods trade surplus.
Share markets in Asia plunged to a 19-month low on Thursday after Wall Street’s worst losses in eight months led to broader risk aversion, partly due to the heated global trade tensions as well as rapidly rising dollar yields.
“We certainly hope we don’t move in either direction of a trade war or a currency war. It will be detrimental on both accounts for all participants,” Lagarde told a news conference. “And there would also be lots of innocent bystanders,” including countries that supply commodities and components to China, such as Indonesia.
In recent weeks, US Treasury officials have expressed concerns about China’s weakened yuan as the department prepares its semi-annual report on currency manipulation, reports Reuters.