Protectionist trade policies, such as the growing array of import tariffs imposed by the Trump administration, risk undermining global economic growth, the International Monetary Fund warned Tuesday, joining a chorus of manufacturers, members of Congress, and economists who have made similar arguments.
Nations with trade surpluses as well as those with trade deficits “should work toward reviving liberalization efforts and strengthening the multilateral trading system,” the organization, which works to buoy global trade and can provide emergency loans, said in its seventh External Sector Report on Wednesday.
Tariffs have become the Trump administration’s tool of choice for addressing what the president says are unfair trade practices by allies such as Canada and Europe, as well as competitors such as China. Trump has complained repeatedly about a trade imbalance, though economists have said that a deficit isn’t necessarily bad, particularly for a large consumer-driven economy like that of the U.S. According to the Bureau of Economic Analysis, America imported $568.4 billion more than it exported in 2017, wider than the year before.
Trump, a real estate developer whose campaign platform emphasized prioritizing America’s interests, took the first shot in the widening tariff spat in January, when he targeted imported solar panels and washing machines. Since then, the trade war has escalated to sweeping duties on steel and aluminum, tariffs on as much as $500 billion of Chinese products and, potentially, levies on automobiles.
Canada, Mexico, the European Union, and China have all slapped the U.S. with billions of dollars in retaliatory tariffs, and the rising trade tensions may hamper short- and medium-term growth, the G-20 finance ministers warned after a meeting in Argentina last week.
Included in the IMF’s report, titled “Tackling Global Imbalances Amid Rising Trade Tensions,” are assessments of individual countries that provide specific recommendations. For the U.S., the organization recommended resolving trade and investment “without resorting to the imposition of tariffs.”
According to the IMF’s report, U.S. fiscal policies such as last year’s tax cuts are exacerbating trade concerns even further by strengthening the dollar. The greenback’s higher valuation relative to world currencies makes U.S. products more expensive, which tends to reduce demand for U.S. exports and widen the country’s trade deficit.
In the past, Trump has supported weakening the U.S.dollar in an effort to make exports more competitive and help domestic manufacturers.
