By Temitayo Ayetoto…
Christine Lagarde, the International Monetary Fund (IMF) chief, Wednesday warned that the trade war US President Donald Trump apparently intends to provoke with tariffs on steel and aluminum would snuff out global growth.
Speaking to French radio station RTL, Lagarde said that a global trade war would create a lose-lose situation for everyone especially if countries in Asia and Europe respond with tariffs of their own.
“If international trade is called into question by these types of measures, it will be a transmission channel for a drop in growth, a drop in trade and it will be fearsome,” Lagarde said
She noted that the macro-economic impact would be serious, not only if the United States took action, but especially if other countries were to retaliate, notably those who would be most affected, such as Canada, Europe, and Germany in particular.
“In a so-called trade war, driven by reciprocal increases of import tariffs, nobody wins, one generally finds losers on both sides,” Lagarde said, adding, “we recommend an agreement between the different parties and talks”.
Trump boasted last week on Twitter that trade wars are “easy to win” after his initial announcement of 10 percent tariffs on imports of aluminum and a 25 percent levy on steel brought into the United States provoked a global outcry.
Trump’s comments specifically sparked cries of foul play from U.S. trading partners and warnings from U.S. lawmakers and businesses of the potential for a tit-for-tat trade war that could hurt the U.S. economy. Trump has said the United States could win such a war, since it was running such a large trade deficit.
US allies have threatened to retaliate by slapping tariffs on US goods entering their markets. The EU is expected to detail its retaliatory measures on Wednesday.
“We are anxious that these are not triggered, we are urging the sides to reach agreements, hold negotiations, consultations,” said Lagarde.
The IMF chief said that to a certain extent she understood the US president’s frustration with the global trade system.
Trump “has good reasons to protest against the current situation. There are countries that don’t always respect WTO agreements, which have technology transfer requirements, one thinks naturally of China, but China isn’t the only country to have such practices,” said Lagarde.
The Trump administration has made the World Trade Organization (WTO) a preferred target of its “America First” policy, threatening to pull the US out of the trade body it says is hampering its ability to compete.
Trump’s top economic advisor Gary Cohn, seen as a voice for Wall Street in the White House, said he would resign after he lost the fight against Trump over the tariffs.
The EU executive will discuss potential retaliation measures on Wednesday. It has drawn up a list of U.S. products from bourbon to Harley Davidson motorbikes on which to apply tariffs if Trump follows imposes tariffs.
French European Affairs Minister Nathalie Loiseau the EU would raise the tariff threat with the WTO.
“We are not happy about this,” Loiseau told Radio Classique. “Europe can no longer afford to be naive and passive faced with this aggressive protectionism,” she said.