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IMF Warns US of 'Macroeconomic Impact' of Trade Policy Changes

Featured nternational Monetary Fund (IMF) Managing Director Christine Lagarde warned of the 'macroeconomic impact' linked to the trade policy changes. | Photo: Reuters nternational Monetary Fund (IMF) Managing Director Christine Lagarde warned of the 'macroeconomic impact' linked to the trade policy changes. | Photo: Reuters
WASHINGTON, DC, June 15, 2018 - Imposing trade tariffs to the European Union, Mexico, and Canada will only hurt the U.S. economy, the International Monetary Fund (IMF) warned Thursday.

In a conclusive analytical report, the IMF predicted an economic crash by 2020 due to the cycle of retaliation tariffs likely to follow President Donald Trump's tax hike on steel and aluminum imports.

The U.S. economy is being juiced by the administration’s $1.5 trillion package of corporate and income tax cuts as well as higher government spending.

In line with the U.S. Federal Reserve, the IMF expects growth to slow considerably in 2020. It forecasts the annual pace of growth falling back to 1.9 percent.

It noted that the U.S. government’s tax and spending policies during a time when the economy is already experiencing strong growth and low unemployment “increases the range and size of future risks” including higher public debt and the greater likelihood of a recession.

Trump stunned his counterparts by backing out of a joint communique agreed by Group of Seven leaders in Canada last weekend that mentioned the importance of free, fair and mutually beneficial trade.

Christine Lagarde, the IMF’s managing director said, "Let us not understate the macroeconomic impact. It 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."

The United States' third-biggest trade partner and NAFTA member, Mexico, is planning to retaliate "proportionately," strategically introducing import taxes on pork legs, apples, grapes, cheese, and steel – products from Midwestern states that supported Trump in the 2016 election.

“These measures…are likely to move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the U.S. economy and for trading partners,” the IMF said in its report.

The IMF also expressed concern about the growing market power of some of the largest U.S. “superstar” corporations and said that there was a “clear role” for applying antitrust policies or increased regulation.

  • Countries: United_States

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