US-China trade tension dominates IMF gathering

IMF Managing Director Christine Lagarde warned about rising protectionism, while US Treasury Secretary Steven Mnuchin blames countries with unfair trade policies. (Photo: AFP/Brendan Smialowski)

Official after official has called for disputes to be resolved through dialogue rather than unilateral tariffs, and warned about the threat to economic growth.

But US President Donald Trump's top finance officials said the fault lay with countries that employed unfair trade policies.

"We strongly believe that unfair global trade practices impede stronger US and global growth, acting as a persistent drag on the global economy," US Treasury Secretary Steven Mnuchin said in a statement to the spring meetings of the International Monetary Fund.

And while IMF chief Christine Lagarde has offered the fund as a forum to resolve differences, Mnuchin instead said the IMF "should be a strong voice" in urging members "to dismantle trade and non-tariff barriers and to protect intellectual property rights."

Theft of American intellectual property and technology has been a key irritant in the dispute with Beijing, which prompted President Donald Trump to announce steep tariffs on tens of billions in Chinese goods, on top of last month's punitive duties on steel that were primarily targeted at China as well.

Washington and Beijing also have filed complaints against each other at the World Trade Organization.

WTO Director Roberto Azevedo warned on Friday that the effects of a major escalation "could be serious," and poor countries would be the collateral damage.

"A breakdown in trade relations among major players could derail the recovery that we have seen in recent years, threatening the ongoing economic expansion and putting many jobs at risk," he said in a statement to the meetings.

French Economy Minister Bruno Le Maire criticized the US spat with China as "vain and pointless" and said his country will not be drawn into the battle.

"The increased tariffs cannot weigh like a sword of Damocles on trade relations among states," he told reporters.

The IMF has singled out the trade tensions as a key downside risk to the otherwise solid global recovery, and Lagarde said the dispute undermined confidence and creates uncertainty that could choke off investment which has been one of the key engines of the global recovery.

The WTO projects global merchandise trade will expand by 4.4 per cent this year, after increasing by 4.7 per cent in 2017.

G20 AVOIDS TRADE ISSUE

Despite the intense focus on the US-China dispute, the Group of 20 finance ministers avoided discussion of the issue on Friday, even while acknowledging the potential danger it posed to the global economy.

"We didn't have a discussion on specific measures on trade," Argentine Treasury Minister Nicolas Dujovne told reporters after the meeting. "The G20 is not the place to discuss specific measures. That's the WTO."

It was a surprising omission for the group that was key to shepherding the global economy through the 2008 financial crisis and preventing another depression.

But Dujovne said, "We have to also recognize the limitations that we as a group have...and try to find a consensus even if the consensus is more limited than we want."

The ministers did express concern over the growth of "inward looking policies," he said, using a frequent euphemism for trade protectionism.

But German central bank chief Jens Weidmann said the G20 officials all agreed trade must benefit all countries.

"Protectionism, not to mention a trade war, is certainly not the solution."