IMF urges G20 to de-escalate trade tensions or risk global economic slowdown
Trump and Xi agree to defuse trade war with 90-day pause in tariff hikes
The International Monetary Fund urged G-20 leaders to de-escalate trade tensions and reverse trade tariff increases or risk a slowdown in the global economy from protectionism.
Rising trade tensions are hurting the global economy as implemented and threatened trade tariffs could wipe out a third of global gross domestic product by 2020, Christine Lagarde, managing director of the IMF, warned in a statement at the end of the G20 meeting in Buenos Aires late Saturday.
"Pressures on emerging markets have been rising and trade tensions have begun to have a negative impact, increasing downside risks," Ms Lagarde said. "First, fix trade—this is priority No. 1 to boost growth and jobs."
The IMF's stark warning comes as US President Donald Trump and Chinese President Xi Jinping agreed to a temporary ceasefire in the trade war between the world's two biggest economies. In a high-stakes working dinner on Saturday in Argentina, the two leaders vowed to diffuse escalating trade tensions by halting the imposition of new tariffs for 90 days and intensifying their trade talks.
Both sides called it "a “highly successful meeting", according to a statement on the White House website.
President Trump agreed to keep tariffs on $200 billion worth of Chinese goods at 10 per cent on January 1 and not escalate them to 25 per cent "at this time", according to the White House.
"China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States to reduce the trade imbalance between our two countries," the White House said. "China has agreed to start purchasing agricultural product from our farmers immediately."
The two leaders agreed to "immediately" start negotiations on "structural changes in forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture," according to the White House.
Both parties said if they're unable to reach an agreement, the 10 per cent tariffs will be raised to 25 per cent.
"This was an amazing and productive meeting with unlimited possibilities for both the United States and China," President Trump said.
The announcement came after the leaders sat down together with their senior representatives at a dinner at the conclusion of a two-day gathering of G20 leaders in Buenos Aires.
Ms Lagarde said that if trade restrictions in services were reduced by 15 per cent, global GDP could be higher by one-half of a per cent.
She said the excessive level of global debt, which stands at $182 trillion by IMF estimates, is a particular concern for emerging markets and low-income countries.
To meet these challenges, the IMF recommended fixing trade, normalising monetary policy and using a flexible exchange rate to mitigate external pressures.
Ms Lagarde also told G20 members that the key to boosting growth is empowering women.
"Eliminate legal obstacles to the participation of women in the economy," she said. "This is key to tackling high and persistent inequality, and would add to the growth potential of all G-20 countries."
Updated: December 2, 2018 10:39 AM