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Trade War & Stagnating Global Economic Growth: Annual Meeting of the IMF & World Bank

Trade War & Stagnating Global Economic Growth: Annual Meeting of the IMF & World Bank

Just two weeks after the Global Land Forum 2018 in Jakarta, and one week after a devastating double-disaster in Palu, the World Bank’s (WB) and the International Monetary Fund’s (IMF) Annual Meeting of 2018 in Bali, Indonesia, came to an end. As for every autumn, under the attendees were Managing Director and Chairwoman of the IMF Christine Lagarde, 189 Member States of the IMF, as well as the USA. While the annual meeting shall serve as a platform for economic, business, and trade collaboration, the Annual Meeting was dominated by the trade war between the USA and China.

The USA and China have been in an ongoing trade war as each country has introduced tariffs on goods traded with the other. President Donald Trump had promised during his campaign to fix China's "long-time abuse of the broken international system and unfair practices". Trump specifically targeted China by imposing 25% tariffs on $34 billion of imported Chinese goods as part of Trump's tariffs policy, which led China to respond with similar tariffs on U.S. products.

A tariff on an additional $16 billion of Chinese imports was added in mid-August, with China responding proportionately. Another tariff on $200 billion of Chinese goods was introduced on September 24, to which China plans to respond to with tariffs on $60 billion of US goods. The Trump administration argued that the tariffs were necessary to protect the intellectual property of U.S. businesses, and to help reduce the U.S. trade deficit with China.

In accordance with the trade war and the motto of the meeting, Governor of the People’s Bank of China Yi Gan joined the chorus on the trade war by saying that: "Countries should jointly take measures against trade protectionism and strive to make economic globalisation more open, inclusive, balanced and beneficial to all.”

During the Annual Meeting, it was made clear that the trade war between the two largest economies in the world is one of the highest risks facing the global economy. Together with high debts of states and enterprises worldwide, the IMF and its Financial Committee, which advises the IMF's board of governors, issued a communique “…urging countries to keep debt under control, engineer policies to ensure credit is available and in line with their levels of inflation and ensure sustained economic growth ‘for the benefit of all.’”

IMF members also vowed to avoid currency devaluation for trade advantages by making a country’s export relatively cheaper. For the EU, the focus laid on the high debts of some European countries such as Italy where the situation has been coined as more worrying than the one in Greece.

At the end of the conference, the IMF and WB predicted a downgrading global economic growth from 3.9% to a stable 3.7% for 2018/19. Lagarde said: "I think it's not inconsistent to have a plateaued growth and downside risks that are the clouds on the horizon, some of which have begun to open up,". Adding that given the global level of debt, "we've given strong recommendations and in terms of trade: de-escalate and please dialogue."

She also stated that countries should ensure that their levels of debt are manageable and that policies foster growth for all: "Sail together and we will be stronger. Focus on your policies. Don't drift and let's cooperate as much as we can because we will be better off together."

 

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