IMF, WTO, Germany Warn of US Protectionism

Escalating trade tensions are posing an increasing threat to the global economy, the head of the International Monetary Fund has warned again.

“The clouds on the horizon … are getting darker by the day,” IMF Managing Director Christine Lagarde said at a news conference in Berlin, hosted by Chancellor Angela Merkel, on Monday, CNNMoney reported.

“The biggest and darkest cloud that we see is the deterioration in confidence that is prompted by the attempt to challenge the way in which trade has been conducted, in which relationships have been handled and the way in which multilateral organizations have been operating”, she said.

Lagarde spoke after a meeting in Berlin with Chancellor Angela Merkel and the chiefs of the World Trade Organization, the World Bank, the Organization for Economic Cooperation and Development, the International Labor Organization and the African Development Bank.

Her comments follow the acrimonious end to the G7 summit in Quebec this weekend in which US President Donald Trump attacked Canadian Prime Minister Justin Trudeau over trade.

Tensions were already rising between the United States and key allies ahead of the G7 summit after the Trump administration slapped steel and aluminum tariffs on Canada, Mexico and the European Union in the name of national security. All three trading partners have announced retaliatory measures.

The United States is also locked in a tense trade dispute with China, the world’s second largest economy.

The Trump administration is expected to announce by the end of this week a list of Chinese goods worth around $50 billion on which it will impose steep new tariffs in response to alleged Chinese theft of American intellectual property. The tariffs will go into effect shortly afterward, it said.

The move has thrown into doubt the outcome of trade talks with China, which previously threatened to retaliate with tariffs on a similar amount of US goods, including cars, planes and soybeans.

Earlier, Germany's Economy Minister Peter Altmaier, one of Merkel's closest lieutenants, said Berlin saw no immediate solution to the trade row between the United States and other major economies but remained open to talks "among friends", seeking to head off a full-blown global trade war.

Stop This Escalation

WTO Director General Roberto Azevedo told the Berlin news conference: "We must ... stop this escalation of tensions. A tit-for-tat process is not going to be helpful." He also criticized the United States' conduct at the WTO.

Speaking alongside Lagarde, Azevedo said the rising tensions in global trade “risk a major economic impact, undermining the strongest sustainable period of trade growth since the financial crisis,” CNA reported.

Azevedo warned against a damaging "escalation" of trade tensions between the United States and other major economies.

Trans-Atlantic and other trade wars would have "a long-term impact on the global economy," he said. "We must stop this escalation of tensions, the tit-for-tat process is not going to be helpful ... new sectors will be brought into the picture, which is something that will harm everyone."

The EU has vowed to retaliate against US metal tariffs imposed by Trump, and tensions worsened at a Group of Seven summit in Canada after Trump rejected an attempt to write a consensus statement and bitterly insulted the Canadian host.

The joint communique which Trump rejected had vowed that G7 members would reform multilateral oversight of commerce through the WTO and seek to cut tariffs. Azevedo warned that "the rising trade tensions risk a major economic impact, undermining the strongest sustainable period of trade growth since the end of the financial crisis.

"But, more than that, the systemic effects could be very damaging, risking a long-term impact on the global economy."

The US president came under fire at the contentious G7 summit of leading economic powers for his "America First" protectionist drive.

Europe ‘Won’t Be Had’ Again

Merkel described as “sobering and a bit depressing” US president’s collapse of the G7 meeting via Twitter. She came out fighting on her return to Berlin, insisting the latest Trump about-turn was a fresh reminder that Europe must become even closer amid a looming trade war.

 “We won’t allow ourselves be had again and again,” she told ARD public television on Sunday evening, insisting the EU would press ahead with counter-measures to US tariffs on European steel and aluminum. The bloc is expected to announce its plans on July 1.

In her strongest comments yet, she criticized the US president for dashing an “arduously negotiated” G7 summit declaration via social media.

“Reneging in a tweet is sobering and a bit depressing,” said Merkel. “It’s difficult, it was disappointing this time, but it’s not over. Sometimes it seems the American president thinks that only one side wins and everyone else loses.”

After 18 months struggling to cope with the Trump administration, Merkel renewed her call to European allies to find new ways of working together and with other countries beyond the US.

“We as Europe have to stand up for our principles, potentially together with Japan and Canada, ” she said.