IMF's Lagarde Warns Rising Protectionism May Slow Global Growth

(Bloomberg) -- IMF Managing Director Christine Lagarde warned that a surge in trade protectionism could sap the momentum of the global economic upswing.

“The stakes are high because the health of the global economy depends on healthy trade flows. The rebound in trade has recently contributed to stronger global economic growth,” Lagarde said Monday, according to the prepared remarks of a speech in Portland, Oregon. “And yet, rising protectionism could stop this positive momentum in its tracks.”

Her remarks come as the U.S. and China continue talks aimed at defusing a trade dispute between the world’s two largest economies. President Donald Trump has threatened to slap tariffs on as much as $150 billion in Chinese goods, while China has vowed to retaliate on everything from American soybeans to airplanes.

“We at the IMF are keenly aware of what could happen when trade gets interrupted, when economic bridges are damaged,” she said, noting the International Monetary Fund was founded more than 70 years ago “precisely to help prevent a return to the self-defeating policies of the Great Depression” such as protectionism.

The IMF last month predicted the world economy’s strongest upswing since 2011 will continue for the next two years. But it warned that growth will fade as central banks tighten monetary policy, and it cautioned that the expansion could be derailed if countries resort to tit-for-tat trade penalties.

Lagarde recommended several steps to improving the global trading system, including expanding trade in services, increasing productivity and protecting people hurt by trade and technology.

“These challenges can only be addressed in a multilateral setting -- where rules are respected, where countries work in partnership, where everyone is committed to fairness, where countries are accountable to each other, and where disputes can be heard and settled efficiently,” she said.

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