IMF’s Peacemaker Role Tested as Tariffs Pummel the Global Economy

(Bloomberg) --

The International Monetary Fund’s role as a promoter of global cooperation faces its biggest test in a decade as the 189-nation organization meets in Washington this week to wrestle with how to heal a world economy fractured by trade disputes.

We already know the IMF is set Tuesday to slash its 2019 global growth forecast for the fifth straight time — each for the same reason. Tariffs and other implements of trade combat are taking their toll on everyone from farmers to manufacturers and in economies across the globe — not just the U.S. and China.

The fund has been warning if the situation worsens that coordinated fiscal action (code words for government spending and other public assistance) will be required. We may learn more this week if central bankers and finance ministers could work together on a policy response like they did in 2009. That’s a tough sell in an environment where protectionism has been embraced by leaders like U.S. President Donald Trump.

Not even last week's trade breakthrough with China will offer solace for economy watchers because the details of the so-called Phase One agreement are still sketchy. Beijing is suggesting it may need more time to negotiate an accord, even as the Trump administration suggests an deal could be signed with Chinese President Xi Jinping at APEC in November. High levels of uncertainty remain.

Here are a few other things to watch for at this week's annual IMF and World Bank meetings:

• Tuesday: The IMF will publish its updated growth forecasts in the World Economic Outlook. We'll find out how deeply they plan to cut the forecast for this year and next, and which nations are hurting the most.
• Wednesday: Reda Cherif and Hector Perez-Saiz of the the fund's Africa department will talk on a panel about whether the African Continental Free Trade Agreement will be a game-changer for the continent.
• Thursday: World Bank Chief Economist Penny Goldberg and Finnish Foreign Trade Minister Ville Skinnar will talk about whether global value chains, trade and development are coming to the end of an era. Also on Thursday, World Bank President David Malpass and IMF Managing Director Kristalina Georgieva will deliver their opening remarks in which trade will no doubt feature prominently.
• Friday: Officials from the Group of 20 will speak to reporters about the state of their economies.

Charting the Trade War

Soybean imports by China, the world’s biggest buyer, fell to the lowest level in three months in September as Brazilian supplies decline seasonally and before new U.S. purchases start to arrive at the country’s ports.

Today’s Must Reads

• Getting a fix | Investors are watching China’s daily yuan fixing for a sign of goodwill toward the U.S. after Trump said a partial trade deal had been reached. So far, the signs aren’t too positive.
• Hectic fortnight | U.K. Prime Minister Boris Johnson’s Brexit deal hung in the balance Tuesday, after the EU presidency said more time was needed before a leaders summit this week.
• Extended slump | Indonesia posted a surprise trade deficit as the U.S.-China trade war and a global slowdown continued to weigh on exports in Southeast Asia’s biggest economy.
• Banking in China | Citigroup is among the first global banks planning to take advantage of China’s decision to allow full foreign ownership of financial services companies in the country.  
• Bargaining chips | The EU will file a WTO case against Colombia in response to the tariffs the South American country imposed on imports of frozen French fries.

Economic Analysis

• U.S. week ahead | The three main focal points will be consumers, industrial activity and Fed policy guidance.
• Trade sanctions | U.S.-Turkey sanctions are more bark than bite for banks, for now.

Coming Up

• Oct. 18-20: IMF’s annual meetings in Washington
• Oct. 21: Japan and South Korea trade data
• Oct. 25: CPB releases Global Trade Monitor

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Brian SwintZoe Schneeweiss

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