Despite a positive near-term outlook for the American economy, the International Monetary Fund warned Tuesday that the Trump administration’s recent trade policies could derail growth.
“Directors raised significant concerns over recent trade policy proposals that could have damaging effects beyond the U.S. economy, trigger retaliatory responses, and undermine the open, fair, rules-based multilateral trading system,” the organization, which works to keep the global money system stable, said in a statement.
The assessment followed the IMF’s annual consultation with the U.S. Such sessions, which are conducted with each of the group’s 189 members, include examinations of economic and financial developments as well as discussions with government and central bank officials.
Officials pointed to rising public debt, already at $21.2 trillion and set to outpace gross domestic product after last year’s tax cuts, and trade tensions as challenges to what could be the longest economic expansion in U.S. history.
“The net effect of U.S. budget and tax policy choices will exacerbate an already unsustainable upward dynamic in the public debt and leave few budget resources available to invest in a wide range of urgently needed supply-side reforms, including infrastructure spending,” the report said.
The directors “stressed that developments and policy in the [U.S.] have significant implications for the rest of the world, and encouraged the authorities to take that into account in their policy decisions.”
Global trade tensions have been climbing since President Trump imposed tariffs of 25 percent on steel imports and 10 percent on aluminum, sparking retaliatory actions from close allies such as the European Union, Mexico, and Canada.
On Friday, $34 billion worth of Chinese imports will be subjected to a 25 percent tariff, and the Trump administration is considering adding the duty to an additional $16 billion in goods. Should China retaliate, as promised, the White House has threatened 10 percent tariffs on $400 billion more in imports.
Separately, the U.S. Department of Commerce is investigating whether autos and auto parts imports pose a national security threat that would warrant tariffs.
The European Union sent a letter last Friday warning the Commerce Department that a 25 percent duty on imported cars and automotive parts could cost the U.S. economy $14 billion, and General Motors said the levies would threaten jobs within the company.
