Christine Lagarde, Managing Director of the International Monetary Fund (IMF), attends a press conference during the spring meetings of the IMF and the World Bank in Washington D.C., the United States, on April 19, 2018. (Xinhua/Yang Chenglin)
Christine Lagarde, Managing Director of the International Monetary Fund (IMF), on Thursday urged policymakers to steer clear of all protectionist measures amid rising trade tensions between the United States and its major trading partners.
"Trade restrictions have not been proven helpful and we suspect that they might even dent confidence," Lagarde said at a press conference during the spring meetings of the IMF and the World Bank, adding all countries should "work together to resolve disagreements without using exceptional measures."
While the actual impact of current trade tensions on global growth "is not very substantial" in terms of gross domestic product (GDP), it's difficult to measure the erosion of confidence in the short term with investors reluctant on investing, Lagarde said.
The IMF chief suspected that trade tensions will be discussed among many bilateral meetings this week, particularly in a meeting of the International Monetary and Financial Committee (IMFC) on Saturday, as finance ministers and central bank governors recognize that trade and investment are the two key engines of global growth.
"We believe that each country can do more from looking at its own domestic policies to helping those affected" by the dislocation from technology and trade, she said.
Lagarde also called for policymakers using current growth momentum to step up structural reforms, build policy buffers and guard against fiscal and financial risks.
The spring meetings of the two leading international financial institutions come after the Trump administration recently announced additional tariffs on imported steel and aluminum and threatened to impose broad tariffs against Chinese imports.
These unilateral protectionist measures have sparked widespread criticism and provoked threats of retaliation from major trading partners, raising the prospect of escalating global trade conflicts that threaten the global recovery.
"The prospect of trade restrictions and counter-restrictions threatens to undermine confidence and derail global growth prematurely," Maurice Obstfeld, economic counsellor and director of research at the IMF, warned Tuesday.
"That major economies are flirting with trade war at a time widespread economic expansion may seem paradoxical -- especially when the expansion is so reliant on investment and trade," he said.
Obstfeld called for "dependable and fair dispute resolution" within a strong rule-based multilateral framework to address intellectual property concerns and other "inequitable trade practices."