IMF: U.S. should keep open trade, work with China to resolve disputes

By David Lawder

WASHINGTON (Reuters) -The U.S. would be better served by maintaining its open trade system rather than imposing new punitive duties on Chinese goods, the International Monetary Fund said on Thursday, adding that Washington and Beijing should work together to resolve their trade tensions.

IMF spokesperson Julie Kozack told a regular news briefing that such trade restrictions as those announced by President Joe Biden on Tuesday can distort trade and investment, fragment supply chains and trigger retaliatory actions.

“Fragmentation of this type can be very costly for the global economy,” she said.

Kozack said the IMF identified some 3,000 global trade restrictions in 2023, up from 1,000 in 2019, and under a worst-case scenario of severe fragmentation into geopolitical blocs, this could reduce global economic output by some 7%, equivalent to removing the GDP of Japan and Germany combined.

“With respect to the tariffs, our view is that the U.S. would be better served by maintaining open trade policies that have been vital to its economic performance,” Kozack said. “We also encourage the U.S. and China to work together toward a solution that addresses the underlying concerns that have exacerbated trade tensions between the two countries.”

Washington has sought to justify the sharply higher duties on Chinese electric vehicles, solar products, semiconductors, medical supplies and other goods as a pre-emptive measure to protect domestic industries against Chinese economic policies that have encouraged over-investment and over-production in these sectors that are expected to unleash a flood of exports into global markets.

Beijing has vowed to retaliate against the new duties and has accused some U.S. officials of “losing their minds.”

Kozack said IMF First Deputy Managing Director Gita Gopinath will travel to Beijing from May 26 to 29 to meet with government officials on the Fund’s annual “Article IV” review of China’s economic policies. Gopinath will hold a news conference on the IMF’s China recommendations on May 29.

(Reporting by David Lawder; Editing by Andrea Ricci)

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