Kristalina Georgieva, the new head of the IMF, has called on the US and China to move towards a lasting “trade peace” for the benefit of the flagging global economy, after they reached a limited truce in their commercial hostilities last week.
Ms Georgieva told reporters at the IMF’s annual meeting in Washington that it was “good news” that the US and China were “talking to each other” after weeks of mounting tensions, but the ceasefire at hand, which leaves all the existing tariffs in place, was not enough to lift the cloud hanging over the world economy.
“What we need is to reach not just truce. We need to have trade peace,” Ms Georgieva said. “We need to go forward to a system that is in health and in force, so we can see trade return to its role as an engine of the world economy.”
The multilateral lender this week downgraded its 2019 global growth forecast to 3 per cent and warned that the persistence of trade friction would deliver a $700bn hit to the world economy by 2020.
Ms Georgieva, a 66-year-old Bulgarian economist who took office at the IMF this month after a career spanning the World Bank and the European Commission, said easing trade conflict would bring broader geopolitical benefits too.
“It is so categorically proven that yes, trade is good for growth, trade is good for jobs, trade is good for poverty reduction [but] trade is great for peace,” she said. “When countries trade they don’t fight that much.”
The US last week agreed to suspend a planned tariff rise on $250bn of Chinese goods that was due to take effect on October 15, in exchange for pledges from Beijing to boost agricultural purchases.
However the truce did not roll back any of the levies imposed by the Trump administration since the trade war between the world’s two largest economies started in early 2018. China has not agreed to any big shifts in its economic model.
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Speaking to reporters as she formally launched the IMF’s annual meeting in Washington Ms Georgieva said she was pleased to hear of the draft deal between the EU and the UK on Brexit, joking that she had “jumped” on the news, much like the pound.
She hoped that the deal could get over the finishing line, adding: “My hope for the next days is that the will holds in all quarters. We’ll see what happens.”
Among Ms Georgieva’s toughest challenges will be to grapple with the crisis in Argentina. Last year the fund agreed a $57bn loan to Buenos Aires, the largest in its history, but that is in jeopardy as the reformist government led by president Mauricio Macri is likely to be unseated in looming elections by Alberto Fernández, a populist challenger.
Ms Georgieva said the Fund was “fully committed to work with Argentina and we are closely engaged” with the country, but would not say whether the current IMF loan programme could survive or might be replaced under a new Argentinian government, or what the conditions on that might be.