The International Monetary Fund (IMF) criticized the Biden administration’s decision to aggressively raise tariffs on some Chinese goods, underscoring its warning that tensions between the world’s top two economies risk hurting global trade and growth.
“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,” IMF spokesperson Julie 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.”
IMF research shows fragmentation in the global economy can have a variety of outcomes, including potential losses for global gross domestic product of as much as 7% in a “severe fragmentation.” The cost would be higher if there’s a breakdown in trade and availability of technology, 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,” Kozack said. “And, more broadly, we urge all countries to work within the multilateral framework to resolve their differences.”
President Joe Biden’s top economic advisor, Lael Brainard, on Thursday defended the new tariffs as necessary to protect recent manufacturing and job gains in the U.S. from “unfairly underpriced exports from China.” She said, “China is using the same playbook it has before to power its growth at the expense of others by investing in significant industrial overcapacity and flooding global markets with artificially cheap exports.”
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