IMF: Anti-Trade and Immigration Rhetoric Put the U.S. At Risk
The fund warns harsh words on the U.S. campaign trail put globalization at risk.
On Tuesday, the International Monetary Fund downgraded its forecast for the U.S. economy while warning of “persistent stagnation” both at home and abroad if there’s continuing backlash against trade and immigration.
In other words, says the 189-member fund meant to foster international economic cooperation, if Donald Trump becomes president, it’s not going to be good for the U.S. or global economy. According to the fund’s World Economic Outlook, the U.S. economy will grow 1.6 percent this year, down from a July estimate of 2.2 percent. Its estimate for global expansion — 3.1 percent –is unchanged from July. Members of the IMF are meeting in Washington this week.
The IMF didn’t mention Trump by name, but the fingerprints of his anti-trade policies — he’s pledged to tear up trade deals, slap steep tariffs on foreign goods, and punish American companies that want to move overseas — are all over the emergency-lending bank’s statement. His Democratic rival, Hillary Clinton, said she is opposed to some trade deals like the Trans Pacific Partnership, a pact between 12 Pacific nations covering 40 percent of world GDP, but is not nearly as bearish on international trade as her opponent.
“It is vitally important to defend the prospects for increasing trade integration,” IMF Chief Economist Maurice Obstfeld said Tuesday. “Turning back the clock on trade can only deepen and prolong the world economy’s current doldrums.” The report even warned of a trade war if the United States began slapping foreign goods with new penalties for entering the American market.
The IMF report also mentioned that “anti-immigrant and anti-trade rhetoric have been prominent from the start of the current [U.S.] presidential election round,” and that there has been “pressure to adopt populist, inward-looking policies” around the world. The bank cited the recent British vote to leave the European Union as an example.
“Globally, concerns are growing about political discontent, income inequality and populist policies, threatening to derail globalization,” the IMF said.
Meanwhile, the fund expects the Chinese economy, the world’s second largest, to expand only 6.6 percent this year, down from an earlier 6.9 growth estimate. That would be perilously close to falling short of official Chinese government growth targets, raising questions about the vitality of a major source of global growth and trade.
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