IMF’s Lagarde warns against Trump-style protectionism

Saturday, 9 July 2016 00:32 - - {{hitsCtrl.values.hits}}

Reuters: International Monetary Fund Managing Director Christine Lagarde warned in an interview published on Thursday that anti-trade policies like those championed by Republican presidential candidate Donald Trump risked a protectionist movement that could severely damage global growth.

Lagarde told the Financial Times that with Britain’s vote to leave the European Union already casting a shadow over global growth, the imposition of new trade barriers in another larger economy could have “disastrous” effects.

“I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the FT in response to a question about such policies.

The newspaper said that while Lagarde made clear her negative views of anti-trade rhetoric and policies, she refrained from referring to Trump by name or singling out any politician.

Lagarde also told the FT that she doubted that a prolonged period of uncertainty over Britain’s exit, without triggering formal separation negotiations, would be politically sustainable.

“We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making,” Lagarde told the newspaper.

In a separate interview with Agence France Presse, Lagarde said Brexit was unlikely to cause a world recession, adding that the immediate effects would hurt the UK, with some spillover to the euro area.

She told AFP that proposals in Britain to cut corporate tax rates to 15% from 20% to counter the damage caused by the UK’s EU divorce was a “race to the bottom” that would hurt other economies.