China, US urged to ease trade war tensions that are ‘weighing on’ global commerce, says IMF chief economist

Gita Gopinath, the International Monetary Fund’s (IMF) chief economist, said in Beijing on Friday that ‘there has been weakness in trade across the board’

The IMF has already revised down China’s 2019 growth projection by 0.1 percentage points to 6.2 per cent and global growth by 0.1 percentage points to 3.2 per cent

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International Monetary Fund (IMF) chief economist Gita Gopinath (second right) did not repeat the a recent evaluation that the weaker yuan exchange rate remained in line with China’s economic fundamentals, in contrast to the US assessment. Photo: Xinhua

Published: 9:30pm, 6 Sep 2019Updated: 9:30pm, 6 Sep 2019

The International Monetary Fund on Friday renewed its call for China and the United States to ease trade tension to reduce the already substantial downside risks their dispute poses for the global economy, one day after the two countries agreed to resume face-to-face negotiations next month.

“Trade tension and trade disagreement are certainly weighing on trade,” Gita Gopinath, the International Monetary Fund’s (IMF) chief economist said in Beijing on Friday.

“If you look at the US, China and emerging Asia, there has been weakness in trade across the board.”

The warning came as Gopinath’s team is preparing the IMF’s latest economic forecasts for 2019. In previous projections in July, the IMF revised down China’s growth projection by 0.1 percentage points to 6.2 per cent and global growth by 0.1 percentage points to 3.2 per cent.

Trade tension and trade disagreement are certainly weighing on trade. If you look at the US, China and emerging Asia, there has been weakness in trade across the board

Gita Gopinath

Despite market worries that the risks of a global recession are rising, Gopinath said that the current China-US tensions are mainly hitting merchandise trade, although the services sector is still holding up well.

The IMF economist highlighted that higher bilateral tariffs are unlikely to reduce aggregate trade imbalances, a long-standing viewpoint of the Washington-based fund.

She also defended the need for exchange rate flexibility and market-driven volatility, adding that a weaker currency would produce a limited boost to exports in the short term.

Gopinath reiterated the IMF’s recent evaluation that the weaker yuan exchange rate remained in line with China’s economic fundamentals in 2018, in contrast to the US assessment that China had deliberately let its currency weaken to gain competitive advantage.