External imbalances in world’s key economies pose risks to global stability, International Monetary Fund says

China should look to settle its trade disputes to help support the international trading system and global economy, the International Monetary Fund said on Tuesday.

The comment, made in its annual “External Sector Report”, came as trade tensions have been escalating around the world. The United States in June announced new tariffs on US$50 billion worth of goods its imports from China, most of which went into force on July 6, and took similar action against its allies Germany and Canada.

“Large and sustained excess external imbalances in the world’s key economies – amid policy actions detrimental to external balances – pose risks to global stability,” the report said, which looked at figures from 30 countries, including their trade balances, foreign currency reserves and exchange rates.

According to figures from Washington, the US has a US$375 billion trade deficit with China, a fact that has been a major contributor to the ongoing trade dispute.

Beijing has yet to respond to the latest threat from the White House to impose punitive tariffs on US$200 billion worth of Chinese products, and possibly extend the action to all goods it imports from the Asian nation, but has instead taken the case to the World Trade Organisation.

“China should seek a negotiated settlement to trade disputes that supports and strengthens the international trading system and the global economy”, the IMF report said.

At present there are no signs that Washington and Beijing are about to return to the negotiating table.