US Out of Line on Restrictive China Trade

US building economic barriers to achieve their political goals will end up hurting them and the rest of the world, the head of the International Monetary Fund (IMF) Kristalina Georgieva has said.

The IMF chief said the tariffs on Chinese goods that had been imposed under former US President Donald Trump and kept in force under Joe Biden were one of such counter-productive measures. She didn’t mention the sanctions imposed on Moscow over the conflict in Ukraine or the attempts by Washington and its allies to put price caps on Russian energy.

“My concern is a deepening fragmentation in the world economy,” Georgieva said in an interview with the Washington Post on Saturday. “We may be sleepwalking into a world that is poorer and less secure as a result.”

If the rivalry between the US and China splits the global economy into opposing camps, it’ll shrink by 1.5%, or more than $1.4 trillion annually, she said, adding that the losses in percentage terms for the Asian region will be twice as large.

Georgieva recalled that she had “lived through the first Cold War on the other side of the Iron Curtain. And, yeah, it is quite cold out there. And to go in a second cold war for another generation is… very irresponsible.”

Some diversification of supply chains might be necessary, especially after the Covid-19 pandemic, but when it goes “beyond economic logic, it would be harmful for the US and the rest of the world,” Georgieva pointed out.

“It is important to think through actions and what they may generate as counter actions carefully, because once you let the genie out of the bottle, it’s hard to put it back in,” she warned.

However, the IMF chief suggested that a complete split between the US and China would likely be impossible. The annual trade between the world’s two top economies currently stands at $600 billion, and they’re deeply interconnected, she explained.