MarketLine Blog

IMF appeases US trade policy

The first conference held by the IMF since the economic policy of the United States underwent dramatic changes following the election victory of Donald Trump already shows strong signs of moving towards a position designed to appease the new president. Differences between previous statements and policies from the IMF and what is now being espoused point towards the dropping of the pledge occurring for political purposes. Indeed the language used by the German Finance Minister and that of the IMF shows a stark contrast between views on the matter.

Whilst many officials are downplaying the importance of the pledge to combat protectionist activities in the global economy, removing the sentence from the communique to appease Trump is unlikely to prevent further such opposition to liberalized trade from the White House in the future. Indeed, given some of the grievances made by the United States are shared by other countries, there is every reason to believe persuading the IMF to end publically avowing free commerce is merely the beginning. Still early in his term as president, Trump is under heaping pressure from his own support base to enact campaign promises faster than has so far been possible.

Words used by the US Treasury Secretary at the climax of the IMF conference suggest the IMF should have resisted the opposition to the pledge disavowing protectionist activities. Treasury Secretary Steven Mnuchin made statements suggesting the primary opposition from the United States was towards how free trade was governed rather than the concept itself. Mnuchin described that the current system does not benefit the open economy which is trading with a closed economy. Given this, the IMF should have fought harder to keep the pledge rather than giving in to US pressure.

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