Washington (AFP)
The Trump administration's trade war against China with punitive tariffs and a weaker dollar will not reverse trade imbalances, IMF economists warned on Wednesday.
In an unusually direct tone, the chief economist of the International Monetary Fund, Gita Gopinath and two of her colleagues say the White House's economic policy is counterproductive and will slow the global economy.
Tariffs "will have a negative impact on both the US and global economies by undermining business confidence and investment and disrupting supply chains, while increasing costs for producers and consumers", write the authors in a post of a blog.
"Higher bilateral tariffs are unlikely to reduce trade imbalances, because they essentially divert trade to other countries," write Ms Gopinath and MM. Gustavo Adler and Luis Cubeddu.
However, the production is not repatriated to the United States but what was produced in China will be produced in another country at low cost and in which case the trade deficit will widen.
The trade deficit is, for Donald Trump, one of the main measures of the health of the American economy. He sees the imbalance as a sign of weakness in the United States and tries to remedy it, especially with China, with punitive tariffs to try to restore balance.
By mid-December, all of the $ 550 billion in goods imported from China should be taxed at between 10 and 25 percent.
- "Too fast, too high" -
The three economists also warn of another idea cherished by the president and often mentioned on Twitter: weaken the dollar to make American products more competitive. The tenant accuses the European Central Bank and Beijing of voluntarily lowering their respective currencies to make their products more attractive to US consumers.
Strategies to weaken a country's currency "are difficult to implement and are in all likelihood ineffective," the Fund's economists point out, adding that to push the point home, it is important to press the Central Bank to lower interest rates. will not achieve the desired goal either.
Donald Trump tirelessly attacks the US central bank, which he accuses of curbing economic growth by increasing its rates "too often, too quickly".
The president who is campaigning for reelection and who knows the importance of the health of the economy on the outcome of the election, now claims a decline of one percentage point of the main interest rate of the Fed, for regain competitiveness and boost growth.
"Strongest dollar in history, very hard for exports, no inflation!", He insurgent on Twitter Wednesday morning, arguing that, elsewhere, rates are lower. The greenback is actually far from its highest historical levels.
"We must not be lulled into the illusion that by lowering interest rates we can weaken a currency enough to make a lasting improvement in the balance of trade," say the blog's authors.
"Monetary policy alone is not able to induce the strong and lasting devaluations that would be necessary to lead to this result and especially not over a period of 12 months", they warn, clearly referring to the presidential term of November 2020.
The Fund also notes that while the economic theory is that a weaker currency favors a country's exports, it turns out that many products in the international trading system are in any case denominated in dollars, which partially cancels out the effects of a weakening of the greenback.
In the same vein, JP Morgan Bank published a study Wednesday arguing that the cost of customs taxes on US household budgets will rise from about $ 600 a year to $ 1,000 if an additional 10% tariff is applied on $ 300 billion of imported Chinese goods, as provided by the Trump administration.
If the Trump administration chooses to impose duties of 25%, it will cost $ 1,500 annually to each household, adds the study obtained by AFP Wednesday.
Donald Trump and his advisers deny any negative effect of tariffs on the consumer.
"There is absolutely no proof that the American consumer will have to bear the consequences," said Peter Navarro, Trump's senior business adviser on CNN Sunday.
© 2019 AFP