International Monetary Fund warns United States fiscal policies could hurt global economy

Make volatility great again

The Trump administration's measures to impose new tariffs and restrict imports are likely to "move the globe further away from an open, fair and rules-based trade system, with adverse effects for both the US economy and for trading partners", the International Monetary Fund said in a report after concluding the Article IV consultation with USA authorities, an annual check-up of economic policies between the International Monetary Fund and its member countries.

"That would be accompanied by a more rapid rise in interest rates that could increase financial market volatility both in the USA and overseas", IMF's managing director Christine Lagarde said at a press conference.

It noted that the US government's tax and spending policies during a time when the economy is already experiencing strong growth and low unemployment "increases the range and size of future risks" including higher public debt and the greater likelihood of a recession.

"These measures... will likely remove the light from an open, equitable and rules-based trading system with adverse consequences for the US economy and trading partners", Lagarde added. But it warned that growth after that will slide to levels just half of what the Trump administration is forecasting.

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According to her, the further consequences of the imposition of duties would weaken the national and worldwide investment in the United States. Instead, trading partners should work on "securing more ambitious bilateral and plurilateral agreements on trade and investment". The IMF, in a report on the U.S.

The United States is the fund's single-largest shareholder.

Trump came to power in part on a wave of anger over immigration and worldwide trade perceived as undermining workers' wages and American living standards.

Regarding the administration's fiscal policy, the International Monetary Fund said in the report that such a strongly procyclical fiscal policy is quite rare in the US context and has not been seen since the 1960s.

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Those forecasts are higher than the Fed's for growth and inflation but lower than the Treasury Department's, which said U.S. policies, "including the productivity-boosting mix of tax reform and regulatory relief, will result in more sustainable economic growth".

The IMF projects the Fed's preferred inflation measure will increase 2.8 percent this year, and 2.4 percent next year, with growth of 2.9 percent and 2.7 percent. However, the organisation expects growth to slow to 2.7% in 2019 and 1.9% in 2020.

The IMF also expressed concern about the growing market power of some of the largest US "superstar" corporations and said that there was a "clear role" for applying antitrust policies or increased regulation. The fund said "it would be preferable to recalibrate the rate structure in order to concentrate tax relief to those earning close to or below the median income".

During the 2016 presidential campaign, Trump pledged his economic program would boost the US growth rate to 4 percent or better. "This is almost double what the deficit was just the years ago".

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Providing stimulus to an already-growing economy is "quite rare" and not seen in the United States since the 1960s, the report said.

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