Worries over Trump policies cloud start of IMF, World Bank meetings

WASHINGTON - Reuters

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World finance leaders have gathered on U.S. President Donald Trump’s home turf on April 20 to try to nudge his still-evolving policies away from protectionism and show broad support for open trade and global integration.

The International Monetary Fund and World Bank spring meetings bring the two multilateral institutions’ 189 members face-to-face with Trump’s “America First” agenda for the first time, just two blocks from the White House.

“These meetings will all be about Trump and the implications of his policies for the international agenda,” said Domenico Lombardi, a former IMF board official who is now with the Centre for International Governance Innovation, a Canadian think-tank.

He added that IMF Managing Director Christine Lagarde is aiming to “socialize” the new administration to the IMF’s agenda and influence its policy choices.

The IMF in particular has sounded warnings against Trump’s plans to shrink U.S. trade deficits with potential measures to restrict imports, arguing in its latest economic forecasts that protectionist policies would crimp global growth that is starting to gain traction.

Lagarde said on April 20 she believes the IMF can work successfully with the Trump administration to improve the global trading system, but added that open trade must be preserved as a growth engine.

Lagarde told a news conference at the opening of the spring meetings in Washington that the IMF saw the need to reduce subsidies and other trade distortions that limit competition, but also said “protectionist measures” needed to be avoided.

“From the various contacts that I’ve had with the administration so far, I have every reason to believe that we will make progress, that we will cooperate all together in order to support and indeed improve the system as we have it,” she said. 

World Bank President Jim Yong Kim said on April 20 he is “encouraged” by the Trump administration’s interest so far in the multilateral lender’s mission and its plans to harness more private capital for development finance.

Kim told Reuters in an interview that Trump administration officials, including U.S. Treasury Secretary Steven Mnuchin, have been asking questions about the bank’s views on solving development problems.

“Speaking with President Trump directly, I told him about the need to make this shift, to work more effectively with the private sector, he was very enthusiastic about that,” Kim said. 

Trump launched the week by signing an executive order to review “Buy American” public procurement rules that have long offered some exemptions under free trade agreements, and by lashing out at Canadian dairy restrictions.

In addition to warnings on trade, the IMF on April 19 unveiled two studies pointing out dangers from fiscal proposals that Trump is considering. These included warnings that his tax reform ideas could fuel financial risk-taking and raise public debt enough to hurt growth.

Making tax reforms “in a way that does not increase the deficit is better for growth,” added IMF fiscal affairs director Vitor Gaspar.