Latest News

Trump's renewed trade war with China clouds IMF and World Bank meetings

The U.S. President threatened 100% tariffs on Chinese imports, sending the markets into a tailspin. Questions about whether Trump's threat to retaliate for China's dramatic expansion of export controls on rare Earths will lead to a full-blown war between the two world's largest economies are likely to dominate the annual meetings of the International Monetary Fund (IMF) and World Bank.

Washington and Beijing reached a delicate truce over the last five months, which brought down tariffs from triple-digits and led to an upgrade of the IMF's outlook for global growth. Trump's plans to meet Chinese President Xi Jinping in the latter part of this month fueled hope for a further thaw.

This optimism was dashed on Friday when Trump threatened to cancel this meeting and impose "massive increases" in tariffs against Chinese goods. He also announced other countermeasures. China's decision on Friday to charge the same port fees as the U.S. for vessels built in China or owned by Chinese companies, or by companies owned by more than 25% U.S. investment funds.

More than 10,000 people, including finance and central bank governors of more than 190 nations, will attend the IMF and World Bank Meetings in Washington.

Martin Muehleisen is a former IMF strategist who now works for the Atlantic Council. He said that Trump's threats could be a way to gain leverage in negotiations, but they would inject volatility into this week's proceedings.

"Let's pray that sanity will prevail." Muehleisen warned that if Trump returns to 100% tariffs, he will face a lot more pain on the markets. Trump's Friday threat triggered the largest U.S. share sell-off since months. This was at a moment when investors and policymakers were already becoming anxious about an artificial intelligence investment boom that could harm future employment.

Muehleisen stated that while China does have some leverage with Trump because of its global dominance over rare earths which are vital for manufacturing tech, it would not be in Beijing's best interest to return to a world of triple-digit duties.

Scott Bessent, the U.S. Treasury secretary who has led U.S. China trade talks, is not expected to meet any Chinese officials in Washington this week. A Treasury spokesperson declined comment on Bessent’s bilateral meeting schedule.

GROWTH PROSPECTS HOLD UP

Kristalina Georgeeva, IMF's Managing Director, had praised the global economy for its ability to handle multiple shocks. She cited a number of factors, including the slowing U.S. jobs market, the rising debt level, and the rapid changes brought about by AI adoption. Georgieva stated last week, in a preview to the IMF World Economic Outlook forecasts that are due on Tuesday: the global GDP growth for 2025 will be just slightly lower than the 3.3% rate of 2024. The IMF raised its GDP growth forecast for 2025 by two tenths of one percentage point in July, based on lower tariff rates than originally feared. This included the U.S. China duties.

In an interview, Georgieva said: "We are witnessing a world of demonstrable resilience." "But we also say it's a time when there is exceptional uncertainty and downside risks still dominate the forecast." Watch it and don't become too comfortable.

G7 FOCUS RUSSIA

The Group of Seven Industrial Democracies' finance ministers will meet on Wednesday in order to discuss ways to increase sanctions on Russia to end the war that Moscow is fighting against Ukraine.

According to a British government source, finance minister Rachel Reeves wants to ensure that G7 and European Union nations take joint action to reduce Russia's revenues from energy and to gain access to assets overseas that are compliant with international law. G7 ministers are expected to discuss a plan by the European Union to use frozen Russian sovereign assets as collateral for a loan to Ukraine of 162 billion euros.

BESSENT'S AGENDA for Institutions

The U.S. will have a large presence at the meetings, from the tariff discussions to Bessent’s call for the IMF to withdraw from climate change and gender issues and focus on its core mission of financial stability. Dan Katz, IMF's No. 2 official, will make his public debut at the meetings. 2 official. The member countries will watch to see if Katz, the former investment banker and Bessent's chief staff, can carry out the agenda of U.S. Treasury Chief, which calls for stronger IMF critique of China's government-led economic policies. The U.S. Treasury’s market intervention in favor of Argentina, IMF’s largest borrower will also take center stage during the meetings, as Argentine's libertarian right-wing president Javier Milei, will join Trump, his ally, two blocks away, at the White House, on Tuesday. Georgieva welcomed the move to keep Argentina's reforms based on market principles on track.

Muehleisen said that the Fund could be pushed to implement Trump's geopolitical objectives - increasing pressure on China, and possibly extending more assistance to U.S. Allies such as Argentina, without adequate reforms.

Is it still a multilateral, global organization or is it more like an appendage to the U.S. Treasury? Treasury?" "Treasury?" This will be a fascinating debate," he said. (Reporting and editing by Dan Burns, Paul Simao and Dan Burns; additional reporting by Andrea Shalal, David Milliken and David Lawder)

(source: Reuters)