Attempts by the United States to erect economic barriers in order to accomplish geopolitical aims would harm both the United States and the rest of the world, according to Kristalina Georgieva, the head of the International Monetary Fund (IMF).
“My fear is an increasing fragmentation of the global economy,” Georgieva told the Washington Post on Saturday.
“We may be sleepwalking into a poorer and less secure society as a result.”
If the US-China competition divides the global economy, it would decrease by 1.5%, or more than $1.4 trillion per year, she said, adding that the losses in percentage terms for the Asian area will be twice as high.
Georgieva, who was born in Bulgaria, recalls having “lived through the first Cold War on the opposite side of the Iron Curtain.” And, yes, it is rather chilly outside. Going into a second cold war for another generation is… extremely irresponsible.”
The IMF chief said the tariffs on Chinese goods that had been imposed under former US President Donald Trump and kept in force under Joe Biden were one of such counter-productive measures. She didn’t mention the sanctions imposed on Moscow over the conflict in Ukraine or the attempts by Washington and its allies to put price caps on Russian energy.
Some diversification of supply chains might be necessary, especially after the Covid-19 pandemic, but when it goes “beyond economic logic, it would be harmful for the US and the rest of the world,” Georgieva pointed out.
“It is important to think through actions and what they may generate as counter actions carefully, because once you let the genie out of the bottle, it’s hard to put it back in,” she warned.
However, the IMF chief suggested that a complete split between the US and China would likely be impossible. The annual trade between the world’s two top economies currently stands at $600 billion, and they’re deeply interconnected, she explained.