Amid concerns that escalating trade tensions between the United States and China could reverberate through the world economy, Lagarde urged government leaders to resolve their disputes through dialogue.     

"Investment and trade are two key engines that are finally picking up. We don't want to damage that," she said at a press briefing to open the spring meetings of the International Monetary Fund (IMF) and World Bank Group (WBG) in Washington on Thursday.

While she acknowledged that the impact of the current trade spats on global growth was "not very substantial," she warned that the ongoing disputes could erode business confidence very quickly due to rising uncertainty, which would make businesses "reluctant to invest."

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The spring meetings of IMF and WBG — scheduled to last until April 22 — bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics.

This year's gatherings are intended to discuss a looming tit-for-tat trade war, unleashed by US President Donald Trump, which Lagarde said threatened to hurt economies that are interconnected by global supply chains.

Key risk to growth

In its World Economic Outlook this week, the IMF listed the trade tensions as a key downside risk to the global recovery and warned that it could harm the poorest in the world through rising prices.

US President Donald Trump last month imposed steep tariffs on steel and aluminum imports and threatened to impose more on tens of billions of dollars in Chinese imports, prompting Beijing to slap duties on US goods in retaliation.

During the news conference, the IMF chief insisted that globalization had "served us so well and delivered more progress for more people than at any time in history." Now, however, the benefits of international cooperation were being questioned, she added.

Multilateral talks

While she welcomed bilateral discussions between Washington and Beijing, she said disagreements should be resolved in a multilateral forum, and every country should address its own trade barriers.

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Urging countries to "steer clear of all protectionism," she said that unilateral trade restrictions had "not proven helpful."     Instead, "countries should work together to resolve disagreements without using exceptional measures."

Apart from veiled criticism of Trump's tactics of bullying China and others into concessions on tariffs and trade, Lagarde praised the US president for his massive tax cuts, which she "advocated, recommended, encouraged, and is very pleased to see happening." The policy would encourage investment around the world, she added.

She also warned, however, that the US should take advantage of good economic times to work to reduce its debt and deficit, rather than increase it.

Debt levels worldwide have hit a record $164 trillion, two-thirds of which is held by the private sector. Public debt in advanced economies is higher than at any time since 1945. Therefore, Lagarde warned of "unsustainable debt burdens" in the world's leading economies should financing conditions shift.

uhe/jd (Reuters, dpa, AFP)