Governments across the world have been called upon by the head of the International Monetary Fund (IMF) to resist the current wave of protectionism in order to protect the principle of liberalized trade.
During a speech at the University of Hong Kong, IMF managing director Christine Lagarde indicated that her organization remains optimistic about global economic prospects, with a growth projection of 3.9 per cent outlined by the IMF in January, but also noted that recent rhetoric on potential import restrictions could jeopardize these prospects.
Fears of a damaging trade war have flared over the last few months, following the introduction of controversial US steel and aluminum tariffs, which has led to China and the US engaging in an ongoing series of tit-for-tat levies and penalties on each other's exports.
The IMF chief warned against any further escalation of this conflict, noting that historically these kinds of restrictive policy end up being harmful to all parties, particularly poorer consumers, as they lead to more expensive products and more limited choices, while also impairing economic growth.
She also spoke out against the US's reasoning that its tariffs are necessary to tackle trade deficits, explaining that gradually curbing its public spending dynamics and increasing revenue would be a much more effective way of reducing future fiscal deficits.
As such, Ms Lagarde called a restoration of the international consensus on the need to reduce trade barriers and resolve disagreements without using exceptional measures, pointing to the new African Continental Free Trade Area and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership as examples of the kind of forward-looking trade initiatives that should be used as a model.
She said: "Remember: the multilateral trade system has transformed our world over the past generation. It helped reduce by half the proportion of the global population living in extreme poverty; it has reduced the cost of living, and has created millions of new jobs with higher wages.
"But that system of rules and shared responsibility is now in danger of being torn apart. This would be an inexcusable, collective policy failure."