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Tariffs aren't answer to imbalances: IMF

Tariffs aren't answer to imbalances: IMF

Express Tribune5 days ago
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Global current account balances widened sharply in 2024, reversing a narrowing under way since the global financial crisis of 2008-2009, the International Monetary Fund (IMF) said on Tuesday, warning that tariffs were not the answer.
In its annual External Sector Report, which assesses imbalances in the 30 largest economies, the IMF noted that external surpluses or deficits were not necessarily a problem but could cause risks if they became excessive.
It said prolonged domestic imbalances, continued fiscal policy uncertainty, and escalating trade tensions could deteriorate global risk sentiment and elevate financial stress, hurting both debtor and creditor nations.
The report took aim at US President Donald Trump's imposition of higher import tariffs against nearly every trading partner, which his administration says is aimed at increasing revenues and righting longstanding trade deficits.
"A further escalation of the trade war would have significant macroeconomic effects," it said, noting that higher tariffs would reduce global demand in the short term and add to inflationary pressures through rising import prices.
Rising geopolitical tensions could also trigger shifts in the international monetary system (IMS), which in turn could undermine financial stability, it said.
This year's report, based on 2024 data, showed the widening of global current account balances was due largely to increased excess balances in the world's three largest economies – the US, China and the euro area.
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