European Central Bank President Christine Lagarde stated on Wednesday (June 11th) that mandatory trade policies cannot resolve financial imbalances. Given the significant risk of economic damage, all parties need to weigh policy adjustments to defuse tensions.
In April, US President Trump triggered global economic turmoil by announcing large tariffs on most countries. Subsequently, during negotiations between various governments and the Trump administration, global trade flows were disrupted to some extent.
Imbalance and Solutions
During her latest visit abroad, Lagarde stated that being a bully in global trade would not offer any long-term advantages. “Coercive trade policies are not a sustainable solution to today’s trade tensions,” she said, though Trump was not explicitly named, the implication was clear.
She pointed out that since 2014, industrial policies aimed at boosting domestic production capacity have increased significantly, with related intervention measures such as subsidies that affect global trade more than tripling worldwide.
Meanwhile, the United States’ share of global demand has surged in recent years, reflecting excessive public sector spending and contributing to imbalances.
Regarding the current situation of trade imbalance, Lagarde said, “The way protectionism addresses the imbalance problem does not solve its root cause; instead, it erodes the foundation of global prosperity.” She noted that countries are deeply integrated through global supply chains, but geopolitical ties are no longer as close as they used to be, and this risk is greater than ever before. Coercive trade policies are more likely to trigger retaliation and lead to mutually harmful consequences.
She believes that all countries should adjust policies that lead to oversupply or overdemand; otherwise, trade barriers and potential retaliation will erode global prosperity. The solution to conflicts lies in respecting global rules more closely and concluding bilateral or regional agreements based on mutual benefit.
Related Topics:
