Christine Lagarde is sounding the alarm on the US-China trade war, calling it a ‘big, dark cloud’ over the global economy

Christine Lagarde, the incoming European Central Bank president.

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Christine Lagarde, the incoming European Central Bank president.
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REUTERS/Charles Platiau

  • Christine Lagarde has bemoaned the US-China trade war as a “big, dark cloud” and “the biggest hurdle for the global economy.”
  • In a CNBC interview this week, the incoming president of the European Central Bank labeled the dispute’s projected 0.8% hit to global growth in 2020 as a “massive number.”
  • Lagarde also tried to head off a tariff battle between the US and Europe. “It’s not a relationship that should turn into any kind of trade war at all,” she said.
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Christine Lagarde has bemoaned the US-China trade war as a “big, dark cloud” and the “biggest hurdle” for global growth.

The world’s two largest economies have slapped tariffs on hundreds of billions of dollars’ worth of each other’s goods over the past 18 months. The International Monetary Fund, which previously forecast worldwide growth of 3.5% next year, predicted this month that the imposed and pending tariffs could wipe 0.8% off of global gross domestic product in 2020.

“That’s a massive number,” Lagarde, the former managing director of the IMF who is now the incoming president of the European Central Bank, said in a CNBC interview this week. “It’s fewer jobs. It’s less business going on. It’s less investment. It’s more uncertainty. It weighs like a big, dark cloud on the global economy.”

She added that the threat to free trade posed “the biggest hurdle for the global economy.”

US and Chinese trade negotiators are set to hold talks in Washington next month, but previous discussions have failed to resolved the dispute or prevent tit-for-tat tariffs.

Lagarde has voiced similar warnings before. “The clouds on the horizon that we have signaled about six months ago are getting darker by the day,” she said at a news conference in June 2018.

Another front in the trade war

The prospect of a tariff battle between the US and Europe over state subsidies for the airplane manufacturer Airbus prompted Lagarde to underline their historical ties in the CNBC interview.

“Europe and the United States have been friends for decades and centuries,” she said, adding that the two had “been on the same side of the battlefield and have rescued each other on many occasions.”

“I’m very grateful to the United States for that,” she added. “It’s not a relationship that should turn into any kind of trade war at all.”