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As Trump touts tariffs, Yellen says US has rejected 'isolationism'

America

By AFP | Oct 23, 2024

US Treasury Secretary Janet Yellen speaks during a press conference at the Treasury Department in Washington, DC, on October 22, 2024, at the starts of the International Monetary Fund/World Bank annual Fall meetings. [AFP]

US Treasury Secretary Janet Yellen appeared to take aim at former president Donald Trump's economic approach Tuesday, saying the current US administration has "rejected isolationism that made America and the world worse off."

Her opening remarks at a news conference two weeks before the US presidential election come as the International Monetary Fund also issued a warning on a global rise in tariffs.

World financial leaders are gathered in Washington this week for a series of meetings hosted by the IMF and World Bank.

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The fund cautioned in its latest World Economic Outlook report that tariffs "affecting a sizable swath of global trade" could dent world growth.

Trump has called for a 10 per cent to 20 per cent tariff on all US imports, and a higher rate of 60 per cent or more on those from China.

But sweeping tariffs among major trading blocs, alongside other policies, could decrease global GDP by about 0.8 per cent by 2025, the IMF said in an analysis.

Trump's rival, Democratic Vice President Kamala Harris, is part of an administration that has instead favoured targeted levies on China.

Both sides have been neck-and-neck in polls leading up to the November 5 election.

Yellen warned Tuesday that broad-based tariffs could hit domestic consumer prices and impact the competitiveness of businesses that rely on imports.

She argued that President Joe Biden's government has "pursued global economic leadership" to the benefit of the US public and economy.

"I am convinced that the sustained American economic leadership and engagement with partners we first restored and then strengthened over the past three and a half years will be indispensable as we move forward," she told reporters on Tuesday.

Companies in the United States have been bracing for the possibility of more levies as they monitor Trump's proposals on the campaign trail.

On Tuesday, the IMF released risk assessments on its economic projections, modelling a scenario in which trade tensions lead to a permanent increase in tariffs -- and the United States, euro area and China impose a 10 per cent rate on trade flows among the three regions.

Its scenario also included a 10 per cent tariff on trade flows between the United States and other countries in the world.

"The increase in tariffs directly affects about one-quarter of all goods trade," it noted.

The scenario took in a 10-year extension of Trump administration tax cuts too, alongside other changes like reductions in net migration.

Apart from the hit to global GDP in the combined effects of this situation, US GDP would also fall by about one per cent relative to the IMF 2025 baseline.