WASHINGTON — As global financial leaders prepare for their upcoming meetings in Washington next week, a significant uncertainty looms: the outcome of the U.S. presidential election, which will shape the policies of the world’s leading economy.
Republican candidate and former President Donald Trump and Democratic candidate Vice President Kamala Harris have largely refrained from detailing their strategies concerning the International Monetary Fund (IMF) and the World Bank. However, their contrasting perspectives on trade, tariffs, and various economic matters will surely be at the forefront of discussions among finance leaders at this annual gathering.
IMF Managing Director Kristalina Georgieva addressed the crucial issues in a speech prior to the meetings. While she didn’t mention Trump by name, she expressed concern that significant players, motivated by national security apprehensions, are increasingly leaning towards industrial policy and protectionism, resulting in a series of trade restrictions. She cautioned that trade would no longer serve as a robust engine of growth as it once did, likening the impact of trade barriers to “pouring cold water on an already lukewarm world economy.”
Trump has pledged that, if elected, he would enforce a 60% tariff on all Chinese imports and instituting a “universal” tariff ranging from 10% to 20% on all other goods entering the United States. He argues that the burden of these taxes will fall on foreign manufacturers. However, many economists contend that such tariffs effectively act as a tax on American consumers, potentially diminishing economic efficiency and exacerbating inflation within the country.
Additionally, Trump’s administration displayed a tendency toward isolationism and openly criticized multilateral organizations. During his previous term, he withdrew the U.S. from the Trans-Pacific Partnership trade agreement and replaced the North American Free Trade Agreement with the United States-Mexico-Canada Agreement. Moreover, his administration halted new appointments to the World Trade Organization appellate body, resulting in a lack of functional judges in that organization.
World Bank President Ajay Banga commented on the election during a press briefing, acknowledging Trump’s contributions to boosting investments in the International Bank for Reconstruction and Development, which provides loans to middle-income developing nations. He noted, “The question will then be how the nuances of each administration will differ.” Banga admitted he was unsure and preferred not to speculate on future engagements with either candidate.
As for Harris, her positions regarding the World Bank and the IMF remain less defined. While she has supported some tariffs, it is anticipated that she would continue the Biden administration’s overall strategy favoring global cooperation rather than confrontation. The Biden-Harris administration has retained several tariffs imposed on China during Trump’s presidency and, in May, introduced substantial tariffs on an array of Chinese products, including electric vehicles, advanced batteries, solar cells, steel, aluminum, and medical equipment.
Harris previously met with Banga in June 2023 when he commenced his five-year term as World Bank president, expressing commendation for the World Bank’s evolving goals to address global challenges such as climate change, pandemics, fragility, and conflicts.
In her speech, Georgieva did not directly address the election but acknowledged the current global climate: “We live in a world filled with distrust and fragmentation, with national security concerns taking precedence for many nations. This has occurred before but never during a period marked by such high economic interdependence. It is vital that we do not let this situation excuse inaction to avert further fragmentation of the global economy.”