US-China trade war threat to world economy, must be resolved: IMF's Lagarde

Lagarde was speaking on the sidelines of a conference at France's finance ministry
The head of the IMF said on Tuesday that fresh trade tensions between the US and China were the main threat to the world economy.

“Clearly the tensions between the US and China are the threat for the world economy,” Christine Lagarde told journalists at a conference in Paris. Also speaking at the Paris Forum event, French Economy Minister Bruno Le Maire warned about the impact of a trade war between the world's two biggest economies.

“We are following the current negotiations very closely between China and the United Staters and we want them to respect the principals of transparency and multilateralism,” he said.

Chinese official to visit US this week

China’s top trade negotiator Liu He will travel to the US this week for high-stakes talks as prospects dimmed for maintaining a fragile truce after President Donald Trump threatened to raise tariffs on Chinese goods starting Friday.

Vice Premier Liu will meet with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, on May 9 and 10, according to a statement Tuesday on the Chinese Ministry of Commerce website. At the same time, China is preparing retaliatory tariffs on US imports should Trump carry out his threat, according to people familiar on the matter.

U.S. equity-index futures extended declines as investors weighed potential setbacks in negotiations that both sides had indicated in recent weeks were headed in the right direction. The dollar edged higher as Treasury yields were steady.

The latest twist sets up Thursday as a crucial moment in the yearlong trade war with potentially huge ramifications for companies, markets, consumers and politicians in both nations. In light of the U.S. ultimatum, attention will turn to whether Liu offers enough concessions to stave off higher tariffs or whether China plays hardball with retaliatory measures.

“The fact that China sends a delegation to the U.S. shows it is still willing to solve the dispute by negotiations regardless of what the U.S. is saying,” said Lu Xiang at the state-run Chinese Academy of Social Sciences in Beijing. “If the Trump administration follows through with the tariffs threats on Friday, I think it means the talks fall apart. We then need to be prepared for worse than worst.”

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