The News
World financial leaders are in Washington, DC this week for the World Bank and International Monetary Fund spring meetings amid plummeting business and economic confidence as a result of US President Donald Trump’s trade war.
The talks are expected to focus on the fallout from tariffs, with many economists and other experts arguing that they are likely to hammer US — and international — economic prospects.
A twice-yearly Brookings-Financial Times index of business confidence fell to its lowest level on record, while Trump’s economic approval is at its worst in either of his presidential terms.
SIGNALS
IMF and World Bank seek to avoid Trump’s ire
This week’s spring meetings “are of existential importance to the IMF and World Bank,” an Atlantic Council analyst wrote: Donald Trump’s review of US membership of international organizations is due by August and, while the IMF and World Bank present as “archetype[s] of multilateralism,” both institutions “remain completely hidebound to Washington,” their biggest shareholder, one economist told The New Republic. World Bank President Ajay Banga has tried to placate Trump in recent weeks by supporting nuclear and gas projects. But it remains unclear whether “these shifts in emphasis will be enough to satisfy” the White House, the Financial Times wrote — especially as Banga still plans for climate financing to account for 45% of World Bank lending this year.
Bretton Woods system losing sway
The Bretton Woods system — from which the World Bank and IMF emerged — is “faltering,” El País wrote: Donald Trump’s unpredictable trade policies do not appear conducive to ruled-based, multilateral cooperation. While the US is unlikely to withdraw from the IMF completely, “the lender likely faces a loss of status” as a result of increased geopolitical tensions and greater protectionism, one economist wrote. “A weaker IMF and World Bank [...] would be an acute risk for emerging market economies struggling with high debt levels [and] dwindling reserves,” Bloomberg noted. The IMF also offers the US substantial economic influence at virtually zero cost, The Hill argued: “If the US steps back from the IMF, there will be only one winner: China.”
World leaders may lack the unity to defend the Bretton Woods system
While Donald Trump is the source of much of the economic turmoil facing policymakers, “a united front, akin to that assembled in 2008, will be impossible,” The Guardian’s economics editor wrote: Already, countries’ responses to US tariffs have been mixed. Recent attempts at multilateral development bank reform and strengthening the sovereign debt architecture “will fall by the wayside,” one analyst told Reuters, as delegations seek to shore up their own economies and strike trade deals with Washington. By engaging in bilateral negotiations, “these countries are unintentionally undercutting the case for multilateral economic coordination that is the foundation of the Bretton Woods system,” an Atlantic Council analyst noted.