- Donald Trump is endangering America’s status as global leader, according to Christine Lagarde.
- The outgoing head of the IMF and incoming head of the European Central Bank said the US president was hurting certainty in trade during a “60 Minutes” interview.
- She added that the trade war could “give a big haircut to the global economy.”
- Lagarde also highlighted the risks of Brexit to the European economy.
- Visit Business Insider’s homepage for more stories.
Donald Trump is endangering America’s status as a global leader, according to Christine Lagarde, the outgoing head of the International Monetary Fund (IMF).
However, one of the most famous women in the world of finance and economics has warned that Trump and his trade wars, along with Brexit, carry major risks to the world economy.
“I think the biggest key that President Trump has is in relation to predictability and certainty of the terms of trade. It’s the unknown which is hurting, because you can’t adjust to the unknown,” Lagarde said in a “60 Minutes” interview on CBS.
“So what do you do? You build buffers. You build savings. You wonder what comes next. That’s not propitious to economic development,” she added.
Lagarde, who led the IMF for eight years, is about to become the president of the ECB. She’ll be replacing Mario Draghi, who during his time at the bank stabilised the European economy, most recently cutting interest rates to -0.5%.
She’s set to inherit a struggling European economy that has been damaged by the trade war, especially countries like Germany.
The trade war is “certainly going to give a big haircut to the global economy,” she said. “And if you shave off almost a percentage point of growth that means less investment, less jobs, more unemployment, reduced growth. So of course it has an impact.”
The Trump administration’s trade wars and other diplomatic spats could lessen America’s influence on the world stage, Lagarde warned. “I was brought up as a citizen of this world. The United States is at risk of losing leadership. And that would be just a terrible development.”
Lagarde said the US “has been a force for good, and for those principles that I respect highly: the rule of law, democracy, free market, and consideration for the individual, and respect.
“It’s the same message the Allies sent to the world 75 years ago on these shores: we’re all in this together.”
Lagarde added that the European economy is vital for America, and vice versa, and so a trade war over Airbus and Boeing poses a serious threat to both countries.
“If things go wrong in one part of the world, it is going to affect the rest of the world as well. We buy American products in huge quantities. The United States buys European products in huge quantities. Massive numbers of European firms have set up shops in the US. Vice versa. We penetrate each other’s markets.”
“My very, very strong message to all policymakers is please sit down like big men, many men in those rooms and put everything on the table, and try to deal bit by bit, piece by piece, so that we have certainty.”
Lagarde also touched upon Britain’s impending departure from the EU in her interview, describing it as a “great sadness.”
“To see them drifting away from the European Union is sad,” she said.
At the ECB, Lagarde will be tasked with keeping Europe, the world’s second largest economy, afloat in the midst of Brexit.
“It will affect both the UK and certain countries in the European Union, Ireland in particular, Germany, the Netherlands. And everybody will be a little less well-off as a result,” she added.
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