IMF warns of China/US blocs deepening trade fragmentation, with ‘fault lines’ emerging
- ‘If fragmentation deepens, we could find ourselves in a new cold war,’ International Monetary Fund’s Gita Gopinath says
- The world’s green transition could also become much more costly since critical minerals are so geographically concentrated and not easily substituted
As national security concerns are shaping economic policy worldwide, the International Monetary Fund has warned that shifting investment trends and trade fragmentation could result in long-term losses in a world divided into two blocs centred on the United States and China.
In a speech delivered on Monday at the opening of the 20th World Congress of the International Economic Association in Colombia, Gita Gopinath – the first deputy managing director at the IMF – explained that China is “no longer” the largest trading partner of the US, as the US-China trade war since 2018 has “effectively” curbed Chinese imports of tariffed products. The comments were taken from an embargoed copy of her speech provided to the Post.
According to official Chinese customs data, the US was the third-largest trading partner of China up to November of this year, following the Association of Southeast Asian Nations and the European Union.
China is also “no longer” a prominent destination for outward US foreign direct investment, Gopinath added, and China is losing ground to emerging markets such as India, Mexico and the United Arab Emirates.
Gopinath also said there is “suggestive evidence” indicating that direct links seen between the US and China in the past are being replaced by indirect links.
