Finance chiefs meeting in Washington this week were set to discuss the global economy’s surprising resilience in the face of Donald Trump’s tariff attacks, until US-China trade war rhetoric reignited with the US president threatening 100% tariffs on Chinese imports and battering financial markets.
The annual meetings of the International Monetary Fund and World Bank are now sure to be dominated by questions about whether Trump’s promise to retaliate against China’s dramatically expanded rare earth export controls will plunge the world’s two largest economies back into a full-blown trade war.
Trump said his new tariffs and export restrictions would take effect on Nov. 1 and threatened to cancel a meeting with Chinese President Xi Jinping later this month in South Korea. The tariffs would break a delicate truce hammered out by Washington and Beijing over five months that brought tariffs down from triple-digit levels and prompted improved global growth forecasts from the IMF.
U.S. Treasury Secretary Scott Bessent on Monday tried to walk back the threat, telling Fox Business Network that he believed the Trump-Xi meeting would continue and that there would be U.S.-China staff-level meetings this week on the sidelines of the IMF-World Bank meeting.
“The 100% tariff doesn’t have to happen,” Bessent said. “The relationship, despite this announcement last week, is good. The lines of communication have reopened, so we’ll see where it goes.”
Bessent added that the United States would “stand firm” against new global export controls on Chinese rare earths, while Trump said on social media site Truth on Sunday: “Don’t worry about China, everything will be fine!”
The softer tone sparked a strong rally in U.S. stocks in early trading in New York on Monday, with the tech-heavy Nasdaq Composite rising more than 2% and other major indexes rising more than 1%. Trump’s threat on Friday sparked a huge sell-off at a time when investors and top policymakers were already increasingly anxious about a frothy stock market fueled by an artificial intelligence investment boom that some officials fear could hurt future employment.
The IMF and World Bank meetings will bring more than 10,000 people to Washington, including finance ministers and central bank governors from more than 190 countries.
Martin Muehleisen, a former IMF chief strategist now at the Atlantic Council, said Trump’s threats may be posturing for negotiating influence, but he said they will inject volatility into the week’s proceedings.
“Let’s hope sanity prevails. If Trump goes back to 100% tariffs on Chinese goods, there will be a lot of pain in the markets for him,” Muehleisen said.
While China has some leverage over Trump due to its global dominance in rare earths, which are essential for manufacturing technology, Muehleisen said Beijing is not interested in diving back into a triple-digit tariff environment.
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Trump’s latest brinkmanship on China tariffs clouds IMF, World Bank meetings
Before Friday’s escalation, IMF Managing Director Kristalina Georgieva had touted the global economy’s ability to withstand multiple shocks, from tariff costs and uncertainty to the slowdown in the U.S. labor market, rising debt levels and the rapid changes brought about by the rapid adoption of AI.
In a preview of the IMF’s World Economic Outlook forecasts to be released on Tuesday, Georgieva said last week that the global GDP growth rate for 2025 would be only slightly below 3.3% for 2024. Based on lower tariff rates than initially feared, including tariffs between the United States and China, the IMF in July raised its GDP growth forecast by 2025 by two tenths of a percentage point to 3%.
“What we are seeing is demonstrable resilience in the world,” Georgieva told Reuters in an interview. “But we also say this is a time of exceptional uncertainty, and downside risks continue to dominate the forecast. So watch it, don’t get too comfortable.”
Finance ministers from the Group of Seven industrial democracies are expected to meet on Wednesday to discuss efforts to step up sanctions pressure against Russia that aim to end Moscow’s war against Ukraine.
A British government source said Finance Minister Rachel Reeves wanted to ensure joint action with G7 countries and the European Union to reduce Russia’s energy revenues and access to overseas assets that comply with international law.
Among these options that G7 ministers will discuss is a European Union plan to use Russia’s frozen sovereign assets to back a $162 billion loan to Ukraine.
The U.S. footprint at the meetings will be large, stretching from tariff discussions to Bessent’s calls for the IMF and World Bank to retreat from climate and gender issues to focus on their core missions of financial stability and development.
The meetings will be the public debut of Dan Katz, the IMF’s new No. 2 official. Member countries will be watching to see how Katz, a former investment banker who was Bessent’s chief of staff, carries out the US Treasury chief’s agenda, which also calls for greater IMF criticism of China’s state-led economic policies.
The U.S. Treasury’s intervention in the market on behalf of Argentina, the IMF’s largest borrower, will also take center stage in the meetings, as Argentina’s right-wing libertarian president, Javier Milei, will join his ally Trump two blocks away at the White House on Tuesday. Georgieva welcomed the move to maintain Argentina’s market-based reforms.
But Muehleisen, the former IMF official, said the Fund risks being pressured by its largest shareholder to enforce Trump’s geopolitical goals, increasing pressure on China and potentially extending more aid to U.S. allies like Argentina without adequate reforms.
“Is it really still a global, multilateral organization, or is it becoming an appendage of the US Treasury?” he said.
With information from Reuters.
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