In a recent interview with Xinhua, Maurice Obstfeld, chef economist of the International Monetary Fund, said the United States attempting to reduce the trade deficit by imposing tariffs was misguided.

Especially, the US government’s misperception of trade tariffs could lead to the introduction of more protectionist policies, which will do little to address the global trade imbalance and, instead, exacerbate trade tensions between countries.

If the US keeps imposing tariffs on imports, the exchange rate will see a huge appreciation and eventually hurt exports. At the same time, the increased purchasing power of dollars will raise the US domestic demand, which will further widen its trade deficit.

The Purchasing Managers' Index of US export orders has fallen due to the uncertainty over the US tariffs, while economic entities face problems in the shortage of key materials and delays in deliveries, he said. In addition, severe trade restrictions will affect efficiency, investment and investor confidence. If the current trade disputes cannot be solved efficiently, the global capital market, especially the stock markets, will be driven down, said Obstfeld.

Countries in trade disputes need to step back and figure out their objectives and negotiate at multilateral levels to jointly improve the trading system such as the WTO, so that global economic growth will be boosted, said Obstfeld.