Lagarde: Trump-style protectionism could harm global economy

The trade protectionism espoused by US presidential hopeful Donald Trump could bring great harm to the world economy, the head of the International Monetary Fund has said.

Christine Lagarde told the Financial Times that the British decision to leave the European Union has caused a disruption to international growth, and anti-trade policies could endanger it even further.

Trump has consistently called for the rupturing of global trade agreements and the impsoition of new trade barriers to help to stimulate the US economy.

“I think it would be quite disastrous, actually. Well I don’t think I should say disastrous because that is an excessive word and I should refrain from excessive words. But it would certainly have a negative impact on global growth,” she told the financial publication.

A Trump presidency is likely to cause further instability to an already fragile market, but Lagarde, who begins a second term as chief of the IMF this week, was careful not to single out the tycoon by name.

She said that the economy is in danger of being disrupted as much as it was by he beginning of the first world war.

“I hope it is not a 1914 moment and I hope that we can be informed by history to actually address the negative impact of globalisation in order to leverage the benefits that it can deliver. Because it has historically delivered massive benefits and it can continue to do so,” she said.

“We have to work with all governments and all authorities but we certainly hope that whatever new government is in place in the US and whoever is elected as president will look at trade in positive terms,” she said.

Lagarde urged the United Kingdom to provide a decision soon regarding their intentions following the vote for a so-called Brexit last month. Political uncertainty has stalled the invoking of Article 50 in the EU, which is used by its members to self-eject from the bloc.

“We want to see clarity sooner rather than later because we think that a lack of clarity feeds uncertainty, which itself undermines investment appetites and decision making,” she said.

“Do we have a forecast and scenario with prolonged uncertainty, total lack of clarity, no triggering of Article 50, things staying in limbo for a long period of time? No. We don't have that. We doubt that it would be sustainable politically, geopolitically,” she said.

The uncertainty caused by the fallout of the British referendum has spread to the UK economy and global markets, with the value of the pound falling to its lowest in 31 years, as investors and businesses remain in limbo about their future prospects inside Britain.