Seoul: U.S. President Donald Trump's inconsistent and regressive tariff policy could hurt the United States the most and undermine its status as a global hegemon, a former senior International Monetary Fund (IMF) official has said. Anne Krueger, former IMF deputy managing director and former World Bank chief economist, made the remarks during a meeting with reporters, emphasizing the need for South Korea and other countries to maintain open economies to ensure future growth.
According to Yonhap News Agency, Krueger stated that in the short term, a lack of investment is likely, and tariffs are expected to decrease the growth rate of production rather than increase it, making them regressive. She also highlighted the policy inconsistencies, noting that Trump's aim for greater direct investment from partner countries while attempting to reduce the trade deficit is contradictory, as increased direct investment leads to more money inflow, thereby increasing the deficit.
Krueger further warned that while other countries will be affected by these policies, the U.S. will suffer the most. She cautioned that if current U.S. policies persist, the period known as the 'American Century' may end by 2025, potentially ceding global leadership to Asia, Europe, or another region.
On July 30, a framework agreement was reached between Seoul and Washington where the Trump administration agreed to reduce "reciprocal" tariffs on Korea and sectoral tariffs on Korean autos. In return, South Korea committed to substantial investments in the U.S., and negotiations are ongoing to finalize the details.
Krueger expressed concern over countries limiting market openness, arguing that historically, open economies have fostered long-term prosperity. She predicted that countries which manage to buffer some tariff impacts while keeping markets open will perform better over the next decade.
Regarding artificial intelligence (AI), Krueger projected a positive impact on the economy, believing it would create new jobs and help offset demographic pressures. She acknowledged South Korea's demographic challenges but suggested that these might not necessarily lead to severe outcomes, as global population growth concerns have been managed in the past.
Krueger is in Seoul to attend an international conference hosted by the Institute for Global Economics (IGE) and Woori Financial Group. She currently holds positions as a senior research professor at Johns Hopkins University and a senior fellow at Stanford University's Center for International Development.