International Monetary Fund (IMF) chief Christine Lagarde s has said countries need to be sensible about talk of a trade war, as a conflict between the United States and China creates uncertainty for businesses and their global supply chain.
In a speech in Hong Kong, Lagarde said the top priorities for the global economy are to steer clear of protectionism, guard against financial risk and foster long-term growth.
The IMF chief was speaking as a threatened trade war between the United States and China creates significant uncertainty for businesses and their global supply chains.
The best way to tackle global imbalances is to use fiscal tools or structural reforms, she said, adding that the World Trade Organisation's rules were in danger of being "torn apart", which would be "an inexcusable, collective policy failure".
Policymakers need to commit to a level playing field and resolve disputes without using exceptional measures, she said.
"There are threats, there are counter-threats, there is an attempt to open a dialogue - we should support that dialogue attempt as much as we can," Lagarde said.
"The impact of those threats is minimal on both sides.
"What is not minimal is the way in which confidence can be undermined."
The IMF chief was speaking after attending the Boao Forum in China where she said that a global economic recovery was taking root.
New analysis by the IMF shows global debt is now at an all-time high, and 40pc higher than in 2007