‘ Winter is coming’: Indonesia warns world finance leaders over trade war

Just in case any of the global central bankers and finance ministers gathered in Indonesia missed the message delivered repeatedly this week, the host nation said it again on Friday: Everyone stands to lose if trade wars are allowed to escalate.

Indonesian President Joko Widodo didn’t mention the United States or China, the world’s two largest economies, but it was clear who he was talking about in an address to the plenary session of the International Monetary Fund and World Bank meetings on the island of Bali.

“Lately it feels like the relations among the major economies are becoming more and more like “Game of Thrones”,” Widodo said in a speech peppered with references to the HBO series about dynasties and kingdoms battling for power.

“Are we so busy fighting with each other and competing against each other that we fail to notice the things which are increasingly threatening, all of us alike, rich and poor, large and small,” he said.

Poorer and populous emerging market countries like his are among the most vulnerable to the fallout from the ongoing US-Sino tariff war, and rising US interest rates that are drawing investors away and driving down currencies.

“All these troubles in the world economy, are enough to make us feel like saying: ‘Winter is Coming’”, Widodo said, using a phrase that characters in the popular fantasy series constantly repeat to refer to spectral dangers that could destroy them all.

With rivalry growing in the world economy, Widodo said “the situation could be more critical compared to the global financial crisis 10 years ago.”

The market ructions have now cascaded through to developed markets with Wall Street extending a slide into a sixth session on Thursday amid the trade war fears.

The United States and China have slapped tit-for-tat tariffs on hundreds of billions of dollars of each other’s goods over the past few months. The tariffs stem from the Trump administration’s demands that China make sweeping changes to its intellectual property practices, rein in high-technology industrial subsidies, open its markets to more foreign competition and take steps to cut a politically sensitive US goods trade surplus.

Rubbing salt in US wounds, China reported yesterday an unexpected acceleration in export growth in September and a record $34.13bn trade surplus with the United States.

In an interview with Reuters, US Treasury Secretary Steven Mnuchin said that he told China’s central bank chief that currency issues need to be part of any further U.S.China trade talks and expressed his con- cerns about the yuan’s recent weakness.

Mnuchin also said that China needs to identify concrete “action items” to rebalance the two countries’ trade relationship before talks to resolve their disputes can resume. The US Treasury chief and People’s Bank of China Governor Yi Gang extensively discussed currency issues on the sidelines of the meetings in Bali.

Mnuchin’s comments on China’s currency come ahead of next week’s scheduled release of a hotly anticipated Treasury report on currency manipulation, the first since a significant weakening of yuan began this spring. Mnuchin said re-launching trade talks would require China to commit to taking action on structural reforms to its economy. If the relationship could be rebalanced, he said the US-China total annual trade relationship could grow to $1tn from $650bn currently, with $500bn of exports from each country. Meanwhile, the chairman of a meeting of finance leaders from the Group of 20 leading industrialised and emerging economies admitted that the trade tensions within the group could only be solved by the countries directly involved.

“The G20 can play a role in providing the platform for discussions. But the differences that still persist should be resolved by the members that are directly involved in the tensions,” Nicolas Dujovne, Argentina’s Treasury Minister, told a news conference after chairing the G20 meeting in Bali.