Trade war ‘a drag on global growth’

Global finance chiefs used the closing sessions of talks in the tropical resort of Bali to hammer home the message that simmering trade tensions are already denting global growth and need to be resolved.

Bank of Japan governor Haruhiko Kuroda said it is essential to have dialogue on trade; Brazil’s central bank president Ilan Goldfajn flagged the tensions as one of the biggest threats to emerging economies; Bank for International Settlements GM Agustin Carstens said there is a risk that the global economy goes backwards due to rising protectionism.

While People’s Bank of China governor Yi Gang called for a constructive solution to the dispute, he added that China is preparing for the worst.

“You see a lot of people in China now preparing for this trade tension to be a prolonged situation,” Yi said during a panel discussion hosted by the Group of Thirty, a consultative group on international economics. “The downside risks from trade tensions are significant.”

The Chinese official received support from the floor when Mexico’s former president Ernesto Zedillo took an opportunity during a question-andanswer session to counsel Yi to follow the example set by Mexico and Canada during their Nafta negotiations with the US.

“Mexico and Canada made clear that they’d rather not have Nafta than having the deal that the US wanted. In the end, Mexico and Canada got their way in every single issue that had been drawn as a red line,” Zedillo said. “So I hope China doesn’t blink.”

IMF MD Christine Lagarde doubled down on the messaging: “Our message was very clear: de-escalate the tensions,” she told Bloomberg Television.

The Sunday blitz came as the IMF and World Bank’s annual meetings wound up. Warnings over the tensions were put in the starkest terms on Friday by Indonesia’s President Jokowi Widodo.