‘Winter is coming’ warns Indonesia
Everyone stands to lose if trade wars escalate, global bankers and finance ministers told
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 US 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 in 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 full of references to the HBO series about dynasties 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 asked.
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 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 than 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 US 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 move to cut a politically sensitive US goods trade surplus.
Rubbing salt in US wounds, China reported on Friday an unexpected acceleration in export growth in September and a record $34.13 billion (R500bn) trade surplus with the US.
In an interview, US Treasury secretary Steven Mnuchin said that he told China’s central bank chief that currency issues needed to be part of any further Us-china trade talks and expressed his concerns about the yuan’s recent weakness.
Mnuchin also said that China needed to identify concrete “action items” to rebalance the two countries’ trade relationship before talks to resolve their disputes could resume.
The US Treasury chief and People’s Bank of China governor Yi Gang extensively discussed currency issues on the sidelines of the Bali meetings.
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 earlier this year.
IMF forecasts of global economic growth for 2018 and 2019 were cut to 3.7%, from 3.9%.