Fi­nance chiefs is­sue warn­ing as trade ten­sions deepen

The News-Times (Sunday) - - Business -

Global fi­nance chiefs warned that ten­sions over trade and ris­ing in­ter­est rates threaten to turn the world econ­omy into a bat­tle­ground just as global growth peaks.

A year since they toasted the most syn­chro­nized ex­pan­sion in years, pol­icy mak­ers at the IMF’s an­nual meet­ing fret­ted this week that the up­swing may come apart as gov­ern­ments turn in­ward and the Fed­eral Re­serve cre­ates rip­ples by tight­en­ing mone­tary pol­icy.

As scenes from the me­dieval fan­tasy TV se­ries “Game of Thrones” played on gi­ant screens above him, In­done­sian Pres­i­dent Joko Wi­dodo on Fri­day pro­claimed “Win­ter is com­ing” — a line from the se­ries un­der­scor­ing the need for con­stant vig­i­lance against ex­ter­nal threats.

“When vic­tory and de­feat have been achieved, will we wake up to a world that is shat­tered?” Wi­dodo asked in Bali, In­done­sia, where fi­nance min­is­ters and cen­tral bankers from the fund’s 189 mem­ber na­tions are meet­ing. “It will be an empty prize, to be­come the most suc­cess­ful econ­omy in a drown­ing world.”

Fol­low­ing the global fi­nan­cial cri­sis a decade ago, the world’s ma­jor economies banded to­gether to calm mar­kets and re­store growth. But their lead­ers are now strug­gling to find com­mon ground, with a trade dis­pute be­tween the U.S. and China show­ing lit­tle sign of end­ing soon and emerg­ing mar­kets strug­gling to cope with a re­ver­sal in cap­i­tal flows.

Tum­bling stock mar­kets un­der­scored the fray­ing con­sen­sus, though signs of calm were re­turn­ing Fri­day as most Asian stocks re­cov­ered and U.S. eq­ui­ties ap­peared set to rise.

Against that back­drop, pol­icy mak­ers and econ­o­mists — many of whom had their sleep dis­turbed early Thurs­day when a mag­ni­tude 6.4 earth­quake struck off the re­sort is­land’s coast — urged the U.S. and China to step back from the brink be­fore their trade war takes a mean­ing­ful bite out of global growth.

The sell-off this week shows the mar­ket is “di­gest­ing” the prospect of higher U.S. in­ter­est rates as well as es­ca­lat­ing trade ten­sions, Aus­tralian Fi­nance Min­is­ter Josh Fry­den­berg said in an in­ter­view with Bloomberg TV. But he said the global econ­omy re­mains strong, and there has yet to be a “large macroe­co­nomic im­pact” from the trade dis­pute.

“We need to see cooler heads pre­vail,” Fry­den­berg said. “We don’t want to see an es­ca­la­tion in some of the trade ten­sions be­tween the United States and China. And we want to see the WTO as the pre­em­i­nent fo­rum for re­solv­ing trade dis­putes.”

Bri­tish Chan­cel­lor of the Ex­che­quer Philip Ham­mond said there con­tin­ues to be “very real con­cerns” about the global econ­omy, mostly due to trade fric­tion be­tween the U.S. and China.

The U.K. is en­cour­ag­ing China to open its econ­omy to “head off some of the un­der­ly­ing causes of U.S. con­cern,” while urg­ing the Trump ad­min­is­tra­tion to ap­proach the con­flict “in a way that max­i­mizes the chances of res­o­lu­tion,” Ham­mond told re­porters in Bali.

Bloomberg News re­ported the U.S. Trea­sury De­part­ment’s staff has ad­vised Sec­re­tary Steven Mnuchin that China isn’t ma­nip­u­lat­ing the yuan as the Trump ad­min­is­tra­tion pre­pares to is­sue a re­port on for­eign cur­ren­cies. The con­clu­sion, if ac­cepted by Mnuchin, would avert an es­ca­la­tion of the U.S.-China trade war.

Getty Im­ages

A truck trans­ports a con­tainer next to stacked con­tain­ers at a port in Qing­dao, China.

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