Trade tensions pose risk to global growth, warns G20
BUENOS AIRES: Negotiations to ease an escalating trade war between the United States and the rest of the world sputtered to a close with no breakthroughs on Sunday at a summit meeting of finance ministers, who warned that the predicament over President Donald Trump’s tariffs was casting a pall over the global economy.
Two days of fitful talks at the Group of 20 gathering in the Argentine capital appeared only to raise the odds that the friction will intensify as Trump threatens more tariffs and other countries vow to retaliate.
In their closing statement, or communiqué, officials at the G20 on Sunday pointed to trade tensions as a new risk factor that could depress global growth.
“Growth has been less synchronised recently and downside risks over the shortand medium-term have increased,” the communiqué said. “These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies.”
The International Monetary Fund projected last week that the currently announced tariffs would reduce global economic output by $430 billion, or half a percent, in 2020, if they remained in place and shook investor confidence.
It argued that the United States was particularly vulnerable to a slowdown because it would bear the brunt of tariff retaliation from other countries.
“I urged once more that trade conflicts be resolved via international cooperation without resort to exceptional measures,” Christine Lagarde, managing director of the fund, said on Sunday, referring to the message that she delivered to policymakers in meetings.
Treasury Secretary Steven Mnuchin said he disagreed with Lagarde’s assessment of how the United States would fare.
The Trump administration has said the tariffs have hurt certain industries in the United States but, at this point, not the broader economy.
The United States is engaged i n major trade disputes on three fronts: It is attempting to renegotiate the North American Free Trade Agreement with Canada and Mexico; it is engaged in titfor-tat tariffs with China; and it faces a fierce backlash from the European Union over recently imposed steel and aluminium tariffs and the prospect of new duties on car imports.
Trump has made restructuring trade pacts and reducing America’s trade deficit a central plank of his economic agenda, but his negotiating tactics have angered the country’s allies.
“World trade cannot base itself on the law of the jungle, and the unilateral increase of tariffs is the law of the jungle,” said Bruno Le Maire, the French finance minister. “We call on the United States to see sense, to respect the rules of multilateralism and to respect their allies.”
Le Maire said Europe would not negotiate “with a gun to the head.”
International summit meetings, which once showcased US leadership, have under the Trump administration become awkward affairs in which the United States is increasingly isolated.
That remained the case in Argentina, where Mnuchin travelled on behalf of the United States on a fraught mission of economic diplomacy. Although he said his conversations with other leaders were cordial, he acknowledged that talks on trade were often very “direct.”
One of Mnuchin’s goals before the meeting was to encourage the EU, Japan and other countries to work with the United States to pressure China to change its trade practices.
However, the Treasury secretary said that no progress was made on that front in multi-country meetings, and that aside from pleasantries, he had no communication with the Chinese delegation.
The G20 meeting also offered the United States an opportunity to jumpstart talks with Canada and Mexico about renegotiating Nafta.
Mnuchin and Bill Morneau, Canada’s finance minister, expressed hope that such talks could gather momentum now that the Mexican election is over.
“My job is to continue to be optimistic,” Morneau said, suggesting that he sensed a desire by the United States to preserve the trilateral pact.
However, Morneau added, the United States’ imposition of tariffs has complicated the process.
He warned that tariffs would raise prices on Americans and Canadians and that if Trump levied another round of them, Canada would have no choice but to retaliate again.
“There continues to be anxiety around trade,” he said.
Besides trade, officials also discussed issues such as cryptocurrencies, international tax and terrorism financing.
Although drafting the communiqué has been a struggle in previous meetings, officials said this one was agreed to with relative ease despite the differences on trade and tariffs.