‘Winter is coming’: Finance leaders warned over trade war
IMF SAYS TRADE WAR LIKELY TO HURT GLOBAL GROWTH OVER NEXT TWO YEARS
Just in case any of the global central bankers and finance ministers gathered in Indonesia missed the message delivered repeatedly last week, the host nation said it again yesterday: Everyone stands to lose if trade wars are allowed to escalate.
Indonesian President Joko Widodo didn’t mention the US or China, 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. “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. US Treasury Secretary Steven Mnuchin has told China’s central bank chief that currency issues need to be part of any further US-China trade talks and expressed concerns 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.
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.
The IMF’s twice-yearly report on the Asia Pacific region warned that the market rout seen in emerging economies could worsen if the Federal Reserve and other major central banks tightened monetary policy more quickly than expected.
At yesterday’s plenary, IMF managing director Christine Lagarde estimated that the escalation of current trade tensions could reduce global GDP by almost one per cent over the next two years. IMF forecasts of global economic growth for both 2018 and 2019 were cut to 3.7 per cent, from 3.9 per cent in its July forecast. “Clearly, we need to deescalate these disputes,” Lagarde told the plenary session.
Rubbing salt in US wounds, China reported yesterday an unexpected acceleration in export growth in September and a record $34.13 billion trade surplus with the US.
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.