Washington Insider: G20 Finance Ministers Warn of Global Risks of Trade War

Reports from the G20 meeting in Buenos Aires this week stress that talks by Finance Ministers “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. The headline also said that “the predicament over President Trump’s tariffs was casting a pall over the global economy, the New York Times said.“Growth has been less synchronized recently and downside risks over the short- and medium-term have increased,” the meeting’s final 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 weakened 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.Steven Mnuchin, the U.S. Treasury Secretary, 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 in major trade disputes on three fronts, the Times said. It is attempting to renegotiate NAFTA with Canada and Mexico; it is engaged in tit-for-tat tariffs with China; and it faces a fierce backlash from the European Union over recently imposed steel and aluminum 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, the Times said.“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.”International summit meetings, which once showcased American 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 traveled on behalf of the United States on a fraught mission of economic diplomacy, the Times reported. Although he said his conversations with other leaders were cordial, he acknowledged that talks on trade were often very “direct.”His trip came a day after Trump lashed out at the European Union and China, accusing them of manipulating their currencies to put the United States at an economic disadvantage. The suggestion had raised concern that a currency war could be on the horizon--but the joint statement reaffirmed the group’s exchange rate commitments.One of Mnuchin’s goals before the meeting was to encourage the European Union, 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.Europe, which is increasingly anxious that President Trump will impose auto tariffs, is taking Mnuchin up on his offer to meet this week. European Union officials, including Jean-Claude Juncker, the president of the European Commission, will travel to Washington for a meeting with Trump and his economic team in hopes that car tariffs can be avoided.The G20 meeting also offered the United States an opportunity to jump-start 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,” Mr. Morneau said, suggesting that he sensed a desire by the United States to preserve the trilateral pact.However, Morneau 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.Besides trade, officials from the countries discussed issues such as cryptocurrencies, international tax and terrorism financing. Although drafting the communique has been a struggle in previous meetings, officials said this one was agreed to with relative ease despite the differences on trade and tariffs.So, we will see. While Secretary Mnuchin pushed back against the premise that the United States had become a pariah in international forums with the comment that he “didn’t feel isolated at all,” the Times said. Still, the Times concluded that the two days of “fitful” talks “appeared only to raise the odds that the friction will intensify as President Trump threatens more tariffs and other countries vow to retaliate. Nonetheless, there are talks scheduled with many trading partners, along with Congressional hearings in the near future—a debate producers should watch closely as it proceeds, Washington Insider believes.