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G-20 summit yields no breakthrough

The US refuses to back down from instigating a trade war; finance ministers say trade tensions will go up

IMF managing director Christine Lagarde appears on a big screen during her address at the G-20 summit of finance ministers. She called for all trade conflicts to be resolved through international cooperation.

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 (G-20) gathering in the Argentine capital appeared only to raise the odds that the friction will intensify as Mr Trump threatens more tariffs and other countries vow to retaliate.

In their closing statement, officials at the meeting on Sunday pointed to trade tensions as a new risk factor that could depress global growth.

The communiqué said: "Growth has been less synchronised recently and downside risks over the short- and medium-term have increased.

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"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 (IMF) projected last week that the currently announced tariffs would reduce global economic output by US$430 billion, or half a per cent, in 2020 if they remain in place and shook investor confidence.

The IMF argued that the US was particularly vulnerable to a slowdown because it would bear the brunt of tariff retaliation from other countries.

Christine Lagarde, managing director of the fund, said on Sunday, in a reference to the message that she delivered to policymakers in meetings: "I urge once more that trade conflicts be resolved via international cooperation without resort to exceptional measures."

US Treasury Secretary Steven Mnuchin said he disagreed with her assessment of how the US would fare. The Trump administration has said the tariffs have hurt certain industries in the US but, at this point, not the broader economy.

The US is engaged in major trade disputes on three fronts:

  • It is attempting to renegotiate the North American Free Trade Agreement (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 aluminium tariffs and the prospect of new duties on car imports.

Mr Trump has made restructuring trade pacts and reducing the US trade deficit a central plank of his economic agenda, but his negotiating tactics have angered the country's allies.

French finance minister Bruno Le Maire, said: "World trade cannot base itself on the law of the jungle, and the unilateral increase of tariffs is the law of the jungle.

"We call on the United States to see sense, to respect the rules of multilateralism and to respect their allies."

Mr 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 US is increasingly isolated.

This remained the case in Argentina, to which Mr Mnuchin travelled on behalf of the US 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".

His trip came a day after Mr Trump lashed out at the EU and China, accusing them of manipulating their currencies to put the US at an economic disadvantage. That suggestion had raised concern that a currency war could be on the horizon, but the joint statement reaffirmed the group's exchange-rate commitments.

Olaf Scholz, the German finance minister, rejected Mr Trump's accusation, arguing that Europe's monetary policy is "very rational" and not geared to create artificial economic success.

One of Mr Mnuchin's goals before the meeting was to encourage the EU, Japan and other countries to work with the US 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.

"Anytime they want to sit down and negotiate meaningful changes, I and our team are available," he said at a concluding news conference on Sunday.

Europe, which is increasingly anxious that Mr Trump will impose auto tariffs, is taking Mr Mnuchin up on such an offer this week.

EU officials, including Jean-Claude Juncker, the president of the European Commission, will travel to Washington for a meeting with Mr Trump and his economic team in hopes that car tariffs can be avoided.

The G-20 meeting also offered the US an opportunity to jump-start talks with Canada and Mexico about renegotiating Nafta. Mr Mnuchin and Bill Morneau, Canada's finance minister, expressed hope that such talks could gather momentum, now that the Mexican election is over.

Mr Morneau, suggesting that he sensed a desire by the United States to preserve the trilateral pact, said: "My job is to continue to be optimistic."

However, he added, the US' imposition of tariffs has complicated the process. He warned that tariffs would raise prices on Americans and Canadians and that if Mr Trump levied another round of them, Canada would have no choice but to retaliate again. "There continues to be anxiety around trade," he said. NYTIMES

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