Economic Leaders Warn of Trade War, but Mnuchin Isn’t Worried

BUENOS AIRES, Argentina — President Donald Trump’s plan to hit other countries with stiff tariffs on imports of steel and aluminum dominated a two-day gathering of global economic leaders with foreign policymakers warning that the United States is on the cusp of triggering an international trade war as it puts its "America First" policy into action.

Finance ministers from several countries appealed to Steven Mnuchin, the U.S. Treasury secretary, for exemptions from the tariffs, which are being imposed in the name of U.S. national security, and said the administration’s protectionist approach to trade policy would hurt all nations.

“We must ensure that protectionism doesn’t become the dominant force in the world,” said Olaf Scholz, Germany’s new finance minister.

Bruno Le Maire, France’s finance minister, said he told Mnuchin on Monday that the entire European Union must be exempt from the steel and aluminum tariffs. In what he characterized as a “frank” discussion, Le Maire warned that time is running out to reach an agreement and that bilateral negotiations with European countries on the matter were not acceptable.

“We are waiting for the United States to show some good will towards Europe,” Le Maire said. “Going the way of protectionism will lead nowhere,” he said, adding that “it will make only losers, not winners, including the United States.”

But in a series of what Mnuchin called “direct” conversations with leaders here for the Group of 20 finance ministers meeting, the Treasury secretary showed no signs of shying away from Trump’s pugilistic approach to trade.

“We’re not afraid of it,” Mnuchin said Tuesday at a news conference, in reference to the prospect of a trade war. “This administration is going to make sure that we’re treated fairly.”

In a sign of the shifting landscape the communiqué — or official agreement unveiled Tuesday by finance ministers — called for “further dialogue and actions” on trade. That is a sharp departure from the more vocal free-trade commitments that were a staple of these gatherings before Trump’s election. In 2016, during President Barack Obama’s last year in office, the G-20 communiqué said unequivocally that “we will resist all forms of protectionism.”

The communiqué seemed to reflect a widespread sense of resignation among foreign leaders that Trump will continue to go his own way.

“It is clear that the consensus that the world had up until the G-20 in Germany is no longer the same,” said Nicolas Dujovne, Argentina’s treasury minister, referring to last year’s summit meeting.

Bill Morneau, Canada’s finance minister who has been engaged in tense negotiations with the United States to overhaul the North American Free Trade Agreement, said the Trump administration was showing little sign of being more accommodating to the trade worries that have gripped the rest of the world.

“I have the continuing sense that they have a point of view, and that point of view is that the system has to work in a way that, in their estimation, benefits American businesses and American trade,” Morneau said. “The ramifications of that are that we’re going to have to rethink some of the rules.”

Trump administration officials have said that the tariffs are aimed primarily at combating cheap metals from China, which they say are flooding into the United States through other countries. The Commerce Department has ruled that those imports pose a threat to national security because they degrade the United States’ industrial base.

Countries including France, Argentina and South Korea pressed Mnuchin during the gathering about being freed from the metals tariffs, arguing that, as U.S. allies, they should not be penalized on national security grounds. Mnuchin said that decisions were being made on a case-by-case basis and that there was not a one-size-fits-all approach to deciding which countries would be exempt. The tariffs go into effect on Friday.

Trump has already said he would exempt Canada and Mexico from the tariffs upon a successful renegotiation of NAFTA, and he has indicated that other countries could also get exemptions. But the United States has yet to detail what would qualify a country for an exemption, other than a vague reference to protecting the United States’ national security and reducing bilateral trade deficits.

In an interview on the sidelines of the meeting, Mnuchin suggested exemptions to the tariffs could be announced “relatively quickly.”

“I think we’ve been very transparent in describing our positions; I don’t think anything should be a surprise,” Mnuchin said. “This is all about free and fair and reciprocal trade.”

On Tuesday, Emily Davis, a spokeswoman for the U.S. trade representative, said in a statement that the administration “is engaged in discussions with several countries to determine if means other than tariffs can be arranged to address our national security concerns.”

Many countries are fearful that steel and aluminum tariffs are just the beginning of a broader effort to erect trade barriers that could upend a globally integrated economy.

The Trump administration is expected to announce at least $30 billion in new tariffs on China this week, and tensions between the two economic superpowers are on the rise. Mnuchin declined to comment on the coming China tariffs but said he made his concerns about the United States’ access to the Asian nation’s market known to his Chinese counterpart at the G-20.

“We’re having very direct discussions with China about reciprocal trade, discussed this morning about market reforms in China,” Mnuchin said. “We look forward to them hopefully moving in that fashion.” At the G-20, concerns about rising trade barriers muted enthusiasm about the recent run of strong economic growth around the world. The International Monetary Fund listed in a report prepared before the meetings that “inward-looking policies” could pose a risk to the global economy. Timothy D. Adams, president of the Institute of International Finance, warned that a trend toward “de-globalization” could harm consumers.

“Protectionism is creeping and seeping in all corners of the economy,” Adams said.

The Trump administration’s trade agenda is provoking consternation among veterans of previous administrations, who lament the United States’ abdication as a vocal promoter of the gains from free and open markets.

“We worked very hard to drive the agenda toward having open markets, free trade, inclusive growth and not interfering in currency in an unfair way,” Jack Lew, who served as Treasury secretary under Obama, said in an interview this month. “I don’t know if that’s where the U.S. is pressing the G-20 to go right now. It doesn’t seem to be.”

Desmond Lachman, a scholar at the conservative American Enterprise Institute and a former deputy director for policy at the International Monetary Fund, said it was remarkable to see the United States adopting an isolationist policy.

“The Europeans are furious with what the U.S. is doing,” Lachman said. “For 70 years, the United States has been the leader in the call for open markets and global markets. Now they are in the opposite position.”

Supporters of Trump, however, have cheered Mnuchin’s approach to China on steel and intellectual property.

“It is a bit rambunctious for the Trump administration to approach the issue this way, but it’s certainly more effective than continuing the polite conversations that have been avoiding the real challenges for some time now,” said Scott Paul, president of the Alliance for American Manufacturing. The group is among those supporting the tariffs, seeing them as a way to protect U.S. manufacturers against the forces of global trade.