Finance Ministers Warn of a Trade War’s Risks
Posted July 22, 2018 9:40 p.m. EDT
BUENOS AIRES, Argentina — 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 G-20 on Sunday pointed to trade tensions as a new risk factor that could depress global growth.
“Growth has been less synchronized recently and downside risks over the short- and 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 in 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 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.
“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 U.S. 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. 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 EU 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.
Olaf Scholz, the German finance minister, rejected Trump’s accusation, arguing that Europe’s monetary policy is “very rational” and not geared to create artificial economic success. 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 multicountry 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,” Mnuchin said at a concluding news conference on Sunday.
Europe, which is increasingly anxious that Trump will impose auto tariffs, is taking 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 Trump and his economic team in hopes that car tariffs can be avoided.
The G-20 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,” 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 from the countries 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.
For his part, Mnuchin pushed back against the premise that the United States had become a pariah in international forums. Participating in more than 20 meetings with his counterparts in two days, the Treasury secretary had little down time in Buenos Aires.
“If requests for meetings is related to popularity, I’m pretty popular here,” Mnuchin said.
He added, “I didn’t feel isolated at all.”