The world’s top financial policymakers admitted on Sunday that trade tensions had worsened, posing a risk for the global economy, after a G20 meeting that laid bare differences between the US and other nations.
Following 30 hours of wrangling in what one official described as a “tense” atmosphere, the G20 finance minister and central bank chiefs produced a final statement acknowledging that “growth remains low and risks remain tilted to the downside”.
“Most importantly, trade and geopolitical tensions have intensified,” the G20 said, adding they “stood ready to take further action” if required.
As a compromise pushed by Washington, the statement omitted language from a previous draft that mentioned a “pressing need to resolve trade tensions”.
The statement capped two days of talks in the western Japanese city of Fukuoka that also tackled the thorny issue of taxing internet giants and, for the first time, the economic challenges posed by ageing.
But trade battles were front and centre of policymakers’ minds as the US and China continue to threaten each other with tariffs that economists fear could slam the brakes on global growth.
The IMF has said Sino-US tariffs could shave global GDP by 0.5 per cent next year or about $455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis.
IMF chief Christine Lagarde said trade conflicts pose the “principal threat” to the global economic outlook.
Tariffs imposed by the world’s top two economies could make a “significant dent” in the global recovery, added Lagarde.
The G20 ministers heaved a sigh of relief just hours before the meeting when the US and Mexico clinched a deal over immigration that stopped Washington imposing five per cent tariffs on Mexican goods.
But US Treasury Secretary Steven Mnuchin told reporters that Washington stood ready to impose more tariffs on China if President Donald Trump and China’s Xi Jinping fail to strike a deal at the G20 summit later this month in Osaka.
“If China wants to come back to the table and negotiate on the basis that we were negotiating, we can get a great historic deal. If they don’t, we’ll proceed with our tariffs,” Mnuchin told reporters on Saturday.
He tweeted on Sunday he had had a “constructive” meeting with China’s central bank governor Yi Gang, during which there was a “candid discussion on trade issues”.
Taking a different line from the other policymakers, Mnuchin said the slowdown in some parts of the world was not due to trade difficulties and even said the friction could benefit some countries if companies relocated from China to avoid tariffs.
“There will be winners and losers,” said the treasury secretary.
The quandary of reforming the global tax system to take into account the rise of Internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city.
In the final statement, the G20 agreed to “redouble our efforts for a consensus-based solution with a final report by 2020”.
However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take.
Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies.
“I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense [that] they have created an urgency to deal with this issue,” Mnuchin said at a public meeting before the formal G20 started.
“Although I don’t like them, I do appreciate the impetus for these issues,” added the top US finance official.