Finance ministers from the world’s top nations gathered Friday in Germany, with fears of a looming trade war over US President Donald Trump’s America First policy yet to be dispelled.
Trump has already torn up a trans-Pacific free trade pact, threatened punitive tariffs against multinationals with factories outside the United States and attacked “currency manipulation” by export giant China.
And his stated aim of keeping jobs at home by making it costly for American companies to outsource is likely to dominate talks at the G20 gathering of finance ministers and central bankers in the western German spa town of Baden-Baden.
Trump’s emissary, US Treasury Secretary Steven Mnuchin, faces scrutiny from Washington’s key trading partners for clues on whether the world’s biggest economy fully intends to abandon its long-standing support of open markets and free trade.
A source close to the talks told AFP that sticking points remained on trade and climate change funding as the gathering got underway on Friday.The US delegation refused to include any language rejecting protectionism in a final statement to be signed by ministers Saturday, the source said.
Countries like France, Italy, China and Brazil argued , against US resistance , for keeping a reference to “rules-based” trade in the final communique, while Germany pushed for a compromise solution referring only to “fairness”.
On the eve of the meeting, German Chancellor Angela Merkel and Chinese President Xi Jinping issued a rare joint pledge, saying they would “together fight for free trade and open markets”.Germany’s Economy Minister Brigitte Zypries ratcheted up the tone, warning that Berlin could take Washington to an international trade court if it insists on imposing punitive tariffs on German goods.
Friday’s G20 session also coincides with Merkel’s first meeting with Trump in Washington, when the chancellor is expected to make a strong push for open markets.
‘Buy American, hire American’
But Trump was elected on the back of voter anger over deindustrialisation in vast areas of the United States.He declared in his inauguration speech that “we will follow two simple rules: buy American and hire American.”
Those caught in the crosshairs include German luxury carmaker BMW, against which Trump has threatened punitive taxes of 35 percent if it does not back down on building a factory in Mexico.
On Thursday, following talks with German Finance Minister Wolfgang Schaeuble, Mnuchin said Washington had no desire to fight “trade wars” with other economic powers.”Our desire is that… when there is imbalances in trading relationships that we have a need to address that,” Mnuchin said after the pair met in Berlin.
Mnuchin said Trump’s administration would keep a close eye on the levels of key global currencies, but pursue policies in the interest of “economic growth that is good for the US and the rest of the world”.
‘US position unclear’
Schaeuble told public broadcaster SWR on Friday morning that Mnuchin had told him explicitly that “of course the Americans are for free trade and also for us setting that out in Baden-Baden.””I think we’ll come to an agreement,” the veteran finance minister went on.
For French Finance Minister Michel Sapin, the problem is that Washington did not appear to have a clear position on trade.”We don’t have a well-argued position from the US and that’s the main difficulty that we have today,” he told AFP, adding that it’s the “fear of a lack of position that’s weighing on the debate”.
“It’s possible that the US is unable to say what they plan to do beyond the simplistic declarations in a tweet,” he added.Amid the growing alarm, IMF chief Christine Lagarde urged the G20 to “collectively avoid self-inflicted injuries”.
“This requires steering clear of policies that would seriously undermine trade, migration, capital flows, and the sharing of technologies across borders,” she wrote in a message that apparently primarily targeted Trump.