G20 calls for greater dialogue on trade tensions

The weekend talks in Buenos Aires come amid an escalation in rhetoric in the trade conflict between the United States and China, the world’s largest economies, which have so far slapped tariffs on $34 billion worth of each other’s goods.

U.S. President Donald Trump raised the stakes on Friday with a threat to impose tariffs on all $500 billion of Chinese exports to the United States unless Beijing agrees to major structural changes to its technology transfer, industrial subsidy and joint venture policies.

The draft reviewed by Reuters, which is subject to possible revisions, noted that the global economy was growing and unemployment was at a decade low but warned that growth was becoming less synchronized among major economies and downside risks over the short- and medium-term had increased.

“These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies,” the draft said.

A spokesman for Argentina’s Treasury Ministry, which coordinates the country’s G20 presidency, said the ministers were still debating the communique’s final language.

The ministers reaffirmed the conclusions from G20 leaders at their most recent summit in Hamburg in July last year, when they emphasized that trade was an engine of global growth and that multilateral trade agreements are important.

“We...recognise the need to step up dialogue and actions to mitigate risks and enhance confidence,” the draft said. “We are working to strengthen the contribution of trade to our economies.”

The draft language marked an incremental toughening from the communique issued at the previous ministerial meeting in March, which had only noted that the leaders “recognise the need for further dialogue.”

Trump has angered European allies by imposing import tariffs of 25 percent on steel and 10 percent on aluminum, causing the European Union to retaliate with similar amounts of tariffs on Harley-Davidson Inc motorcycles, Kentucky bourbon and other products.

Trump, who frequently criticizes Europe’s 10 percent car tariffs, is also studying adding a 25 percent levy on automotive imports, which would hit both Europe and Japan hard.

U.S. Treasury Secretary Steve Mnuchin has sought to use the meeting to woo Europe and Japan with the offer of free-trade deals, as Washington tries to gain leverage with allies in its dispute with China.

However, French Finance Minister Bruno Le Maire rebuffed the overture on Saturday, saying that Washington must drop its tariffs before any talks could start.

European Council representative to the G20 Hubert Fuchs struck a more cautious tone on Sunday, saying the United States’ removal of tariffs was not a necessary precondition for trade talks to begin and he welcomed the candid approach adopted by Mnuchin at the meeting.

“Even the Minister of the Treasury of the United States says that he’s in favor of fair and free trade, but the problem is that the United States understands something different under fair and free trade,” he said.

The draft communique emphasized that structural reforms were needed to enhance the potential growth of economies, and reaffirmed commitments from March’s ministerial meeting to refrain from competitive devaluations that could have adverse effects on global financial stability.

It noted that emerging market economies were now better prepared to adjust to external shocks but still faced challenges from market volatility and reversals of capital flows.

The U.S. dollar fell the most in three weeks on Friday against a basket of six major currencies after Trump complained again about the greenback’s strength and about Federal Reserve interest rate rises, halting a rally that had driven the dollar to its highest in a year.

A Japanese finance ministry official said late on Saturday that Tokyo might need to convince Washington its monetary easing was not aimed at weakening the yen but beating persistent deflation in Asia’s second-largest economy.