G20 says worsening trade wars pose risk to world economy

Daniel Fowler
June 10, 2019

"We reaffirm our leaders' conclusions on trade from the Buenos Aires Summit and recognize the pressing need to resolve trade tensions", the sentence still under discussion said.

U.S. Treasury Secretary Steven Mnuchin met People's Bank of China (PBOC) Governor Yi Gang.

The G-20 finance leaders said Sunday in a joint communique that risks from trade and geopolitical tensions were "intensifying".

Lagarde has previously described the trade wars as a "self-inflicted wound" and warned that US-China tariffs so far imposed and threatened could trim 0.5 percentage points off global GDP growth next year - an amount $455 billion larger than the entire South African economy.

"Global growth appears to be stabilising, and is generally projected to pick up moderately later this year and into 2020", the G20 finance leaders said, in a communique issued as the meetings in Fukuoka closed.

"Importantly, these results suggest that if the US follows through on its threat to impose 25 percent tariffs on its remaining $300 billion of imports from China, it could lead to substantially more import substitution, given that a much larger proportion of this tranche of imports comprise of electronic products", said the report.

After rocky negotiations that almost aborted the issuance of a communique, the G20 finance ministers and central bank governors gathered in Fukuoka, Japan and agreed to affirm language on trade issued in Buenos Aires, Argentina last December, the sources with knowledge of final communique language said.

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This week will see potential highs of just 66.2F (19C), a marked shift from the 82.4F (28C) heat seen in London on June 3. Sunday was a wonderful end to the weekend with sunny skies, a few high clouds, and temperatures in the 70s and low 80s.

U.S. Treasury Secretary Steven Mnuchin said on Sunday that President Donald Trump might ease U.S. restrictions on Huawei if there was progress in the trade row with China - but absent a deal, Washington would maintain tariffs to cut its deficit.

The central bank governors and other financial regulators meeting in Fukuoka flagged risks from upsets to the global economy as Beijing and Washington clash over trade and technology. The next day, the Trump administration raised tariffs on billions of dollars of Chinese goods to 25 percent.

Nevertheless, Mnuchin also pointed to the positive boost to the world economy that could result from a breakthrough in trade talks, likely to be the main focus of a meeting between the U.S. and Chinese leaders at a G20 summit later this month.

"I will make that decision, I would say, over the next two weeks - probably right after the G-20", he said.

"We've stopped negotiating", Mnuchin said, with the next steps depending on Trump's meeting with Xi in Osaka, Japan at the G20 meeting of world leaders at the end of June.

A prolonged U.S. -China trade war will force more companies to shift their supply chain activities out of China.

The deletion, which G20 sources told the Reuters news agency came at the insistence of the United States, shows a desire by Washington to avoid encumbrances as it increases tariffs on Chinese goods.

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