The world’s top financial policymakers admitted Sunday that “intensifying” trade tensions pose a risk for the global economy, after a G20 meeting that laid bare differences between the United States 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 in a statement seen by AFP, 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 US-China tariffs could shave global GDP by 0.5 per cent in 2020 or about US$455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis.
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 percent 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.
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.
Appropriately for a meeting held in Japan — which is on track to become the world’s first “super-aged” society in which more than 28 percent of the population is over 65 — the G20 ministers discussed for the first time the “challenges and opportunities” posed by ageing.
They suggested getting more women and elderly people into the workforce and “promoting elderly-friendly industries”, as well as reforming the fiscal and banking systems to take into account ageing populations.
“You basically have a very large portion of mankind that is ageing and then the workforce is shrinking,” OECD Secretary-General Angel Gurria told AFP in an interview.
Solving the issue will require wholesale changes to the way society is organised, added Gurria.