BADEN-BADEN, Germany: Finance ministers from the world’s top nations gather in Germany on Friday as fears grow of a looming trade war over US President Donald Trump’s America First policy.
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, is set to face 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.
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”.
The statement by the leaders of the two major exporters also came a day before Merkel is due to meet Trump in Washington for the first time, when the chancellor is expected to make a push for open markets.
Chinese Premier Li Keqiang also issued a separate warning to Washington.
“We don’t want to see any trade war breaking out between the two countries. That wouldn’t make our trade fairer,” Li told reporters Wednesday.
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 have “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”.
According to sources involved in the preparation of the G20 meeting, the issue of free trade has emerged as a main sticking point with the US refusing to commit to a clear rejection of protectionism.
‘US position unclear’
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.
Sources say host Germany is looking at a possible compromise that would remove the issue of trade from a final statement at the end of the two day meeting, deferring until heads of state meet at a summit in July.
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.