Finance ministers and central bank governors of the world’s 20 biggest economies are meeting in Buenos Aires to discuss the economic outlook, capital flows, cryptocurrencies like Bitcoin, and how to prevent tax avoidance by international companies.
But since the unilateral decision by US President Donald Trump on March 8 to impose tariffs of 25 percent on steel and 10 percent on aluminium, trade has become the focal point of the meeting.
“I am seriously concerned that the foundation of our prosperity – free trade – is being put at risk,” German Finance Minister Olaf Scholz told German mass-selling daily Bild.
“Protectionism is not the answer to the difficulties of our time. The situation is serious,” he said, adding he would be cautious yet about using the term trade “war.”
On Sunday Scholz said he would seek to dissuade Washington from imposing the planned punitive steel and aluminium tariffs which only come into effect on March 23.
Others at the G20 meeting, which will conclude on Tuesday with a joint communique, shared Germany’s concern.
“There is a solid understanding among the global community that free trade is important,” Japanese central bank governor Haruhiko Kuroda told reporters upon arrival for the talks. Brazilian Central Bank governor Ilan Goldfajn also called on the G20 to work to keep global trade flows open.
The U.S. import tariffs on steel and aluminium have raised alarms among trading partners that Trump is following through on his threats to dismantle the decades-old trading system based around World Trade Organization rules in favor of unilateral US actions.
Potentially broader anti-China tariffs and investment restrictions under consideration as part of a US intellectual property probe have raised concerns that retaliation could seriously diminish global trade and choke off the strongest global growth since the G20 was formed during the 2008 financial crisis.
Morgan Stanley economists said in a report to clients late on Sunday that a broad-based application of U.S. “Section 301” remedies resulting in a 20 percent tariff on Chinese manufactured goods, coupled with a commensurate response from China, would slash annual growth rates in both countries by a full percentage point within a year.
An early draft of the G20 communique seen by Reuters contained the phrase “international trade and investment are important engines of growth.”
It also said that G20 finance ministers stood by an agreement reached by their leaders in July last year in Hamburg.
A G20 official said discussions now centered on whether that language on trade would remain in the communique, which has to be endorsed unanimously, including by the United States.
The agreement from Hamburg, to which the Buenos Aires draft referred, said: “We note the importance of bilateral, regional and plurilateral agreements being open, transparent, inclusive and WTO-consistent, and commit to working to ensure they complement the multilateral trade agreements.”
Unilateral decisions by the United States to impose tariffs are seen as going against negotiated, or “multilateral” measures that would be part of the WTO.
The draft G20 communique also said that while the global economic outlook has been improving, “a retreat to inward looking policies” – suggesting protectionist trade practices – was a risk to growth.