Steven Mnuchin, the U.S. Treasury Secretary, will have to be on his game over the next few days as the G20 finance ministers meeting in Buenos Aires begins. The talk of tariffs and trade wars will never be far from ministers’ minds as Mnuchin tries to defend Donald Trump’s trade plans against an increasing irate audience. As former Treasury and Federal Reserve international policy official Edwin Truman put it, ‘He’s going to get an earful from them’ adding, ‘Mnuchin is going to be playing defence in his comments and he’ll put the best face on it that he can’. Whilst the tariffs announced so far may have a limited global impact, anything that constrains trade will also constrain global growth, so any escalation of trade wars will need careful watching.
Over the weekend G20 Finance Ministers dropped their long-standing pledge to ‘resist all forms of protectionism’, instead stating in a communique that they are ‘working to strengthen the contribution of trade to our economies’. The change of wording comes after the Donald Trump’s new US Treasury secretary Steven Mnuchin insisted that the traditional line of opposing protectionism was no longer relevant and said the new administration in the US was now looking for balanced trade over lower border tariffs, in line with Trump’s ‘America First’ statements.
This year's G20 Summit concluded on Monday with ~85% of the world leaders departing from China's Hangzhou City and attention seeking North Korea launch three Rodong ballistic missiles which ended up in the Sea of Japan. Poor Mr. Obama neither had a red carpet rolled out on arrival, nor an appropriate staircase, this upset Mr. Trump no end, who tweeted his total disbelief at the ‘sign of such disrespect’. ‘First World problems’ comes to mind.
It seems there was a lot of chat at the Summit but very little outcome. For one, UK PM, May stood firm, not settling on any firm trade deals, despite Japan’s 15 page memo warning of Japanese businesses’ potential exit and Obama’s statement that although 'very special', the US’s relationship with the UK is not a priority.
At the G20 summit over the weekend the UK’s new Prime Minister Theresa May made her debut on the international stage where she has to begin to take on the task of implementing the UK’s vote to leave the European Union. As well as Brexit, she also has had to try to smooth relationships with the Chinese and Japanese governments which have become somewhat strained since the vote. On top of all this she will have to try to convince the G20 leaders that the UK has not turned its back on their core values of free trade and globalization. Not that all this has had any effect on UK data recently; after last week’s very good Manufacturing and Construction data which put Sterling very much on the front foot; this morning’s record UK services PMI figure of 52.9 from July’s 7-year low of 47.4 saw sterling again being driven higher. This was the biggest monthly gain since records began 20 years ago.
The 18th Sino-EU Summit concluded in Beijing last week, this was the first meeting between China and the EU since the Brexit announcement. Quite a critical meeting therefore required the attendance of European Council President, Donald Tusk, European Commission President, Jean-Claude Juncker and the EU high representative for foreign affairs and security policy, Federica Mogherini. China's leaders were no doubt keen to hear of the implications to Europe’s growth post-Brexit, and thus the subsequent effect to China’s economy. Not known for getting involved in Western politics, Chinese leaders had actually advised British voters to remain in the EU ahead of the referendum, stating the importance of its membership within the Union.
The International Monetary Fund (IMF) has again warned governments around the world that they cannot rely on low or negative interest rates alone to avert recession and drive growth. Sighting factors such as low productivity, the lack of firepower from monetary policy and persistently low inflation the IMF is worried that there are still a number of factors that could blow global growth off course. Also, in a statement from the G20 there was a grave warning, “Growth remains modest and uneven, and downside risks and uncertainties to the global outlook persist against the backdrop of continued financial volatility, challenges faced by commodity exporters and low inflation.”
On the 1st December 2015 China took over the G20 presidency for the first time with the Chinese President Xi Jinping stating the theme will be "Building an innovative, invigorated, interconnected and inclusive world economy”. He added that preparations for the presidency will focus on innovating upon growth patterns, improving global economic and financial governance, boosting international trade and investment, and promoting inclusive and interconnected development. During a working lunch at the just concluded 10th G20 summit, which was held at Antalya, Turkey he went on to say, "We need to increase the representation and voice of the emerging-market economies and developing countries, so as to enhance the capabilities of the world economy to resist risks".
Over the weekend the financial leaders from the world’s 20 biggest economies (G20) met in Ankara, Turkey for the third time to exchange views on the recent global economic events, as well as discuss actions required to achieve the ambitions for the group over the coming year. At the last summit the leaders agreed to boost global output over the next 5 years by 2% above what was already expected through coordinated reforms and investment. They acknowledged that ultra-low interest rates alone would not be enough to accelerate economic expansion globally and agreed to step up reforms in an effort to boost slowing growth to achieve this goal.