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G20 finance ministers to meet under America First shadow

Mar 15 2017 18:32

Berlin - Finance ministers from the world's top nations gather in Germany Friday as fears grow that US President Donald Trump could upend the global economic order with his America First policy.

Within two months of moving into the White House, Trump has already torn up the trans-Pacific free trade pact, threatened punitive tariffs against multinationals with factories outside the United States and attacked "currency manipulation" by export giant China.

US Treasury Secretary Steven Mnuchin makes his first official foreign foray when he joins the G20 gathering of finance ministers and central bankers from Friday in the western German spa town of Baden-Baden.

The former Goldman Sachs banker faces scrutiny by 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.

Germany adopted a conciliatory tone ahead of the meeting, shrugging off Trump's attacks against Berlin over its massive trade surplus.

"There is no reason to be pessimistic about the world economy, and there is no reason to be pessimistic about the relationship with the US," said a German finance ministry official.

"There are topics that require discussion that are known to all, such as in the area of taxes. We think that these discussions will run constructively and lead to a good understanding," added the official, who spoke on condition of anonymity.

The official did not specify which tax issue, but among protectionist measures threatened by Trump is a 35% levy against BMW if the German car giant pushes on with building a factory in Mexico.

Where's the US going?

The issue is also expected to come up when Chancellor Angela Merkel meets Trump for the first time in Washington on Friday.

A European colleague was less ambivalent about his concerns, asking: "Will the US continue to believe in the G20?"

And 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 appeared targeted primarily at Trump.

Chinese Premier Li Keqiang also warned Washington against starting a trade war.

"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 on Wednesday.

The problem is that, "it's still rather difficult to decipher which way the US is going," said another European source, adding "we see a difference between the president's position and those at ministerial level."

The eve of the G20 meeting may provide some clarity, when German Finance Minister Wolfgang Schaeuble hosts Mnuchin on Thursday for talks in Berlin.

The Baden-Baden gathering aims to lay the groundwork ahead of a July leaders' summit in Hamburg.

A statement is produced at the end of the two-day meeting that has in past sessions consistently committed signatories to rejecting protectionism and refraining from competitive currency devaluations.

But fears are running high that this year's may look a little different.

Ahead of the talks, a senior Treasury official said Mnuchin will press partners to fulfil their commitments on exchange rates.

Glaring omission

While declining to say if Washington will push for stronger language on the issue, the official said the G20 can be a "helpful" forum to promote issues of interest to the US administration, including pledges to avoid devaluing currencies to gain a competitive trade advantage.

White House economic advisor Peter Navarro has accused export giants Germany and China of taking advantage of weak currencies to build a trade surplus with the US.

Likewise on protectionism, the US Treasury official declined to speculate on any changes that might be made to the statement.

But a draft of the concluding statement seen by Bloomberg has sparked concerns because of the glaring omission of an anti-protectionism pledge.

For the EU's top economic official Pierre Moscovici, the G20 meeting is all the more important given the unknowns.

"In a time of heightened policy uncertainty, we must seize this opportunity to provide some clarity," he stressed.

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global economy  |  g20

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