Global Growth Threatened by Trade Wars – G20
(30 July 2018 - Argentina) Finance ministers and central bankers from the world’s largest economies met in Argentina last week to address heightened trade and geopolitical tensions which in their view pose an increased risk to global growth.
Ministers are calling for greater dialogue, noting that emerging market economies are better prepared to adjust to external shocks but they still face challenges from market volatility and reversals of capital flows. Structural reforms are needed to enhance the potential growth of economies and representatives reaffirmed commitments from the previous G20 finance ministers meeting in March 2018 to refrain from competitive devaluations that could have adverse effects on global financial stability. The ministers reaffirmed the conclusions from G20 leaders at their most recent summit in Hamburg in July 2017, when they emphasized that trade was an engine of global growth and reaffirmed the importance of multilateral trade agreements.
Finance ministers warned in a statement on that heightened trade tensions are creating downside risks to the global economy, calling for dialogue and action to alleviate the impact, particularly between the US and China. "Currency depreciation in emerging economies, including China, is inviting capital outflows, creating risk in financial markets," Japanese Finance Minister Taro Aso said. Aso met with US Treasury Secretary Steven Mnuchin and reviewed the yuan’s sharp depreciation to reach fresh 13 month lows against the US dollar.
An escalation of global trade tensions that results in new tariffs on US$2 trillion in global trade flows would reduce world growth from 3.2 percent to 2.8 percent in 2018 according to Fitch Ratings' June 2018 "Global Economic Outlook" baseline forecast. “We recognise the need to step up dialogue and actions to mitigate risks and enhance confidence. We are working to strengthen the contribution of trade to our economies. Global economic growth remains and unemployment is at a decade low. However, growth has been less synchronized recently and downside risks over the short- and medium-term have increased. These include rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies”
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