Central banks and policymakers around the world are growing concerned about the increasing trade tensions between the US and China, even as a potential trade war with Mexico has been evaded. They are not reluctant to use stimulus as one of the options.
Finance ministers are concerned
The policymakers are alarmed about the world economy and want to increase stimulus. The G20 financial ministers haven’t made considerable progress in handling the trade tensions between the US and China. Even though issues with Mexico have been evaded, the trade issues with China have only “intensified.”
Talks in the port city of Fukuoka, Japan were focused on the trade war and its impact on the world economy. Markets will have to wait for a few more weeks before a resolution is reached. Chinese President Xi Jinping and US President Donald Trump are expected to meet at the G20 leaders’ summit in Osaka.
US Treasury Secretary Steven Mnuchin recently noted on Twitter he had a “constructive” and “candid” talk on trade with Yi Gang, the Governor of People’s Bank of China. On the other hand, Chinese Finance Minister Liu Kun called protectionism a “crucial challenge” and urged all sides to work together for preserving the rules-based multilateral system.
How will trade tensions subside?
According to Japanese Finance Minister Taro Aso, a bilateral approach doesn’t work for trade. Instead, they have to work on a multilateral system. Aso said that if economic activity deteriorates, then all possible policy tools should be mobilized. German Finance Minister Olaf Scholz also echoed Aso’s sentiments, hoping for the trade tensions to “vanish.”
He spoke to Bloomberg Television and said that pending questions about the trade relationship between the US and China is impacting global development. The German economy will also be impacted hugely if this uncertainty is removed.
Canada, for now, is eased because US’ impending issues with Mexico have been called off. Canadian Finance Minister Bill Morneau said that the US administration’s decision of not putting 5% or more trade traffic on Mexico will push the joint US-Mexico-Canada trade deal. The US has also decided not to put steel and aluminum duties on Canada. Morneau said that Canada is opposed to using tariffs as a global trade strategy.
He said that breaking the ice between China and the US will also help Canada improve its trade relationship with China. Canada too is facing a tough time with China right now because of cancellation of canola purchases, imprisonment of Canadians and the Huawei dispute.
