Finance ministers and central bank governors of G20 concluded yesterday (9 June) that as trade and geopolitical tensions have intensified, the risks to improving global growth have increased. “Global growth appears to be stabilising, and is generally projected to pick up moderately later this year and into 2020,” said an issued communiqué that, however, also added that “growth remains low and risks remain tilted to the downside. Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action”.
While the group of 20 finance leaders agreed that there is a pressing need to resolve the tensions, it failed to recognize that the deepening US-China trade conflict may be its partial cause, scaling down the prospects for growth. After fiery negotiations, G20 supported a rules-based multilateral trading system and common rules that aim to close loopholes used by global tech giants such as Facebook and Google to reduce their corporate taxes. Other priorities are increased debt transparency and sustainable infrastructure development that, in some cases, increases the debt of poor countries.
However, the meeting omitted a proposed clause to address the need to resolve trade tensions. The dropped clause is claimed to come at the insistence of the United States, which may imply the country’s unwillingness to discuss its increased tariffs on Chinese goods. At the same time, the International Monetary Fund warned that the US-China tariff war could cut 0.5 percent from global GDP output in 2020, which is, for illustration, the approximate size of South Africa’s economy. The omission also dashed Japan’s to emphasize global external imbalances as a high-priority issue.