The US-China trade dispute will be the main topic of discussion at this year’s G20 summit, taking place June 28 to 29 in Osaka, Japan.
The US and China have agreed to a tentative truce ahead of the much anticipated meeting between Chinese President Xi Jinping and US President Donald Trump this weekend, the South China Morning Post reported on Thursday. However, details of the agreement, which would halt the next round of US tariffs on an additional $300 billion (Dh1.1 trillion) worth of Chinese goods, have yet to be released.
The US and China have imposed tariffs of up to 25 per cent on hundreds of billions of dollars of each other’s goods in a trade war that has lasted almost a year. After a breakdown of talks in May, Mr Trump said he is prepared to impose tariffs on virtually all remaining Chinese imports.
A report from the Bank of Singapore published Thursday said the Xi-Trump meeting “will yield important signals on how the US-China trade war will evolve ahead”.
However, “the odds of having a detailed formal trade agreement seems low, and we expect that the developments at the G20 will not provide full clarity on whether President Trump is finished with tariff escalation or whether both sides will eventually reach a trade agreement”.
Here is more on the G20 and what to expect from this year’s summit.
First off, what is the G20?
The Group of Twenty (G20) is an international organisation founded in 1999 with the purpose of international economic cooperation and discussions. Its members are 19 countries (Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the UK and the US) and the European Union. The group accounts for more than 80 per cent of global GDP.
What is the G20 summit?
The G20 started as a meeting of finance ministers and central bank governors in the aftermath of the Asian financial crisis. In 2008, the first G20 leaders’ summit was held in response to the global financial crisis. The G20 leaders initially met twice a year, but this was reduced to once a year since 2011.
Separate ministerial meetings take place in the host country on different dates. For example, a meeting between finance ministers and central bank governors took place in Japan earlier this month and a foreign ministers’ meeting is scheduled for November.
The last G20 summit took place in Buenos Aires, Argentina November 30 to December 1. The next summit will be held in Riyadh on November 21 to 22, 2020.
What will be discussed?
There are eight main themes of discussion for the Osaka summit, according to the G20 website: global economy, trade and investment, innovation, environment and energy, employment, women’s empowerment, development and health. Reform of the World Trade Organisation is one of the issues under the theme of “trade and investment”.
Another meeting on the sidelines that will be closely watched is between Russian President Vladimir Putin and Mr Trump. A topic of discussion may be the US’s dispute with Iran over its nuclear deal and tanker attacks in the Arabian Gulf. The Russian leader previously warned the US against using force on Iran, saying it will trigger a “catastrophe”.
Mr Trump said in a tweet Wednesday that he is also looking forward to speaking with Indian Prime Minister Modi about a recent increase in tariffs, which he said is “unacceptable” and “must be withdrawn”.
What effect will US-China talks have on the global economy?
The Bank of Singapore anticipates the base case to be that US and China re-enter talks and the final round of tariffs is put on hold for a few months. Based on that scenario, the bank expects “a positive reaction from equities, narrower credit spreads and a stronger Chinese yuan. The rallies in treasuries and safe havens, gold and the Japanese yen would take a breather, and some profit-taking could ensue”.
In regards to potential rate cuts from the US Federal Reserve, the report said: “given persistent trade uncertainty even as talks continue, we expect that the Fed will cut rates in H2 2019 in any case”.
