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(China Plus) Seven months after their meeting in Buenos Aires, the leaders of the G20 countries, which account for some four-fifths of global economic output, nearly three quarters of global trade volume, and two-thirds of the world’s population, are gathering once again in Japan’s Osaka this week to pick up where they left off in the Argentine capital. However, there is a growing sense that the upcoming summit is likely to keep global trade tensions low on the agenda.|
Chef Masafumi Takeda showing off 20 octopus balls--a classic Osaka snack--bearing the national flags of the G20 members, June 26, 2019, in Chuo Ward, Osaka Prefecture, Japan. The G20 summit meeting will be held in Osaka on June 28-29, 2019. [Photo: China Plus]
Despite IMF chief Christine Lagarde’s call to make resolving the current trade tensions the immediate priority at the G20 gathering, finance ministers and central bank governors of the twenty major economies failed to agree on how pressing it is to resolve the issue in the communique released after their meeting earlier this month, which usually tunes the schedule of the summit meeting to follow. The deletion of a proposed clause to recognize the pressing need reportedly came at the insistence of the United States.
But it would be a big mistake if the United States misses the opportunity to try to ease tensions with its trading partners at the summit.
According to analytics provider IHS Markit, business activity in the United States edged closer to stagnation in June. The manufacturing purchasing managers’ index, a key indicator of economic health for the manufacturing sector, dropped to 50.1 in June from 50.5 in May, the worst reading since September, 2009. In addition, the services purchasing managers’ index in June fell to 50.7 from 50.9, the worst since March, 2016. These figures come after the U.S. Labor Department earlier this month reported a sharp decline in job creation in May when 75,000 jobs were added. On average, in the first five months of this year, 164,000 jobs were created, compared with an average increase of 223,000 for all of 2018. Such a gloomy picture, according to economists, has mainly been caused by the frictions the United States is having with its trading partners.
The latest economic data spells no good news for the current U.S. administration with President Trump just recently kicking off his re-election campaign in Orlando, Florida, a key swing state where he won by a narrow margin in the 2016 presidential election. He has found himself trailing major Democratic rival Joe Biden by almost double digits in a new poll that comes after two and half years in office. Farmers, who used to vote heavily for Trump, are feeling the pains inflicted on them because agriculture, a pillar of Florida’s economy, has been hit the hardest by the trade wars the Trump administration has been waging against China and other trading partners. The new poll from Quinnipiac University also found Biden leading Trump by four points in another swing farm state, Texas, where Trump won by a nine percent margin over his Democratic rival in 2016.
Adding to the farmers’ dissatisfaction is opposition from over 600 U.S. major companies and industry trade associations in the retail, manufacturing and tech sectors. They wrote a letter to the White House, urging it to ditch the additional tariffs imposed on Chinese goods and to end the trade tensions as they know American businesses, families and the country’s economy will be significantly impacted in the long term.
If the U.S. president heeds the advice and takes the initiative to hold talks aimed at easing trade tensions now, it will give a boost to business and consumer confidence, which is critical to economic outlook.
The IMF has recently lowered its forecast for U.S. growth this year from 2.5 percent to 2.3 percent due to weaker exports and investment caused by escalating trade tensions. Though the organization also lowered its growth forecast for the economy of China—the major target of the U.S.-initiated trade wars—from 6.3 percent to 6.2 percent, the severity of loss caused to the U.S. growth will be much higher than that caused to the Chinese economy, as pointed out by Justin Yifu Lin, a former Chief Economist at the World Bank. U.S. economic growth is projected to decrease by eight percent, while by comparison, Chinese growth is expected to be trimmed by one and half percent. If such a trend extends into next year, average American families will be feeling more pinch, with savings rates standing much lower than that of their Chinese counterparts. That would prove a curse on Trump’s re-election attempt. After all, it’s what the administration can actually deliver to the general public instead of what damages it may cause to other countries that will decide where the ballots will go in 17 months’ time.
We’ve seen President Trump take the initiative to call President Xi Jinping and propose a meeting between them in Osaka. Their phone conversation received positive reaction from global financial markets as major bourses surged ahead after the announcement. The U.S. side could take further proactive steps and make the G20 summit a problem-solving platform, shoring up market confidence and demonstrating that the administration is truly able to deliver.