BUENOS AIRES—The leaders of the world’s biggest economies are gathering on Nov. 30 and Dec. 1 in Argentina amid slowing global economic growth, escalating U.S.–China trade tensions and Brexit uncertainties.
Growth momentum is still strong in the United States. Economists, however, are delivering a gloomy outlook for the rest of the world. Hence, the slowing growth is considered one of the core issues to be discussed at this week’s Group of 20 (G-20) summit in Buenos Aires.
G-20 leaders need to act swiftly to prevent an economic crisis, warns Christine Lagarde, International Monetary Fund chief.
“We have had a good stretch of solid growth by historical standards, but now we are facing a period where significant risks are materializing and darker clouds are looming,” she wrote in a recent blog post.
In its latest report, the IMF said the global economy is expected to grow by 3.7 percent this year and next year, cutting its projections by 0.2 percentage points for both periods. IMF revised down its growth projections due to slowing Chinese economic growth, U.S.–China trade war, and financial worries in emerging markets such as Argentina and Turkey.
The summit was elevated to leaders level during the global financial crisis in 2008. It is a major forum for dialogue and decision-making attended by leaders of top economies. Together, the G-20 members represent 85 percent of the global gross domestic product, two-thirds of the world’s population, and 75 percent of international trade.
It has been a difficult year for the host country Argentina, as it has been plagued by economic problems recently. The country has been preparing for this summit for almost two years. And Argentine President Mauricio Macri, the president of the summit, would like to play a personal role in ending the trade conflict between the United States and China.
“[It’s] not clear [whether] he’s going to be able to insert himself in that, but he very much would like to play that role,” said Michael Matera, director and senior fellow of the Americas program at the Center for Strategic and International Studies.
Rising interest rates in advanced economies and trade tensions have increased external pressures for some emerging markets including Argentina.
“Most of Latin America has either the U.S. or China as their number-one trading partner; and therefore, this [trade war] is seen as a great threat to global growth,” Matera said.
Macri will hold a bilateral breakfast meeting with Trump on the first day of the summit. Global trade and the issue of Venezuela are likely to be high on his agenda.
Washington and Beijing face a critical juncture at the G-20 in Buenos Aires. Both leaders are scheduled to meet for dinner on Dec. 1 on the sidelines of the summit and expected to discuss a range of issues, including North Korea, but trade is likely to dominate the conversation.
While the outcome of the talks is hard to predict, any kind of ceasefire on trade will likely bring some relief to global markets.
Before his departure for the G-20 summit, Trump said that his administration was very close to doing a deal with China.
“I think China wants to make a deal. I’m open to making a deal. But, frankly, I like the deal we have right now,” Trump said, adding that the United States has been benefiting from the “billions and billions of dollars” that is coming in the form of tariffs or taxes.
“I don’t know that I want to do it.”
Trump’s remarks were seen as a continuation of his administration’s tougher tone against China recently. The White House signaled earlier that if no deal was reached at the summit, new tariffs and measures against Beijing would kick in.
The United States has levied duties on roughly $250 billion worth of Chinese goods this year and the tariffs will be raised to 25 percent from 10 percent on Jan. 1, 2019. Washington may also impose tariffs on an additional $267 billion in Chinese goods if no progress is achieved.
Experts are not expecting a huge negotiation during Trump–Xi bilateral meeting but assuming that there will be a fifty-fifty chance of a peace deal similar to the one achieved with the European Union in July. In a ceasefire, they expect Washington to put the additional tariffs on hold.
“Market reaction to the U.S.-China trade talks is likely to be asymmetric in that any positive developments may produce greater gains than negative developments would produce a loss,” said Max Gokhman, head of asset allocation at Pacific Life Fund Advisers.
“This is in part because a trade war is becoming increasingly priced in and because investors do not expect to find a neatly wrapped up trade deal under their Christmas tree this year.”