G20 announcements are typically nothing but hot air because what countries pledge and what countries actually do are two different things.
In this case, however, the attitude change is real and concerning as a Watered-Down Commitment to Free Trade reflects Trump’s America first agenda that every country is sure to follow.
Finance ministers from the world’s biggest economies have dropped pledges to renounce protectionism in a meeting marked by tension over trade between the US and others including China.
G20 finance ministers meeting in the German resort town of Baden-Baden noted the importance of trade to the global economy but dropped tougher language from last year that vowed to “resist all forms of protectionism”.
The watered-down commitments on free trade reflected the anti-globalisation mood that Donald Trump has brought to Washington and came in the first G20 meetings between Steven Mnuchin, the new US Treasury secretary, and his foreign counterparts.
While representatives from China were particularly vocal in urging forthright language on protectionism, the US was unwilling to comply, in a turnaround from America’s traditional position as a standard-bearer for globalized capitalism.
Japan was said to be one of the few countries that struck a more supportive tone towards the US approach.
G20 Trade Impasse
Wolfgang Schäuble, Germany’s finance minister, said: “It will take some time for the US finance ministry to come forward. It may be sensitive for some, for others less so. We really tried on all levels.
“We have reached an impasse,” he said. “That’s why at the end we said nothing on [avoiding protectionism] because it meant different things when we said we didn’t want protectionism.”
Previous commitments to free trade never happened. Everyone praised free trade but no one wanted to really march forward.
Now, the pretense of free trade is gone in a wave of “me first” mentality. Protectionists, led by Trump’s trade czar, Peter Navarro, will cheer.
Here’s my take:
Also, think about the absurdity of having every nation be in trade balance with every other nation.
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- Navarro Nonsense and the Folly of Trump’s Proposed Tariffs
- Hugo Salinas Price and Michael Pettis on the Trade Imbalance Dilemma; Gold’s Honest Discipline Revisited
Mike “Mish” Shedlock