Trade Alarms Ring Loud for Group of 20

Global economic growth is poised to pick up this year, though the alarm bells about trade protectionism are getting louder.

That’s the backdrop for central bankers and finance ministers from the Group of 20 nations who gather on July 21 and 22 in Buenos Aires, Bloomberg reported.

It’s the first meeting of the club that oversees 85% of the world economy since US President Donald J. Trump imposed tariffs on China and the European Union, sparking retaliation in the first salvo of a global trade war.

Financiers and business leaders from G20 nations cautioned about the repercussions of increased protectionism ahead of this weekend’s meetings. US Federal Reserve Chairman Jerome Powell on Tuesday said trade barriers threaten productivity and wages, while BlackRock Inc. boss Larry Fink warned intensifying tensions could spur a broad market downturn.

“Global growth has reached an inflection and tipping point, with signs that the escalating US-China trade war is starting to disrupt business and investment,” said Chua Hak Bin, senior economist at Maybank Kim Eng Research Pte. in Singapore.

That disruption hasn’t yet dented global growth, which is poised to pick up to 3.9% in 2018—the fastest expansion in seven years, according to July forecasts from the International Monetary Fund.

The bigger concern is that tit-for-tat tariffs between the United States and its trading partners will gnaw at confidence and eventually hurt business investment and consumer spending. For JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, the tension is so far “affecting psyche more than it is hitting economics,” which can have “unpredictable outcomes.”

The trade war has been building for some time. An early warning sign was the March 2017 G20 meeting in Germany—the first for US Treasury Secretary Steven Mnuchin—when members dropped from the official communique a pledge to avoid protectionism.

Since then, the US has slapped tariffs on $34 billion of Chinese imports, with another $16 billion likely to follow and an additional $200 billion under consideration.

Beijing has retaliated on $34 billion of US goods, saying it will fight back against any further levies. Separately, the US and EU are in a tit-for-tat battle over American metal tariffs, while Trump has threatened to erect barriers against European cars.

The tariffs are hitting supply chains and boosting prices just as some major economies show signs of decelerating.

While the numbers point to modest deceleration, the trade clash with the US has only just begun.