Treasury Secretary Steven Mnuchin may offer the Group of 20 something the world hasn’t heard yet from the new U.S. administration on currency and trade policy: reassurance.
Mnuchin arrives Friday in Baden-Baden, Germany, for a meeting of G-20 finance ministers and central bankers, during his first official trip abroad. There he’ll run into international peers with sway over the world’s biggest developed and emerging economies who are grappling with the uncertainty of the Trump administration’s “America First” message.
In his first press conference since becoming Treasury chief last month, Mnuchin sat next to his German counterpart Thursday in Berlin and described his talks with Wolfgang Schaeuble as “extremely productive.” Schaeuble was also complimentary, calling the discussion “a good start.”
Mnuchin’s diplomatic touch stood in stark contrast to other Trump administration officials who’ve called the U.S.’s $68-billion trade deficit with Germany an economic injustice that needs to be countered, taking a more confrontational tone. Mnuchin’s measured approach may be seen as an emollient amid the often chaotic signaling by the new administration.
The new U.S. Treasury chief acknowledged the complexity underlying Germany’s large trade imbalance and said the U.S. wants to avoid trade wars. While President Donald Trump and his advisers have claimed Germany is gaming foreign-exchange markets, the administration hasn’t until now clarified its views, considering the nation is part of the 19-nation euro area.
“The euro is used by many countries and impacted by many aspects. It is a very different situation than we have: a single currency controlled by a single country,” Mnuchin said.
While stewarding currency policy has traditionally been the job of the Treasury secretary, comments from Commerce Secretary Wilbur Ross, Trump’s top trade adviser, and the president himself have left the world to wonder who is really driving that policy.
“They should listen to the president first and listen to me as well,” Mnuchin said when asked who is the U.S. spokesman on the dollar. Sticking to his message, he said that the Treasury Department will use a regular review of foreign-exchange markets to examine whether any nation should be designated a currency manipulator.
The 54-year-old Mnuchin, a political newcomer, will use his first G-20 meeting to urge counterparts to follow through on their commitment to refrain from competitive currency devaluations, a senior Treasury official said in a briefing on Monday in Washington.
The counterpart to the U.S.’s currency stance is trade policy, and while that’s not the specialty of the central bank governors and finance ministers in the G-20, a consensus on that topic is normally reflected in all of their statements—unless there is none.
Germany, which hosts the G-20 presidency this year, was rebuffed in its attempts to forge a compromise on the wording of a statement about the global economy that reflects the rules-led system under the World Trade Organization, and the focus on “fairness” that the new U.S. spirit has brought with it.
The challenge for Mnuchin will be to square the Trump administration’s threats of tariffs for trade cheaters and inward-looking economic policies with the cooperative spirit the G-20 has operated under for years. The club of the world’s key economies has, until now, mostly stressed agreement on rules-based trade, open markets and predictable monetary policy.
EU Commissioner Pierre Moscovici said in a Bloomberg TV interview in Baden-Baden on Friday that he believes Mnuchin wants to show the U.S. is involved in multilateral institutions. The Italian and French finance ministers want to go further.
“I hope there will be a wide agreement on the benefits of a global, open system based on rules and multilateralism,” Italy’s Pier Carlo Padoan told reporters.
“What is sure is that the G-20 is dedicated to multilateralism and international cooperation,” France’s Michel Sapin said. “We at the G-20, the rest of the world, aren’t in favor of protectionism, in fact are anti-protectionism. We are for a free, regulated international trade, with rules respected by everyone.”
Mnuchin wasn’t sounding like a hardened trade protectionist on Thursday.
“We both believe it is important for the U.S. to play an essential leadership role towards global economic growth,” he said sitting next to Schaeuble. “We also both feel it’s very important to work together to unleash growth, stimulate job creation, and work cooperatively on balanced trade across the economies.”
Deputies to the G-20 finance chiefs concluded the draft communique on Thursday that will be discussed by the ministers and central bank governors, who can still make changes.
Negotiators from countries including France, the U.K., Italy, Brazil and Singapore—as well as the European Commission—were against a proposal that dropped a G-20 commitment to “multilateral” and “rule-based” trade in the policy statement, a person familiar with the matter said, asking not to be named because the proceedings are private. The U.S. had requested the changes, and asked that a reference to “fair” international trade to be included.
In the G-20’s attempt to accommodate the new U.S. administration, it could be readying to drop a commitment that last year had been critical—the pledge to resist “all forms of protectionism.” That could be just wording—or it could be the signal of a new era in the global economy in response to Trump’s focus on bilateral trade deals and the America First stance.
“The muscular rhetoric of getting better trade deals and bilateral deals may work very well politically, the question is whether or not it is ever going to lead to some actual deals, accomplishments on the trade front,” said Kevin Madden, partner at Hamilton Place Strategies, said on a panel on Frankfurt on Thursday.
“A lot of what of this administration does is try to draw a contrast with they believe was the wrong direction of the past eight years, which was globalism.”