Trump Tariff Turmoil Casts a Shadow Over G-20 Meeting

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(Bloomberg) — The club of finance ministers and central bankers who’ve steered the global economy through a quarter century of market meltdowns, recessions, wars and the pandemic meet this week facing new headwinds to their goal of broader prosperity — tariffs and the imminent threat of trade wars.

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Long an opponent of instability and uncertainty in forums like the Group of 20, Washington is now the biggest source of disruption and discord given President Donald Trump’s 10% tariffs on all Chinese imports and threats of even higher import taxes on main trading partners Mexico, Canada and the European Union. G-20 finance ministers and central bank chiefs convene in Cape Town, South Africa, on Wednesday and Thursday amid Trump’s assault on the multilateral world order. 

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The US pullback is clear: Treasury Secretary Scott Bessent is skipping the meeting, following Secretary of State Marco Rubio’s absence in Johannesburg last week at a gathering of G-20 foreign ministers. This week’s summit comes just days after Trump deepened US diplomatic tensions with European allies by voting along with Russia against a UN General Assembly resolution that called out Moscow’s full-scale invasion of Ukraine three years ago.

While Bessent’s decision wasn’t framed as a boycott and he will send one senior Treasury official in his place, his focus on domestic priorities raises more questions about how the Trump administration plans to maintain US leadership of the world economy, said Josh Lipsky, senior director of the GeoEconomics Center at the Atlantic Council in Washington.

“It’s a tremor and not an earthquake,” Lipsky said. “But it’s a tremor that raises a lot of concerns.”

‘Economic Coercion’

The coastal town near the southern tip of Africa — around which much global seaborne trade has been rerouted to avoid attacks in the Red Sea — provides an apt backdrop for a world in geopolitical turmoil. 

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South Africa is an emerging economy in the Global South navigating a world order that’s splintering, as authoritarian regimes in China and Russia vie for influence against the democracies of the West. During Trump’s first five weeks in office, he’s prioritizing prosperity at home over the collective good of the global economy. 

That’s included withdrawing the US from the World Health Organization and the Paris climate accord, and slashing foreign aid to Africa and across the developing world.

Bessent’s absence comes as top officials from Mexico and Canada are also focused elsewhere this week — on preserving the integration of North America’s economy, which Trump is threatening to rupture with 25% tariffs on their imports starting March 4.

“We currently find ourselves at a pivotal moment,” Ronald Lamola, South Africa’s foreign minister, said at a press briefing last week, weeks after Rubio slammed the country’s efforts to address racial inequality stemming from apartheid. “Geo-economic pressures — whether in supply chain disruptions, trade restrictions and unilateral sanctions or economic coercion — are reshaping the international marketplace.”

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US officials have this week pushed back on issuing a joint communique that includes references to climate change and concepts like “inclusion,” according to two people familiar with the matter who asked not to be named because they are not authorized to discuss the proceedings. 

Still, South African President Cyril Ramaphosa urged foreign ministers last week to set aside differences and unite to address the world’s most pressing challenges, a response “that should be well coordinated through various forums such as the G-20.”

The absence of Bessent is a gift to geo-strategic rivals — particularly in Beijing — ready to fill the global leadership vacuum, especially given Trump’s swift change of tone on Ukraine, according to Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA and a senior fellow at Brussels-based think tank Bruegel.

“This is terrible news for the US’ image overseas and wonderful news for China,” she said.

Policy Uncertainty

Since Trump’s election in November, a gauge of trade policy uncertainty has surged to the highest levels since 2019. 

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The price of gold has jump to a record high, driven by safe haven demand. On Tuesday, stocks struggled for direction and 10-year Treasury yields slipped to the lowest in more than two months amid concerns about global economic growth.

EU officials are starting to tally the potential damage to their economies from Trump’s threatened tariffs and are preparing to retaliate, while remaining open to negotiations. Yet those disputes have been enmeshed recently in security concerns related to Trump’s embrace of Russia in trying to resolve its war with Ukraine.

At the foreign ministers’ gathering last week, many leaders — including the EU’s top diplomat Kaja Kallas — expressed solidarity and a commitment to maintaining multilateralism.

But on trade, many economies are resorting to solo diplomatic missions to Washington to try to appeal to him — bilateral meetings that leave them out-leveraged by a more transactional US — conscious that his reciprocal tariffs, if imposed, would leave virtually no country unscathed and mark the end of the rules-based trading order.

“He’s a president who will have a major impact on all the rules of international trade,” said Luis de la Calle, a consultant and former undersecretary for international trade negotiations at Mexico’s Economy Ministry. “The risk of Donald Trump is the temptation to return to unilateralism. The problem is unilateralism doesn’t work.”

—With assistance from S’thembile Cele, Enda Curran, Toru Fujioka, Jennifer Zabasajja, Maya Averbuch, Daniel Flatley and Kamil Kowalcze.

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