US economy

Tackling trade deficits needs global action, Aso warns


Japan’s finance minister has said it is impossible to tackle trade imbalances one country at a time and that Donald Trump’s tariff war with China and Mexico may just shift the US deficit to different countries.

In an interview with the Financial Times, Taro Aso said next weekend’s G20 finance ministers’ meeting in Fukuoka, which he is hosting, will be a chance to switch the discussion to a global level.

Mr Trump is deeply embroiled in a trade war with China and plans to levy tariffs on all imports from Mexico unless it steps up efforts to stop illegal migration. The tariffs are scheduled to take effect just hours before Mr Aso sits down with his counterparts in the western city of Fukuoka.

“As the US president, [Mr Trump] is surely thinking about the election in November next year, and when he considers people in New Mexico, Arizona, Texas and the Deep South, then he has to say something,” said Mr Aso. “Illegal immigration is a very big issue.”

But he said that any reduction in the US trade deficit brought by tariffs on one country would be replaced by a deficit elsewhere: “If [they] stop buying things from China, then unless the US starts making them itself, they will be buying them from Mexico or Bangladesh and the deficit will increase there.”

“When you’re talking about the overall trade balance, you have to think multilaterally, not bilaterally,” he added. “The G20 is a great forum for that.”

His comments highlight the challenge for Japan as chair of the G20 at a moment when the global consensus on trade is breaking down and the world economy is wobbling.

Mr Aso said he did not expect US-China trade tension to be resolved by the time of the G20 leaders’ summit in Osaka at the end of the month. Mr Trump and Chinese president Xi Jinping are expected to attend.

“It’s still a month till the end of June but I don’t think the US and China can reach agreement by then,” said Mr Aso. “I think maybe they can take a first step towards a deal, but the big issues like intellectual property aren’t so easily resolved.”

US concerns about Japan were purely about trade, he said, but the US-China tensions were founded in wider issues including defence and the balance of power. Mr Aso said Asian countries shared US worries about Chinese activities, such as the building of military bases on artificial islands in the South China Sea.

Among the issues on the finance ministers’ agenda at next weekend’s meeting were how to build high-quality infrastructure in developing countries without leaving behind unserviceable debts and tackling tax avoidance in the digital economy, Mr Aso said.

But despite trade tensions and signs of strain in the global economy, Mr Aso said he was upbeat about growth. “The overall world economy is pretty stable,” he said. “The trend is definitely towards recovery and modest growth.”



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