Mnuchin to Focus on Currencies as G-20 Girds for Trump EraBy and
Mnuchin team in limbo leaves U.S. policies with little clarity
G-20 finance chiefs, central bankers meet in Germany next week
U.S. Treasury Secretary Steven Mnuchin plans to use his debut at a Group of 20 meeting in Germany next week to drive home the message that the U.S. won’t tolerate countries that engage in currency devaluation to gain an edge in trade, according to people familiar with the matter.
The message, which will borrow from the G-20 consensus view hammered out with the previous U.S. administration, will be Mnuchin’s focus as he has few political staffers to develop detailed positions on key points such as global trade rules and their collision with President Donald Trump’s “America First” stance, the people said.
A mainstay of G-20 statements in recent years, the pledge to refrain from using monetary policy to cheapen currencies takes on new relevance amid U.S. claims that China, Germany and others are doing just that. While other members plan to stick to the informal economic rule book that the G-20 writes, the U.S. appears poised to challenge the consensus that its based on.
Four people in the U.S. and Europe with knowledge of the Treasury’s preparations and the G-20 communique drafting process spoke on the condition of anonymity to discuss the confidential deliberations.
Finance ministers and central bank governors of the world’s 20 key economies are scheduled to meet from March 17 in the spa resort of Baden-Baden in southern Germany. American input to the drafting process has started late, though officials have now asked for the standard wording from previous meetings on competitive devaluation to be inserted, the people said.
Mnuchin will also say that the American trade deficit is a sign other major economies aren’t doing their part to support global demand, making the world’s economic growth unbalanced, according to one of the people. While this is a long-standing U.S. grievance, counterparts are on the lookout for signs that this position is hardening in the context of a stronger dollar, especially toward Germany, which last year ran a trade surplus of more than 8 percent of its gross domestic product.
Specific language on countering trade barriers that may also be a focus for haggling in Baden-Baden. The G-20’s last communique, from the meeting in Chengdu, China, in July, commits members to resisting “all forms of protectionism,” wording that the U.S. now appears set on removing. The Trump administration’s protectionist stance, plans to renegotiate trade pacts like Nafta, and the possible implementation of a border tax would make it next to impossible for Mnuchin to sign up to that line.
An early draft communique, dated March 1, omitted that pledge, even though the hosts, Germany, and most other members continue to back it. Instead, the U.S. wants the insertion of a reference to “fair and equitable trade,” a reflection of the inward-looking trade policies that Trump backs, two people said.
If Mnuchin advances this argument further in Germany, he’ll find himself at odds with fellow Goldman Sachs alumnus Mario Draghi. The European Central Bank president on Thursday rejected the Trump administration charge that Germany is manipulating its currency -- the euro, which is shares with 18 other countries -- and defended the G-20 status quo.
“It’s quite important that the G-20 reaffirms this commitment,” Draghi said at a press conference in Frankfurt. The consensus against protectionism and in favor of market-based exchange rates “have been pillars of world prosperity for many, many years,” he said.
There are signs that the yuan-dollar exchange rate -- a sore-point for the administration -- could be soothed in the short-term. Even as one of Trump’s campaign pledges was to brand China a “currency manipulator,” from day one of his presidency, Mnuchin has put that action off for the time being.
China has in fact intervened to prevent its currency from falling too quickly as capital leaves the country, rather than the other way around as Trump charges. The yuan’s exchange rate will be “relatively stable” this year, People’s Bank of China Governor Zhou Xiaochuan said at a press conference in Beijing on Friday.
On his first foray on the international stage and under the scrutiny of the G-20, Mnuchin will have little support from political staff. His picks for the top ranks of the U.S. Treasury are stalled due to resistance from the White House, leaving him to rely on career staff to lay the groundwork. The U.S.’s policy agenda remains unclear to counterparts, according to two people.
“The preparation for this meeting is very much in the hands of civil servants, who are competent but don’t have the political mandate and legitimacy that comes from the political appointees,” said Domenico Lombardi, former official on the International Monetary Fund’s board.