Officials from Europe and other leading economies are mounting a campaign to draw Donald Trump and his administration towards the mainstream on trade and currency policy ahead of international economic talks in Germany this week.
Steven Mnuchin, US Treasury secretary, will meet fellow Group of 20 finance ministers and central bankers in the spa town of Baden-Baden beginning on Friday. The gathering comes amid uncertainty over Mr Trump’s anti-globalisation ethos and will be a test of international efforts to pull the US president away from the protectionist “America First” agenda he has set out ahead of G7 and G20 summits in May and July.
Mr Mnuchin is expected by many G20 officials to strike a more emollient tone than the US president — as he has in recent public statements over China and the US dollar. This contrasts with Mr Trump’s more aggressive complaints about Beijing as a “grand champion” of currency manipulation and the dollar’s high valuation.
But wrangling over the contents of the post-meeting communiqué highlights the tensions between the Trump administration and other G20 members who are fighting to preserve longstanding language opposing protectionism.
Nathan Sheets, visiting fellow at the Peterson Institute for International Economics who until January served as undersecretary for international affairs at the US Treasury, said: “The two issues that will be front and centre are the administration’s view on international trade and their thinking on exchange rates.”
Early drafts of the communiqué omitted some previous reference to avoiding protectionism and competitive currency devaluations. Asked about this on Thursday, Mario Draghi, president of the European Central Bank, said formal commitments to open borders and floating exchange rates were the “pillar of the stability that has accompanied world growth in the past 20 years”.
By Friday evening, however, the section on avoiding competitive devaluations was back in the document, although there was no agreement on what the draft communiqué would say about trade.
Some senior officials said a move by the US to sign up to past G20 pledges to resist protectionism should in some ways be easy for a Trump administration that has been eager to calm fears among allies. “They are not saying they are protectionist. [New US officials] are saying ‘No, no, no. We want free trade, but we won’t be taken advantage of’,” said a senior international official.
A report on the state of the global economy prepared by the International Monetary Fund for the Baden-Baden gathering is expected to repeat recent warnings that any move toward protectionism would hurt a global economy caught in a fragile recovery.
Mr Mnuchin has demanded the IMF engage in frank and candid analysis of other countries’ exchange rate policies amid concerns the US is being hurt by other nations’ practices.
Conflicting signals from the Trump administration have left overseas partners scrambling to anticipate US economic policy choices. One official with knowledge of the G20 discussions said: “There is no immediate crisis, and that gives them [the US] some breathing space. But the rest of the world would like to see where they stand.”
Mr Mnuchin will enter talks with a skeleton team and policies that are in the early stage of formation. Mr Trump has yet to name a head of international affairs at the US Treasury, making cross-border engagement more difficult.
Matthew Goodman, a former White House official now at the Center for Strategic and International Studies, said Mr Mnuchin appeared to be in the mould of James Mattis, US defence secretary, and Rex Tillerson, secretary of state, suggesting he may attempt to offer a “reassuring face” to America’s partners.
“He seems to have more conventional views based on what he has said so far — this will be a test of that hypothesis,” Mr Goodman said.
However, he added: “It will offer some comfort to G20 partners, but perhaps not complete comfort. It will leave some doubt as to what the real position of the administration is going to be on . . . the specific issues they are dealing with.”
On Friday, one senior US official signalled the Trump administration had yet to whether the G20 should remain the pre-eminent forum for international co-operation, saying “we don’t have any predisposed position”.
Host Germany is also unclear what the new US administration will bring and is braced for talks about its trade surplus with the US — something Peter Navarro, Mr Trump’s trade adviser, has denounced.
Wolfgang Schäuble, German finance minister, has said he and Mr Mnuchin would discuss the usual range of topics as they get to know one another. But he also made clear that relationships were moving into unknown territory.
“The election in the US had a lot of elements that were very unfamiliar — to put it politely — to people in Europe and in Germany and that we wouldn’t want to imitate,” Mr Schäuble said. “The US voted, and we will work with the people they elected as well as possible. International co-operation will continue.”
Additional reporting by Stefan Wagstyl in Berlin