U.S. sparks fears of trade war as Trump arrives in Davos
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[January 25, 2018]
By Noah Barkin and Yara Bayoumy
DAVOS, Switzerland (Reuters) - A day after
sending the dollar reeling with comments supportive of a weak U.S.
currency, U.S Treasury Secretary Steven Mnuchin said the Trump
administration was not seeking a trade war but would defend its economic
interests.
At a news conference at the World Economic Forum in Davos, Mnuchin
played down his comments on Wednesday that a weaker dollar was "good for
us as it relates to trade and opportunities", saying they had been
"balanced and consistent".
The remarks were seen by markets as departing from traditional U.S.
currency policy and elicited thinly veiled warnings from European
finance ministers, as U.S. President Donald Trump arrived in Davos to
promote his "America First" agenda.
"I thought my comment on the dollar was actually quite clear yesterday,"
Mnuchin told reporters. "I thought it was actually balanced and
consistent with what I've said before, which is, we are not concerned
with where the dollar is in the short term."
Mnuchin said there were "both advantages and disadvantages of where the
dollar is in the short-term" and stressed that the United States wanted
fair economic competition.
"We want free and fair and reciprocal trade. So I think it's very clear.
We're not looking to get into trade wars. On the other hand we are
looking to defend America's interests."
But the finance ministers of France and Italy expressed concerns about
Mnuchin's remarks, which pushed the dollar down to multi-year lows.
A stronger euro, hovering at a three-year peak against the dollar, could
hurt the European economy by making its exports less competitive. It
also risks complicating the European Central Bank's exit from years of
ultra-loose monetary policy.
"We want currency levels to reflect economic fundamentals," French
Finance Minister Bruno Le Maire told reporters in Davos, saying this was
the official position of the Group of Seven, of which the United States
is a member. "We hope that it remains the common position because it is
the responsible position from an economic point of view."
His Italian counterpart Pier Carlo Padoan said Mnuchin's comments
reminded him of American policy in the 1970s and expressed concern about
a trade war.
"I hope not. But history tells us that if there is a move which impacts
trade towards more protectionism in one country then the temptation for
the other partner to do the same or to retaliate is very high and
increases, so things may get out of hand," he told Reuters in an
interview.
British Chancellor of the Exchequer Philip Hammond, on a panel with
Mnuchin, noted that sterling, which tumbled after the 2016 Brexit vote,
had been appreciating.
He turned to Mnuchin and added: "And we seem to be recovering quite a
bit more, Steve, thanks very much."
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Steven Mnuchin, U.S. Secretary of the Treasury, attends the World
Economic Forum (WEF) annual meeting in Davos, Switzerland January
25, 2018. REUTERS/Denis Balibouse
PREDATORY
After Mnuchin's remarks on Wednesday, Commerce Secretary Wilbur Ross
denied his colleague was advocating a weaker dollar, but when asked
about the risk of trade wars, he told CNBC: "Trade war has been in place
for quite a little while, the difference is the U.S. troops are now
coming to the ramparts."
Speaking at the Thursday morning news conference, Ross said: "People are
using some predatory practices against us and we're not flinching from
that."
The comments came a day after European leaders, without specifically
mentioning the United States, warned against a rise in nationalism and
protectionism.
Chinese Foreign Ministry spokeswoman Hua Chunying told a regular news
briefing in Beijing on Thursday that the country's leaders were
committed to openness.
"I believe everyone has already noticed that at the end of last year
China has taken real steps to greatly loosen its financial industry,
market access and others," she said.
Trump is due to speak on Friday, the final day of the four-day gathering
of CEOs, bankers, academics and celebrities which has become a
synonymous with the "global elite" that the president has railed
against.
Mnuchin said he had met the economic adviser to Chinese President Xi
Jinping and had a "very good and open dialogue", talking about North
Korea sanctions and trade.
"We're working together on the issue of the trade deficit in a mutual
desire to shrink the trade deficit. We talked about some very specific
ideas that we both have on that."
Asked about negotiations between the United States, Canada and Mexico to
rework the North American Free Trade Agreement (NAFTA), Ross said it was
more important to get a "proper deal" than a quick agreement.
But he conceded that a Mexican presidential election, Canadian
provincial elections and the U.S. congressional election -- all this
year -- could complicate the talks if they drag on.
"As we move further into the year, the political calendar gets more
complicated," Ross said.
(Additional reporting by Alessandra Galloni, Soyoung Kim, Silvia Aloisi;
Writing by Noah Barkin and Yara Bayoumy,; Editing by William Maclean)
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