Wednesday 23 August 2017

Leaders' worst fears ease as Trump hard rhetoric softens

International Monetary Fund managing director Christine Lagarde, left, talks to US Federal Reserve Chairwoman Janet Yellen at the IMF Headquarters in Washington, DC. Photo: Getty
International Monetary Fund managing director Christine Lagarde, left, talks to US Federal Reserve Chairwoman Janet Yellen at the IMF Headquarters in Washington, DC. Photo: Getty

Howard Schneider and Jan Strupczewski

Donald Trump took power in January pledging to overhaul a global order that he said cheated middle-class Americans with a promise to tear up trade agreements and impose tariffs on China and Mexico.

Some of Mr Trump's policy advisers named allies like Germany and Japan as possible targets for economic retaliation.

Fast-forward almost 100 days into Mr Trump's presidency and the world's most powerful finance officials, gathered in Washington for the International Monetary Fund spring meetings, have found an administration that is far from the disruptive force Mr Trump promised.

Although he did act on his campaign promise to tear up a 12-nation Pacific trade pact that had been the cornerstone of former president Barack Obama's Asian pivot, he has taken a much softer stance on other issues. He has refrained from pulling out of the North American Free Trade Agreement (Nafta), did not carry out a pledge to label China a currency cheat, and his administration has signalled the US may stay in the Paris climate accord.

Constraints being put on Mr Trump by Congress and the courts on issues ranging from healthcare to immigration that would have filtered into the economy and the slow pace with which he is filling key administration jobs have played a role. Some foreign policy makers say they are still not sure who their counterparts are in the Trump administration.

"Many of the top jobs are still vacant," said one European diplomat who was attending the IMF meetings and spoke on condition of anonymity.

"Nobody outside the US really knows who is the most powerful or influential one at the moment," the official said.

But these policy makers said that important initial decisions have been far more centrist than might have been expected. The European Union's commissioner for economic and financial affairs, Pierre Moscovici, summed up a widely shared sentiment as he highlighted how two people at the top of Mr Trump's economic team - Treasury Secretary Steven Mnuchin, and Gary Cohn, director of the National Economic Council - have curbed the worst fears over the young US presidency.

"We have the feeling that Mr Mnuchin and Mr Cohn are sensible people with whom we can discuss things, who are conscious of what an open economy requires," Mr Moscovici told Reuters in an interview.

Mexico's finance undersecretary Vanessa Rubio Marquez said discussions with the Trump administration so far have become "anchored" around a handful of issues "that Mexico would be able to deal with".

"There is still a lot of uncertainty," she said. But "dialogue has been more structured, more constant".

What Mr Trump might mean for the US and world economies has preoccupied central bankers, investors and analysts since the new president took office promising a virtual revolution in the way the United States relates to the rest of the world.

Though much about Mr Trump's policies remains unformed as the administration approaches the 100-day mark, the more extreme risks seem to have receded. (Reuters)

Reuters

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