G20 opens Argentina summit under shadow of China-U.S. tensions

BUENOS AIRES (Reuters) – The leaders of the world’s largest economies opened talks on Friday overshadowed by U.S. President Donald Trump’s threat to escalate tariffs on imports from China as well as military tensions between Russia and Ukraine.

This year’s two-day gathering is a major test for the Group of 20 industrialized nations, whose leaders first met in 2008 to help rescue the global economy from the worst financial crisis in seven decades.

With a rise in nationalist sentiment in many countries, the G20 – which accounts for two-thirds of the global population – faces questions over its ability to deal with trade tensions, which have roiled global markets, and ease geo-political disputes.

Hanging over the summit in Buenos Aires is the trade dispute between the United States and China, the world’s two largest economies, which have imposed tariffs on hundreds of billions of dollars on each other’s imports.

Global financial markets will take their lead next week from the outcome of talks between Trump and Chinese President Xi Jinping over dinner on Saturday, aimed at resolving differences that are weighing on global economic growth.

Beijing hopes to persuade Trump to abandon plans to hike tariffs on $ 200 billion of Chinese goods to 25 percent in January, from 10 percent at present.

Trump said on Friday there were some good signs for the talks with China ahead of his meeting with Xi.

“We’re working very hard. If we could make a deal that would be good. I think they want to. I think we’d like to. We’ll see,” he said, speaking during a meeting with Japanese Prime Minister Shinzo Abe.

U.S. Trade Representative Robert Lighthizer earlier told reporters that Trump and Xi have a good personal relationship and “I would be very surprised if it (their meeting) was not a success.”

“But in terms of doing a deal … that’s entirely up to the president of the United States and the president of China. Way, way, way above my pay grade,” he said.

On the eve of the summit, G20 nations were still trying to reach consensus on wording for the summit’s communique on major issues including trade, migration and climate change, which in past years have been worked out well in advance.

Trump’s skepticism that global warming is caused by human activity has raised questions about whether the countries will be able to find enough common ground on climate change to include it in any communique.

Earlier this month, officials from countries attending a major Asia-Pacific summit failed to issue a joint statement for the first time after the U.S. delegation clashed with China over trade and security.

However, delegates to the Buenos Aires talks said good progress had been made on economic sections of the final communique overnight. Argentina’s presidency voiced optimism that consensus would be reached, but a White House official said the United States would walk away from any statement that prejudiced U.S. positions.

Highlighting the deep rifts within the G20, European Council President Donald Tusk said the European Union would extend its economic sanctions on Moscow next month, after Russian ships fired on Ukrainian ones in the Sea of Azov last week, seizing the boats and sailors.

“As this is a difficult moment for international cooperation, I would like to appeal to the leaders to use this summit … to seriously discuss real issues such as trade wars, the tragic situation in Syria and Yemen and the Russian aggression in Ukraine,” Tusk told a news conference.

RUSSIAN TENSIONS

Trump cited Russia’s seizure of the ships as the reason he canceled a planned bilateral meeting with Russian President Vladimir Putin, where they had been expected to discuss the U.S. leader’s threat to withdraw from the Cold War-era Intermediate-Range Nuclear Forces treaty.

Moscow said U.S. domestic politics may have been the real reason behind the cancellation after Michael Cohen, Trump’s former longtime personal lawyer, pleaded guilty on Thursday to lying to Congress about a proposed Trump Organization skyscraper in Moscow.

A White House spokeswoman denied this and Trump said on Friday the ships’ seizure was the “sole reason” he scratched the meeting.

The presence of Crown Prince Mohammed bin Salman at the summit also raised an awkward dilemma for leaders, and Saudi Arabia’s de facto leader cut a lonely figure standing at the edge of the G20 family photo.

Prince Mohammed arrived under swirling controversy over the murder of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul on Oct. 2. Human Rights Watch asked Argentine prosecutors to investigate him for human rights abuses.

British Prime Minister Theresa May said she would be robust when she talks to Prince Mohammed, urging him to hold a full and credible investigation into Khashoggi’s killing. The Saudi foreign ministry said the prince had meetings with his French, South Korean and Mexican counterparts.

Saudi Arabia has said the prince had no prior knowledge of the murder.

TRUMP AND TRADE

After violent protests marred last year’s G20 summit in Germany, Argentine police, coast guard and border patrols cordoned off a 12-square-kilometer (5-square-mile) area around the riverside Costa Salguero convention center.

Inside the talks, uncertainty prevailed about how Trump, known for his unpredictability, would behave at what was shaping up as one of the group’s most consequential summits.

Oil markets will also be closely watching a bilateral meeting between Putin and Saudi Prince Mohammed on Saturday afternoon for any sign of a breakthrough in a deal for Russia to participate in a production cut by the OPEC oil cartel next month.

Putin was the only leader to exchange a warm greeting with the prince, high-fiving him when he entered the main summit room.

In another bilateral meeting on Friday, French President Emmanuel Macron will discuss the Renault-Nissan alliance’s future with Japan’s Abe, seeking to defuse a brewing diplomatic row over the balance of power inside the partnership.

NEW-LOOK NAFTA

One bright spot in Buenos Aires on Friday before the summit opened was the signing of a revised U.S.-Mexico-Canada trade pact to replace the North American Free Trade Agreement.

Signing the agreement alongside Canadian Prime Minister Justin Trudeau and Mexican President Enrique Pena Nieto, Trump said he looked forward to working with the U.S. Congress to complete the terms of the deal and did not anticipate problems in passing it.

The three countries agreed a deal in principle to govern their trillion dollars of mutual trade after a year and a half of contentious talks concluded with a late-night bargain just an hour before a deadline on Sept. 30.

Trudeau still had a few barbs on Friday. He called the deal by its old name NAFTA, prodded Trump over U.S. steel and aluminum tariffs and said General Motors Co’s decision to cut production and its North American workforce, including in Canada, was a “heavy blow.”