(Bloomberg) \u2014 After a week of talks dominated by trade spats and geopolitical distrust, finance chiefs were once again left hanging on the outcome of a potential meeting between the leaders of the world\u2019s two largest economies.<\/p>\n
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In Washington, the mood at World Bank and International Monetary Fund gatherings was a mix of relief that US President Donald Trump\u2019s tariffs hadn\u2019t caused a deeper slowdown and dread about the risks ahead.<\/p>\n
Policymakers left town hoping that Trump and Chinese President Xi Jinping will meet at the end of the month, resigned to the reality that the outlook for the global economy is at stake.<\/p>\n
The meeting coincided with some of the harshest rhetoric between Washington and Beijing in Trump\u2019s second term, as both sides flexed their dominance with export controls in key industries \u2014 the US with advanced technology and China with its rare earths reserves.<\/p>\n
While the anxiety mostly played out behind the scenes, with few officials willing to publicly opine on the power play, the IMF\u2019s managing director urged policymakers not to panic. Kristalina Georgieva suggested the lack of retaliation against US tariffs was helping to keep subpar global growth from collapsing.<\/p>\n
\u201cOur message to everybody is: Be calm,\u201d she said in an interview Thursday with Bloomberg Television. \u201cAnd to China: Be careful, do not provoke other countries to see you as a threat to their economies.\u201d<\/p>\n
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US Treasury Secretary Scott Bessent and China Vice Premier He Lifeng are expected to meet next week to negotiate down recent escalatory measures \u2014 after Bessent upbraided a Chinese negotiator during a press conference earlier in the week, describing him as \u201cunhinged\u201d and perhaps having \u201cgone rogue.\u201d<\/p>\n
The discussions will come ahead of a potential meeting between their two presidents in South Korea on the sidelines of the Asia-Pacific Economic Cooperation leaders summit.<\/p>\n
Earlier in the week, Georgieva warned that countries \u201cshouldn\u2019t be complacent\u201d given mounting fiscal and spillover concerns. Global public debt is on track to exceed 100% of GDP by the end of this decade \u2014 its highest since 1948. Argentina is suffering from a depressed currency and is poised to get a $20 billion lifeline from the US.<\/p>\n
Meanwhile, equity markets hovering near records were whipsawed all week by the latest trade drama.<\/p>\n
Underpinning the recent rally are shares of US artificial-intelligence chipmakers, which fed into a drumbeat of warnings from central bankers and supervisors about high asset prices, potential complacency in financial markets and the risk of a sudden, sharp correction.<\/p>\n
Some, including the IMF\u2019s Georgieva and a former official at the Washington-based fund, drew comparisons with the dot-com bubble that burst in 2000. \u201cI wouldn\u2019t immediately agree with this opinion, but it\u2019s something we need to watch,\u201d European Central Bank Governing Council member Joachim Nagel said Friday.<\/p>\n
Analysis by Bloomberg Economics found that a renewed trade war between China and the US, coupled with the threat of an AI bubble that eventually bursts poses a $1.4 trillion hit to world growth.<\/p>\n
The mood was less grim than when officials last gathered in Washington in April, just weeks after Trump announced the biggest round of tariff hikes since the 1930s. But the fresh escalation of tensions put a lid on any optimism, said Josh Lipsky, senior director of the GeoEconomics Center at the Atlantic Council in Washington and a former adviser at the IMF.<\/p>\n
\u201cThere\u2019s this strange dichotomy between feeling better than they did in April and yet being very worried about all the risk, which could become a tipping point at any moment,\u201d Lipsky said. \u201cThat tension played out throughout the week in a mixture of relief and anxiety combined.\u201d<\/p>\n
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That subdued spirit was backed up in the IMF\u2019s forecasts for 3.2% world growth this year and 3.1% next \u2014 both well below the historical average of about 3.7%. If trade risks materialize, global growth could be lower by 0.3 percentage point, Krishna Srinivasan, the IMF\u2019s director of the Asia and Pacific Department, told Bloomberg TV\u2019s Haslinda Amin.<\/p>\n
By week\u2019s end, though, there were signs that Trump and Xi would meet and iron out some differences. That\u2019s the hope of rich and poor economies caught in the middle, with big stakes in ensuring the dispute doesn\u2019t widen.<\/p>\n
\u201cWe are monitoring the situation very closely,\u201d German Finance Minister Lars Klingbeil said. \u201cI am now somewhat hopeful that much can be resolved at the meeting between President Trump and President Xi.\u201d<\/p>\n
While in Washington, Chinese officials tried to ease concerns over an expansion of restrictions on rare earths \u2014 minerals critical to many industries \u2014 in an attempt to soften an international backlash. Chinese delegates told their global counterparts that tightened export controls will not harm normal trade flows, according to people familiar with the matter.<\/p>\n
Klingbeil said Germany made it clear during Group of Seven talks this week that \u201cwe disagree with China\u2019s approach, and we will monitor the situation very closely in the hope that we can do what we can politically to ensure that there is no escalation, but rather a d\u00e9tente between the US and China.\u201d<\/p>\n
For monetary policymakers, the concern centers around their goals to control inflation, avoid sharp currency moves and sustain growth through trade dislocations.<\/p>\n
South Africa\u2019s central bank governor, Lesetja Kganyago, said tensions between the US and China could push prices lower in other countries at the expense of their own manufacturers.<\/p>\n
\u201cThe interesting thing about that spillover is that it could actually depress prices elsewhere and initially it might be beneficial,\u201d Kganyago said. \u201cAnd it might actually end up looking like dumping or something along those lines.\u201d<\/p>\n
The combination of trade and geopolitical tensions combined with financial fragility could yet trigger market turmoil, People\u2019s Bank of China Governor Pan Gongsheng warned during meetings of Group of 20 financial chiefs and central bank leaders.<\/p>\n
Such uncertainty, according to the IMF, is a permanent fixture that will require policymakers to stay vigilant and flexible. \u201cThe reality is people are both resilient and creative and you figure out ways how to compensate things,\u201d Pakistani Finance Minister Muhammad Aurangzeb said.<\/p>\n
\u2014With assistance from Lisa Abramowicz, Matthew Hill, Alexander Weber, Erik Hertzberg, Mark Schroers, Phila Siu, Manuela Tobias, Kamil Kowalcze, Yujing Liu and Lucille Liu.<\/p>\n
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\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) \u2014 After a week of talks dominated by trade spats and geopolitical distrust, finance chiefs were once…\n","protected":false},"author":2,"featured_media":224061,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,1071,1072,99,512,2490,164,15324,124579,135974,7756,8261,16740,3601,42975],"class_list":["post-224060","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-bloomberg","tag-bloomberg-television","tag-business","tag-china","tag-donald-trump","tag-economy","tag-international-monetary-fund","tag-kristalina-georgieva","tag-leaders-of-the-world","tag-president-xi-jinping","tag-rare-earths","tag-scott-bessent","tag-washington","tag-world-bank"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/224060","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=224060"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/224060\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/224061"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=224060"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=224060"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=224060"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}