The best way for Trump to reduce the US trade deficit is to rein in his fiscal policy. Trump's massive increase in the fiscal deficit, which has done nothing to lift investment or productivity, will require a US government bond issuance of $US1.34 trillion ($1.85 trillion) by the end of 2018. If history is any guide, about half of that will have to be financed by foreign investors. This capital inflow will push up the US dollar and worsen the US trade deficit even further.

The US trade deficit is "Made in the USA" not "Made in China".

There are issues in the global trading system that Trump has correctly identified as problems. But they cannot be solved bilaterally. They require a multilateral response, for which the G20 is eminently suited – provided Trump has the will to work with other countries.

Potential outcomes

For one, global trade liberalisation has been asymmetric. Barriers to goods trade have been lowered while barriers to services trade remain high. This penalises service-based economies such as the US and, as Trump correctly laments, makes it difficult for their firms to gain a foothold in countries such as China and India.

Donald Trump's unreasonable demands mean G20 meetings have become the "G19 versus one". SUSAN WALSH

The US should use the G20 to push for a multilateral agenda to liberalise trade in services and reform the World Trade Organisation. This would halve the global trade imbalances that are fuelling political tensions, according to the Bank of England, without reverting to protectionism. Countries such as China can be more readily brought along if liberalisation is part of a broader multilateral effort.

Reducing supply chain barriers to trade would increase world GDP over six times more than removing all tariffs, according to the World Economic Forum. Supporting digital trade and data flows across borders would help small and medium-sized enterprises access global markets – better spreading the benefits of globalisation throughout communities. Yet many countries, including the US, remain fixated on traditional barriers to trade.


The G20 could deliver these outcomes if countries, particularly the US, use the forum strategically. Conversely, an outcome in Buenos Aires where China agrees to buy more products from the US will legitimise a nonsensical policy objective and a "bully approach" to international relations. It will do nothing to reduce the US trade deficit and will take the world further away from real and effective solutions. China's response to US calls for trade opening need to be framed as a multilateral liberalisation that is open to the world.

If Trump uses the G20 strategically, he could also use it to advance his domestic priorities. This year's G20 host country, Argentina, has emphasised reforms to make infrastructure its own asset class. The agenda focuses on promoting greater standardisation in infrastructure projects across countries, strengthening investment environments and improving project development.

Trump has made his bilateral meeting with Chinese President Xi Jinping the centre of attention at this year's G20 meeting in Buenos Aires. Photo: Bloomberg

Infrastructure is one of the few priorities Trump shares with the rest of the G20, as well as with his newly minted Democratic House of Representatives. The G20's agenda can help redirect the global pool of savings into productivity-enhancing US infrastructure – allowing Trump to do a deal with the Democrats and deliver real results on one of his core election promises before 2020.

There are plenty of other challenges the G20 needs to turn to. All of them require a collaborative, multilateral response: strengthening the global financial safety net and the inadequate role of the International Monetary Fund within it, addressing climate change, reforming outdated global institutions and development. None of them can be achieved bilaterally.

It has been a rocky year for Argentina. The country has been embroiled in a currency crisis and has sought a bailout from the IMF. Given the challenges facing the G20 this year, it is perhaps appropriate that its host country has been dealing with crises of its own. Hopefully some of the crisis-fighting skills learned by Argentina's President Mauricio Macri are transferable to the G20.

Adam Triggs is director of research at the Asian Bureau of Economic Research, Crawford School of Public Policy, The Australian National University. This article is part of a series from East Asia Forum (www.eastasiaforum.org) in the Crawford School.