All eyes are on Buenos Aires for the second half of this week, as leaders of the Group of 20, or G-20 nations, arrive for the annual G-20 summit.
Canadians will be watching closely for a variety of reasons, among them negotiations between the U.S. and China, the signing of the United States-Mexico-Canada Agreement (USMCA) trade agreement, negotiations around oil, international taxation, and financial regulation, among others.
However, the issue that is at the top of most people’s minds is the meeting between the U.S. President Donald Trump and Chinese President Xi Jinping.
“I don’t think anyone’s in the mood to negotiate, and neither party seems to be in the mood for compromise,” said John Kirton, the founder and co-director of the University of Toronto’s G-20 Research Group, who is in Buenos Aires for the summit.
He notes that the attitude seems to be more like “hunker down and wait it out,” as the consensus opinion is that President Trump is “on his way out,” so it’s just a matter of time before the issue is resolved.
However, the dispute as it stands has already had a negative impact on Canada.
“We have already seen the impact of the U.S.-China trade dispute on the overall global economy. It has put pressure on the basket of Canadian commodities, and as a result, we expect weaker commodity exports in Q42018,” notes Avery Shenfeld, managing director and chief economist of CIBC Capital Markets.
Morningstar analysts believe the U.S.-China trade dispute situation is evolving into a new cold war.
“There are fairly hard-nosed individuals on both sides of the negotiations, so there is a possibility it could escalate,” said Shenfeld, pointing out that there are already elements of a cold war in place in areas such as the south China sea, as the U.S. does view China as a rival.
Canada will closely watch Russia and Saudi Arabia
Meanwhile, Saudi Crown Prince Mohammad bin Salman is expected to meet Russian President Vladimir Putin at a side meeting in Buenos Aires, where they will discuss oil production strategies.
“An announcement on the discussions is unlikely until the next OPEC meeting, but Canada will watch that meeting closely as it could be an important step towards an oil price recovery,” Shenfeld noted.
Earlier this month, Canadian crude plunged to record lows, caused by a supply glut and pipeline bottlenecks. The bottlenecks prompted the Alberta government to negotiate the purchase of rail cars to transport crude oil barrels.
However, Kirton points out that energy is a recurrent issue on the G-20 stage, but for several countries, falling oil prices are viewed as a positive.
“It is interesting to wonder if President Putin is using the sea-clash with Ukraine as a diversionary tactic to keep people’s minds off the sliding oil prices” he said.
USMCA not likely to see any surprises
The signing of the USMCA is likely to be a semi nonevent, said Kirton. Shenfeld broadly concurred with this point of view, saying that he expects it to be signed as is.
“The next step after signing is the ratifying of the deal in Congress. The reality is that for Canada, the ratifying of the USMCA is not a pressing concern,” Shenfeld noted.
If Prime Minister Justin Trudeau and Trump sign the deal together, it is possible that there could be an announcement on steel and aluminum tariffs, Kirton said.
Other things that could be discussed are the possibility of increased infrastructure spending in Canada, including a high-speed rail track between Quebec and Windsor and pipelines for oil and natural gas in Alberta; progress on international taxation agreements; talks around a single financial regulator; and negotiations around raising resources for the international monetary fund, Kirton said.
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