U.S. Treasury Secretary Scott Bessent faces a test of his economic diplomacy at the Group of 20 finance ministers and central bank governors meeting opening on the 31st.
CNBC reported on the 30th that the United States must press for smaller global trade imbalances, faster growth and a severing of economic ties with Iran, while at the same time calming market anxiety over surging national debt and rising Treasury yields. The Donald Trump administration, which kept its distance from the G20 process in South Africa last year, intends to use the meeting to strengthen a U.S.-led economic order, the network said.
The finance ministers and central bank governors meet on the 31st and Sept. 1 in Asheville, North Carolina. The international economic backdrop is seen as anything but easy. Additional tariff measures from the Trump administration remain uncertain, a trade dispute between the United States and Canada continues, and the war with Iran is keeping energy and commodity prices elevated.
The prolonged closure of the Strait of Hormuz in particular is weighing on growth across most G20 economies. Washington has warned it could impose secondary sanctions on countries and companies that keep buying Iranian crude or support financial and commercial dealings with Iran.
Bessent recently sanctioned an Egypt-based bank accused of transacting with Iran through a branch in the United Arab Emirates. CNBC said that at the meeting the United States is likely to put tougher Iran sanctions front and center, while other G20 members will seek to discuss U.S. tariff policy first.
Tariffs are the central point of contention. After the U.S. Supreme Court in February blocked Trump's sweeping tariffs imposed under emergency powers legislation, the administration has been rebuilding its tariff system using other legal authorities.
In July it imposed tariffs of up to 12.5% on 60 economies, including G20 members and the European Union, on grounds that they had failed to properly enforce bans on forced labor. Sixteen major U.S. trading partners could also face additional tariffs under separate trade investigations targeting excess industrial capacity, and more than half of them are G20 members.
Europe is also worried about expanding Chinese exports. China, facing a prolonged slump in domestic demand, is rapidly increasing shipments of manufactured goods such as electric vehicles and semiconductors. Chinese exports rose 23.9% in July from a year earlier. With the U.S. market closed off by high tariffs and a ban on Chinese car imports, Chinese goods have flowed into Europe in large volumes, and calls are growing within the EU to tighten restrictions on imports from China.
Economists note that the United States has also been less than aggressive in cutting its massive fiscal deficit, another source of trade imbalances. U.S. national debt recently topped $40 trillion, or about 55.33 quadrillion won. That is double the level of 2017, having grown through the first and second Trump administrations and the Joe Biden administration.
Growing concern over the fiscal outlook has also pushed up long-term U.S. Treasury yields. The 30-year yield rose this month to its highest level in 19 years at one point. Bessent responded by announcing he would raise long-dated Treasury buybacks to $4 billion, or about 5.48 trillion won, per operation from $2 billion, or about 2.74 trillion won, and yields stabilized temporarily.
The intervention has drawn criticism. Stanley Druckenmiller, Bessent's mentor from his Wall Street days, criticized the move, and some central bank officials have voiced concern that the Treasury Department could depart from its principle of regular and predictable debt issuance and intervene more actively in the market.
Washington has been intervening in currency markets as well. On the 1st it stepped into the market jointly with Japan to defend the yen, and in October last year it bought Argentine pesos.
CNBC said experts believe U.S. diplomatic persuasion alone is unlikely to paper over differences within the G20. It cited Mark Sobel, U.S. chairman of the Official Monetary and Financial Institutions Forum and a former Treasury official, as saying G20 countries will not be reassured simply by listening to Washington, and that many of them in particular do not support the war with Iran.
The United States says it will lift global growth through deregulation, expanded energy production and private-sector innovation, and return the G20 to its original role of economic and financial cooperation. The G20 emerged as a leaders-level forum during the 2008 global financial crisis to prevent a worldwide downturn.
CNBC said the G20, which brings together countries with divergent interests including the United States, China and Russia, must address tariffs, the war with Iran, Chinese overcapacity and U.S. fiscal and Treasury market strains all at once, adding that it is unclear whether the meeting will produce a meaningful joint agreement.
