Global: G20 finance chiefs back action on trade distortions

Finance leaders from 19 G20 countries have backed calls to address “non-market” policies and economic distortions that contribute to persistent trade imbalances, despite China withholding its support for the initiative.

The agreement emerged from a two-day meeting of G20 finance ministers and central bank officials hosted by the United States, with discussions largely centred on China’s growing export surplus and the impact of industrial policies on global trade.

U.S. Treasury Secretary Scott Bessent said the outcome validated Washington’s concerns that excess Chinese production and exports could increasingly be redirected towards other markets as countries impose higher tariffs and trade restrictions.

“We believe that non-market-based economies pushing out a never-ending stream of cheap exports is not sustainable,” Bessent told reporters, arguing that the support from 19 G20 members demonstrated the scale of the challenge.

G20 targets persistent trade imbalances

The G20 chair’s concluding statement called on countries to remove “non-market policies” that contribute to global economic imbalances.

It specifically urged countries with large and persistent external surpluses to address domestic distortions that suppress consumption and increase dependence on exports as a source of economic growth.

The agreement highlights growing concerns among major economies over the effects of export-led growth strategies on domestic industries, employment and investment elsewhere.

China, however, did not endorse the language, underscoring the continuing differences between Beijing and other major economies over industrial subsidies, trade practices and the structure of global demand.

The discussions took place against the backdrop of heightened tensions over tariffs and a broader selloff in global bond markets, as investors remain concerned about rising government debt and persistent inflationary pressures.

The meeting also exposed divisions among G20 members on other geopolitical and economic issues, including Russia’s participation after being invited by the U.S. hosts. European countries and Canada expressed concern over Moscow’s return to the forum for the first time since its invasion of Ukraine in 2022.

China’s export expansion under scrutiny

China’s expanding export sector has become a major source of concern for trading partners, particularly as weak domestic demand has encouraged manufacturers to seek growth in overseas markets.

Chinese exports increased 23.9% year-on-year in July, with electric vehicles, semiconductors and other manufactured products contributing to the country’s growing presence in international markets.

The expansion has intensified calls in Europe for stronger measures to manage the influx of Chinese goods, while the United States has adopted higher tariffs and restrictions on selected Chinese products.

China has faced longstanding calls to reduce industrial subsidies and rebalance its economy towards stronger domestic consumption. Critics also argue that the yuan remains undervalued against several measures, further supporting the competitiveness of Chinese exports.

China’s goods trade surplus with the European Union reached €360.6 billion in 2025, representing a 15% increase from the previous year, with the imbalance continuing to widen this year.

European Economy Commissioner Valdis Dombrovskis described China as a significant contributor to global economic imbalances but stressed that addressing them would require action from both Europe and the United States.

Trade tensions add to global uncertainty

Germany’s Finance Minister Lars Klingbeil warned that trade disputes and geopolitical tensions were adding to uncertainty and weighing on economic growth.

“Uncertainty is poison for economic growth,” Klingbeil said, pointing to U.S. tariff disputes, including tensions with Canada, as factors undermining confidence and trust in international trade relations.

The United Kingdom said it would continue pursuing a pragmatic economic relationship with China while working to address trade imbalances. Canada also said it was engaging with Beijing under clear conditions and broadly in line with the approach adopted by other G7 economies.

International Monetary Fund Managing Director Kristalina Georgieva said China appeared to recognise the need for policy action but argued that the issue required coordinated efforts among major economies.

She also pointed to the United States’ growing fiscal deficits, which contribute to stronger import demand, suggesting that trade imbalances cannot be addressed solely through measures directed at China.

Critical minerals become part of trade debate

The G20 discussions also addressed export restrictions on critical minerals, an increasingly important issue in global supply chains.

China’s dominant position in the processing of several critical minerals has given Beijing significant influence over global supplies. Its restrictions on rare-earth exports introduced in April 2025 came in response to U.S. tariff measures but have also affected companies outside the United States.

Japan’s Finance Minister Satsuki Katayama told G20 counterparts that arbitrary restrictions on critical minerals were damaging the global economy.

The concern was reflected in the chair’s statement, which urged countries to avoid unnecessary export restrictions and support the continued functioning of global supply chains.

The issue adds another layer to the broader debate over trade resilience, strategic dependencies and economic security as governments seek to reduce vulnerabilities in critical industries.

Bond market volatility raises broader concerns

The G20 meeting also coincided with renewed turbulence in global bond markets.

Japan’s 10-year government bond yield reached 3% on Tuesday, its highest level since 1996, reflecting investor concerns over energy-driven inflation, potential interest-rate increases and deteriorating fiscal conditions.

Bessent has also been pressing for monetary policies that keep inflation expectations anchored and limit excessive currency volatility.

Following a meeting with Bank of Japan Governor Kazuo Ueda, Bessent said he expected Japanese authorities and the central bank to take measures that would support a stronger yen.

The comments reinforced market expectations that the Bank of Japan could raise interest rates at its September 17–18 policy meeting, adding monetary policy to the wider set of factors shaping global trade, currency and financial-market conditions.