NUSA DUA, Indonesia -- Calls for easing U.S.-China trade tensions are growing as Group of 20 finance ministers and central bank governors gather in Bali, Indonesia, which was hit by another earthquake early on Thursday.
The dignitaries are set for two days of talks on the resort island, through Friday, amid the escalating trade war and increasing financial strain on emerging markets. Despite the high stakes and the rare opportunity for affected countries to sit down together, expectations are low. A joint communique is unlikely to be issued this time.
The focus will be on whether the U.S. and China manage to find any common ground. The countries have slapped tit-for-tat tariffs on each other over the past few months, causing jitters in the financial markets as investors worry about the potential ripple effects.
The G-20 meeting is happening alongside the joint annual meeting of the International Monetary Fund and the World Bank. The heads of global institutions attending the latter meeting have been vocal about the conflict between Washington and Beijing.
"We are very concerned about trade tensions," Jim Yong Kim, president of the World Bank group, told reporters on Thursday. A further escalation, he said, would lead to a "clear slowdown in the economy and the impact on developing countries would be greater."
The previous day, World Trade Organization Director-General Roberto Azevedo said an all-out trade war would diminish global trade by 17%, knocking an average 1.9% off the world's gross domestic product growth.
Christine Lagarde, managing director of the IMF, also expressed concern. She stressed that if the conflict intensifies further, it will damage not only the U.S. and China but also "innocent bystanders" that happen to be part of supply chains.
"My recommendation is very simple," Lagarde said. "De-escalate, fix the system and do not break it. All countries have had the benefit of that legal [trade] framework for many years and it has served the international trade well."
The tensions are also seen as a factor driving capital outflows from emerging markets, as investors begin to doubt their growth prospects. Asian currencies like the Indian rupee, Indonesian rupiah and Philippine peso have hit multiyear lows in recent weeks.
Asian stock markets plunged on Thursday, after Wall Street suffered its worst loss in eight months on concerns over rising U.S. interest rates and the tariff battle.
Without a coordinated G-20 effort to shore up emerging markets, some countries are taking matters into their own hands.
Indonesia is a prime example, with the country's central bank having raised its benchmark interest rate by a total of 150 basis points since May. The government has also introduced an array of countermeasures, including raising taxes on imports of 1,147 selected goods.
The Philippine central bank in September announced measures to expand currency hedging to be settled in pesos.