Tensions over trade surfaced on the first day of a G20 meeting of finance ministers on Monday as the United States and China -- whose differences are fueling fears of a trade war -- flexed their muscles in the Argentine capital.

The meeting of the world's leading economies in Buenos Aires comes days before US tariffs on steel and aluminum are due to come into force on Friday for all countries except Canada and Mexico.

The main focus of the talks is the threat of a trade war between the US and its trading partners, particularly China and the European Union.

And, as with every G20 meeting since US President Donald Trump's arrival at the White House, the drafting of the meeting's final statement has revealed differences between the world's two biggest economies.

"China and the United States are each flexing their muscles during the negotiations on the final text of the communique," which will be released at the end of the meeting on Tuesday, a source close to the talks said.

"The communique is likely to show that there are tensions over trade."

"The text won't look to hide these tension, but it should however underline that a collective solution remains the best option," the source added.

The US tariffs are essentially aimed at China, whose steel-producing overcapacity has hampered US producers for years, but Washington's European allies have also come under fire from Trump, who has particularly targeted German trade surpluses.

In recent days, Europeans have reaffirmed their unity amid a flurry of diplomatic moves to prevent steel and aluminum taxes leading to a trade war.

"Dividing Europe cannot be in the interest of the American government, and it will not succeed," German Economy Minister Peter Altmaier told German business daily Handelsblatt before heading to Washington.

But France's minister Bruno Le Maire waded into the tariff row at the meeting, telling US Treasury Secretary Steve Mnuchin "very frankly" that the EU should be exempted from the US tariffs.

"To tell you the bottom line, no one would understand if the EU, at the end of the day, is not globally exempt from this," he said, after meeting Mnuchin on the sidelines.

He said he told Mnuchin that the tariffs "will hurt your own allies, in this case your own European allies, impact on the jobs of your allies, on the businesses of your allies."

Analysts said the G20 are not going to resolve differences on trade policy this week, but may be able to find some common ground.

"They may agree to work to reduce overcapacity in the steel industry," said Capital Economics in a note, after the issue was reportedly discussed in a weekend meeting between German Chancellor Angela Merkel and Chinese President Xi Jinping.

- US and EU duel over taxes -

However, the EU's consideration of a plan to tax the revenues of US tech giants Amazon, Apple Facebook and Google is further increasing tensions.

Before the Buenos Aires meeting, G20 members failed to reach agreement on a united way forward, paving the way for unilateral action in the meantime.

The European Commission in Brussels will present its own measures on Wednesday in the aftermath of the G20 meeting.

France's EU Commissioner Pierre Moscovici sought to reassure Washington in a letter to Mnuchin.

"These proposals are neither a response to a French request nor a response against the United States," Moscovici told AFP.

"We have been working on these proposals for months, in close consultation with the digital companies, Europeans, the OECD and our international partners, including the Americans."

Nevertheless, Mnuchin issued a hands-off warning on Friday. "The US firmly opposes proposals by any country to single out digital companies," he said.

In such a tense context, the final communique will avoid once again any references to "protectionism" and replace it with a more ambiguous commitment to resist "inward looking policies."

China reshapes economic team to battle trade tensions, debt pile
Beijing (AFP) March 19, 2018 - Xi Jinping reshaped his core economic team on Monday, promoting two trusted, US-educated lieutenants to key positions at a time of escalating trade tensions with Washington and concerns over a growing debt mountain.

Parliament approved the nomination of Xi's influential adviser Liu He, a Harvard-educated Communist Party official who as vice premier is expected to oversee the financial and economic sectors.

The deputy governor of the People's Bank of China (PBOC), Yi Gang, was elevated to head the central bank, replacing Zhou Xiaochuan, another advocate of reforms who had held the job since 2002.

The appointments were made at an annual session of the National People's Congress that has boosted Xi's influence on the world's second-largest economy, with presidential term limits abolished and his name added to the constitution.

The reshuffle gives Xi trusted hands at the economic controls as China faces the prospect of a tit-for-tat trade war with the US and concerns that ballooning debt has made the country vulnerable to a potential crisis.

Liu travelled to Washington earlier this month and met with US officials at the White House, but his trip has not stopped Trump from considering new trade measures against China.

"The most important task is carrying out a stable monetary policy, and at the same time pushing forward financial reform and opening, while maintaining financial stability," Yi told reporters after his appointment.

"There will be a series of reform and opening policies and measures to come," Yi said, according to the central bank's news outlet Financial News.

While at the PBOC, Yi has called for greater market access for foreign investors and further internationalisation of China's currency.

At a press conference earlier in the annual parliamentary session, Yi said the central bank would work to push through reforms that will bring about "equal treatment for domestic and foreign investors".

He specifically cited liberalisation of China's financial sector, by "allowing greater access or eliminating restrictions on foreign ownership" altogether. Last year Beijing said it would permit companies to own majority stakes in financial firms within three years.

Market access restrictions have been a top complaint from the US and Europe which have repeatedly said their firms face major hurdles to doing business in China, including being forced to share their know-how and technology with local partners.

Earlier this year, Yi wrote an op-ed in local business weekly Caixin pushing for the further reform of China's renminbi, which has long been allowed to fluctuate within a range set by the PBOC.

-- Shake-up --

A massive overhaul of China's bureaucracy announced last week -- the biggest in a decade and designed to boost efficiency -- will give the central bank more power to push through such reforms.

As part of the shake-up, the PBOC was given the responsibility of drafting new laws and regulations for the banking and insurance sectors, and with it new authority over China's financial system.

An economic reformer, Yi studied in the US, earning a PhD in economics from the University of Illinois and then a tenured faculty position at Indiana University, before returning to China to take a position at Peking University. He moved to the central bank in 1997.

Chief among his concerns will be China's mounting debt, whose growth analysts say resembles trends that precipitated financial crises elsewhere.

"The PBOC is in a very difficult position, because if it's trying to de-leverage in any significant ways that's going to put an enormous amount of financial stress," said Christopher Balding, a Peking University economics professor.

"But they are not going to accept that trade-off."

- Rocky US ties -

Relations with the US are also among the first challenges Yi and Liu are likely to face.

The Trump administration is expected to unleash new tariffs on Chinese imports in the coming months while the Federal Reserve is projected to raise interest rates as the US economic recovery continues.

Both policies will be felt in China and may force responses from its central bank.

In addition to promoting Liu, the rubber-stamp parliament on Saturday elevated Wang Qishan, a Xi confidant and former trade negotiator, to the vice presidency, giving him another experienced ally to deal with Washington.

The country's foreign minister, Wang Yi, was also promoted to state councillor, making him a ranking member of the cabinet with more influence on international policy.

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At G20, US seeks 'like-minded' countries, As Trump eyes China tarrifs
Washington (AFP) March 15, 2018
The United States heads to next week's Group of 20 finance ministers meeting looking for partners in confronting Beijing over its trade practices, a senior Treasury Department official said Thursday. Talks in Buenos Aires between the world's largest advanced and emerging economies will occur amid raw tensions over President Donald Trump's increasingly confrontational trade policies. The White House last week announced a raft of tariffs and is poised to unveil more soon. "We have been working ... read more