G-20 meeting is all about Trump—He's there in spirit

Long Wei | VCG | Getty Images

Figurines of G-20 country leaders made by folk artist Wu Xiaoli for the G-20 Hangzhou Summit.

Donald Trump is not on the G-20 Hangzhou guest list and neither he nor the U.S. Presidential race are on the official agenda. But he's there in spirit.

No doubt it will be a tortuous road to the U.S.'s November elections and a seat in the Oval Office. But the risk of a Trump Presidency and more importantly, what it means for global trade, will almost certainly be privately debated and agonized over by leaders and diplomats here in Hangzhou in eastern China.

"Public sphere, we can expect more bland statements about all working to get the recovery on track," one head of research at a European bank tells me. "Backstage, I imagine real tension and panic," emanating from November's U.S. election and European elections in 2017.

Needless to say such stress testing of Grey Swans, Black Swans and what some cheekily describe as the "Orange Swan" event will be safely confined to the sidelines of this power gathering. Nevertheless, we'll be keeping our ears to the ground.

Carlo Allegri | Reuters

Donald Trump

What's abundantly clear is that G-20 Hangzhou has been painstakingly choreographed to ensure that this is not just U.S. President Barack Obama's farewell summit and last hurrah, but also his legacy swan song.

He will flash his credentials as a champion of green energy in the battle against climate change as he rides off into the sunset. And he will be doing so with a rather big feather in his cap.

China's legislature on Saturday morning rubber-stamped the Paris climate change agreement, paving the way for Chinese President Xi Jinping and Obama to announce the formal adoption of the deal on the eve of the G-20 summit here in Hangzhou.

That's a "substantive" step towards the Paris deal coming into force, political analyst and former diplomat Alastair Newton tells me, "Despite Obama not having the approval of the Senate — he says he doesn't need it."

VCG | Getty Images

Farmers make a pattern of '2016 G20 Summit' with crops at Chengkan Village in Huizhou District on August 29, 2016 in Huangshan, Anhui Province.

Superficially, G-20 Hangzhou may be Obama's show. But like it or not, Trump's perceived anti-trade rhetoric - and Hillary Clinton's for that matter — like the ghosts in a Shakespearean tragedy, will spook the globalization crowd gathered here and ultimately usurp the unofficial agenda.

Asia has the most at stake, warn Standard Chartered strategists in their preview of the G-20 summit, highlighting the risks posed by both U.S. Presidential candidates for global trade and the financial markets.

"From an asset market perspective, the G-20 summit has a couple of striking characteristics: It is in China and comes ahead of the U.S. Presidential elections, where both parties have adopted a more protectionist stance on global trade," Standard Chartered writes.

"Markets may react adversely to any hints that protectionist themes are beginning to play a bigger role in U.S. policy. This could potentially trigger a bout of broader risk aversion, which would, in turn, be unfavourable for Asian (and broader emerging market) currencies."

Seen from an immediate global risks point of view, the G-20 fire brigade can perhaps stand down. The aftershock from Britain's European Union referendum has abated, though life after Article 50 remains a wild card.

So too does the outcome of the U.S. election. As the Brexit vote taught us, complacency comes at a price. G-20 leaders would be well advised to do some preemptive ghost-busting and exorcise the mounting protectionist forces that may gain ground after November.