U.S. Isolated at `G-6 Plus 1' as Divisions Sap Western Alliance
Treasury Secretary Steven Mnuchin received an earful from global finance chiefs Thursday.
(Bloomberg) -- The U.S.’s closest allies warned protectionist measures taken by the Trump administration threaten to create deep fissures in the Western economic alliance that end up isolating the Americans.
At a meeting of finance chiefs from the Group of Seven countries Friday, officials expressed frustration over how the U.S. is alienating its historical trading partners with new tariffs on steel. They cautioned the Americans are losing sight of the real challenges faced by the global economy, even as they held out hope of a change of heart.
“We will be divided -- it will not be a G-7, it will be a G-6 plus one,” French Finance Minister Bruno Le Maire said in a Bloomberg Television interview at the meeting in the Whistler ski resort near Vancouver. “It is dangerous for growth, dangerous for the economic development of the world, and dangerous for our jobs in the EU.”
The trade disputes are hijacking a summit that was initially seen as an opportunity to tout the successes of the global economic upswing, and is severely testing the resiliency of economic ties among Western nations. Canada and the European Union have said they will take immediate steps to retaliate after the Trump administration imposed steel and aluminum duties on national security grounds.
High Drama
Frictions in Whistler this weekend could foreshadow even more high-drama at a G-7 leaders’ summit next week in Quebec that Trump will attend.
“We won’t negotiate under pressure. We will never accept to negotiate under pressure,” said Le Maire, adding that the EU should be granted an exemption to the metal tariffs.
The security designation used by Trump to justify the tariffs has been particularly grating to the Europeans and Canadians.
“We’re obviously all very disappointed as close allies and partners of the U.S. that they have taken this step, especially as they’ve taken it on national security grounds,” U.K. Chancellor of the Exchequer Philip Hammond said in a separate interview with BNN Bloomberg Television. He said the leaders summit next week may offer an opportunity to resolve the dispute.
“We know that President Trump’s way of doing business is very personal and the fact that he is going to have direct interactions with the leaders of the countries most affected by these measures gives us hope,” Hammond said.
Mnuchin
Treasury Secretary Steven Mnuchin -- who is representing the U.S. at this week’s meetings -- has already received an earful.
German Finance Minister Olaf Scholz said Thursday the U.S. levies on imported metals from the European Union, Mexico and Canada are probably illegal. Canadian Finance Minister Bill Morneau said he’ll “clearly” express his displeasure to Mnuchin with the protectionist measures.
“The decision by the U.S. government to unilaterally implement tariffs is wrong, and -- from my point of view -- also illegal,’’ Scholz told reporters. “We have clear rules, which are determined at the international level, and this is a breach of those rules.”
Mnuchin held a string of bilaterals in the first few hours after his arrival in Whistler, meeting individually with Japan’s Taro Aso, Scholz and Morneau. While a Treasury Department readout of the Aso meeting made no mention of trade coming up in the discussions, a Japanese finance ministry official said the trade dispute was discussed.
National Security
In imposing the tariffs, Trump invoked a seldom-used section of a 1960s trade law that allows him to erect trade barriers when imports imperil national security. Trump in March imposed 25 percent duties on imported steel and 10 percent on aluminum, but he gave temporary reprieve to a handful of allies for further talks to take place.
That reprieve ended Thursday, prompting swift retaliation from Canada, which announced duties on $12.8 billion worth of U.S. imports, ranging from steel to whiskey and maple syrup. The EU meanwhile said it would impose levies on 2.8 billion euros ($3.3 billion) of goods, including Harley Davidson motorcycles.
The U.S.’s ire is misdirected, Le Maire said, since the real cause of global oversupply of steel is due to Chinese production.
He said the dispute is also distracting the G-7 from dealing with real problems in global trade, such as the need to pressure China in particular on some of its practices with respect to intellectual property protection and state funding of its economy.
“A trade war is not in the interest of Europe, not in the interest of the United States,” said Le Maire. “I think that we should use G-7 to all discuss together -- the six states, plus the United States -- to try to find a way out.”
The finance ministers, along with their central bankers, kicked off the official part of the meetings with dinner Thursday, and are holding talks all day Friday and in the morning on Saturday. Mnuchin is scheduled to speak to the media on Saturday afternoon after the meeting ends.
While trade is front and center, the G-7 officials will also need to deal with other potential risks to the global economy such as turmoil in emerging markets.
--With assistance from Michael McKee and Amanda Lang.
To contact the reporters on this story: Yuko Takeo in Tokyo at ytakeo2@bloomberg.net;Natalie Obiko Pearson in Vancouver at npearson7@bloomberg.net;Jana Randow in Frankfurt at jrandow@bloomberg.net
To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Theophilos Argitis
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