US isolated at G7 meeting as tariffs prompt retaliation

By Reuters   June 1, 2018 | 05:12 pm PT
US isolated at G7 meeting as tariffs prompt retaliation
Finance ministers and central bank governors meet during the G7 Finance Ministers Summit in Whistler, British Columbia, Canada, June 1, 2018. Photo by Reuters/Ben Nelms
The European Union and Canada both filed challenges with the World Trade Organization against the tariffs.

The United States’ closest allies attacked the Trump administration on Friday for imposing tariffs on steel and aluminum imports and mounted challenges with the world’s top trade body, fouling the mood at a G7 finance leaders meeting.

U.S. Treasury Secretary Steven Mnuchin was the prime target of the criticism at the meeting of Group of Seven finance ministers and central bank governors in Canada, with the six other G7 member countries subject to the U.S. metals tariffs, which were imposed on national security grounds.

Their complaints also complicated U.S. efforts to gain cooperation to challenge China’s trade practices.

The European Union and Canada both filed challenges with the World Trade Organization.

Canadian Foreign Minister Chrystia Freeland said in a statement that the tariffs were “imposed under a false pretext of safeguarding U.S. national security.”

Canada’s finance minister, Bill Morneau, told reporters that in a meeting with Mnuchin, “I expressed in strong terms our opposition to these tariffs in the steel and aluminum sector, our absolute view that this is absurd that Canada could in any way be a security risk.”

French Finance Minister Bruno Le Maire said Mnuchin was clearly isolated on the issue, though France, Germany, Japan, Britain, Italy and Canada were trying to talk the Trump administration “back to good reason.”

“Unfortunately, we are going to have a G6 plus-one with the United States alone against everyone and running the risk of economic destabilization,” Le Maire told reporters.

British finance minister Philip Hammond told reporters that the U.S. action “worries” the G7 members, but he hoped that Friday’s discussions could lay the groundwork for G7 leaders to reach an understanding with President Donald Trump on tariffs next week at the G7 summit in Charlevoix, Quebec

“We know that the president has a very personal style. He likes to deal personally with issues,” Hammond said.

Mnuchin, regarded as one of the more moderate trade voices in Trump’s cabinet, took a low profile during the G7 discussion of tariffs but was clearly “isolated,” two officials participating in the talks said.

“He said it may need to be solved at the summit level,” one of the officials said.

The U.S. tariffs of 25 percent on imports of steel and 10 percent on aluminum were imposed early on Friday on Canada, Mexico and the European Union after they refused to accept steel and aluminum quotas in negotiations with U.S. Commerce Secretary Wilbur Ross.

Trump's Twitter tirade 

Trump took to Twitter again on Friday to castigate Canada after his testy exchange with Canadian Prime Minister Justin Trudeau on Thursday over rocky negotiations to update the North American Free Trade Agreement.

Trump tweeted that Canada had treated U.S. farmers “very poorly for a very long period of time.”

“Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us,” he wrote.

Later on Friday, Trump told reporters that he might prefer separate trade deals with Canada and Mexico instead of a revamped NAFTA.

The White House said Trump told French President Emmanuel Macron of the need to “rebalance trade with Europe.”

Trump’s words followed swift responses to the tariffs by Canada, Mexico and the EU, which plan to retaliate with levies on billions of dollars of U.S. goods, including orange juice, whiskey, blue jeans and Harley-Davidson motorcycles.

Harley-Davidson’s stock dropped about 1 percent on Friday, while shares of steelmakers U.S. Steel and AK Steel both rose 2.2 percent. The broader stock market rebounded on strong monthly jobs data.

Canada, the largest supplier of steel to the United States, said it will impose tariffs covering C$16.6 billion ($12.8 billion) on U.S. imports, including whiskey, orange juice, steel, aluminum and other products.

Mexico announced “equivalent” measures on a wide range of U.S. farm and industrial products, including pork legs, apples, grapes, cheese, steel and other goods.

The EU plans tariffs on U.S. exports running the gamut from canoes to “manicure or pedicure preparations.”

“We are determined to protect the multilateral system,” EU Trade Commissioner Cecilia Malmstrom said of the WTO challenge. “We are expecting everybody to play by the rules."

China complications 

The complaints came on the eve of a visit by Ross to China to try to secure long-term purchases of U.S. farm and energy commodities to help shrink the U.S. trade deficit and avert a looming tariff war between the world’s two largest economies. The U.S. team also wants to secure greater intellectual property protections and an end to Chinese subsidies that have contributed to overproduction of steel and aluminum.

Officials at the G7 meeting said the tariffs made it more difficult for the group to work together to confront China’s trade practices, especially when Beijing, like most G7 members, supports the current World Trade Organization-based trade rules and the United States is seeking go around them.

Le Maire asked Mnuchin, “How can you get the Chinese to respect international law if you don’t?” one meeting participant said.

A U.S. Treasury spokesman was not immediately available to comment on the G7 discussions.

For the EU, a decision on how far to push back will require agreement among the 28 member states that make up the world’s biggest trade bloc.

Germany, by far the biggest exporter to the United States, is keen to avoid a wider trade war, especially as the Trump administration has floated the prospect of tariffs on cars, which would potentially be devastating to German exporters.

Other EU countries such as France favor a more robust stance against what they see as American bullying.

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