BCN-04-05Escalating trade battle embroils G7 finance meet

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Escalating trade battle embroils G7 finance meet

WHISTLER, Canada, May 31, 2018 (BSS/AFP) – Amid threats of imminent
tariffs on metals and auto imports, escalating trade tensions between Europe
and the United States were casting a shadow over a meeting of finance
ministers from the world’s top economies.

Long a bastion of multilateralism, the Group of Seven ministerial in a
Canadian mountain resort will serve as the latest battleground for the
discord now at the heart of the global economy.

As the US engages in a multi-front trade battle, with allies and
adversaries alike, US Commerce Secretary Wilbur Ross on Wednesday rejected
calls to extend exemptions on punishing import tariffs on steel and aluminum
and warned that duties for massive US imports of automobiles were on the
horizon.

This means the metals tariffs would take effect on Friday, the second day
of the G7 meeting as frustration mounts in Europe, the single-largest source
of US steel imports.

The Wall Street Journal reported on Wednesday that Washington would allow
the EU exemption to expire, after weeks of talks failed to yield a
compromise, such as a quota arrangement.

The harsh duties imposed in March to combat global overcapacity of the
metals and boost domestic production, were only one part of a dizzying pace
of developments, coinciding with a political crisis in Italy, which this week
has roiled markets fearful for the future of the euro and bringing turmoil to
the European Union, the G7’s largest economic bloc.

– New G7 agenda –

US Treasury Secretary Steven Mnuchin is due to hold meetings with his
European counterparts to discuss President Donald Trump’s confrontational
trade agenda, officials said.

But Jacob Kirkegaard, senior fellow at the Peterson Institute for
International Economics, told AFP that the agenda Canada, the current G7
chair, set for the meeting — which included uncontroversial themes such as
inclusive development and innovation in finance — would be swept aside amid
raw relations between America and its traditional allies.

“Hopefully they can agree to keep talking about these issues, although
that is unlikely,” he said, adding that Trump’s recent actions proved to US
allies that Washington would not de-escalate the dispute.

“I think the only thing you can hope for is no further harm.”

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In recent weeks, Trump has repeatedly switched course on key foreign
policy and trade issues, first imposing then easing sanctions on Chinese
telecoms equipment firm ZTE, and declaring a “hold” on a looming trade war
with Beijing but then announcing he would press ahead with $50 billion in
tariffs on China’s tech sector.

Last week, the administration also launched a national security-based
investigation that could result in stinging tariffs on the hundreds of
billions of autos the US imports annually, just as it has for the smaller
aluminum and steel industries.

And Ross also vetoed a traditional joint statement at an annual economic
meeting in Paris this week which denounced protectionism, further angering US
allies.

– About faces hinder consensus –

Relations among G7 nations represent particularly high stakes as they
account for more than 60 percent of global GDP.

And the sectors where Trump has chosen to wage his battles are key to
trade in the economic bloc.

More than 60 percent of US auto imports — an industry that closely binds
US and Canadian manufacturing — come from G7 countries, as well as more than
50 percent of aluminum imports and nearly 36 percent of steel.

Stephanie Segal, deputy director of the Simon Chair in political economy
at the Center for Strategic and International Studies, said Washington’s many
about-faces meant consensus in the near-term was an increasingly dim
prospect.

“It doesn’t feel particularly constructive to me and I have to believe
that the end game is not to create market instability, which is precisely
what something like this does,” she told AFP.

The Italian crisis, she said, demonstrated that there already were
pressing matters facing the G7 even without the man-made ones now dominating
the trans-Atlantic conversation.

“It’s an opportunity to focus the mind on the fact that there are plenty
of real crises out there, that creating a crises with a trade war on-off and
antagonizing allies is probably not where we should be spending our energy.”

BSS/AFP/HR/09100