Trade talk gets tough

La Malbaie (Quebec) - Trade war fears unnerve Washington's top allies and investors

US President Donald Trump lashed out at Canada and the European Union on Friday, setting the tone for a hostile Group of Seven summit and raising the spectre of a trade war that has unnerved Washington's top allies as well as investors.
The confrontation over US tariffs on steel and aluminium imports threatened to rupture the G7, which during its 42-year history has traditionally sought to find consensus on the economy and other issues.
Trump, who aides said has scant interest in multilateralism, resumed his tirade against G7 members and their "unfair trade practices" early on Friday.
"Looking forward to straightening out unfair Trade Deals with the G-7 countries. If it doesn't happen, we come out even better!" Trump tweeted before he was to leave Washington for Quebec.
The White House said he would leave the two-day summit in Canada four hours earlier than originally planned.
The US leader will have left Canada by the time Canadian Prime Minister Justin Trudeau and other leaders begin closing news conferences likely to be laden with criticism of Washington's trade policy.
"We're going to deal with the unfair trade practices. If you look at what Canada, and Mexico, the European Union - all of them - have been doing to us for many, many decades. We have to change it. And they understand it's going to happen," Trump said before departing for the summit in La Malbaie, Quebec.
"We are going to do very well. Now, if we're unable to make a deal we'll terminate Nafta, we'll have a better deal," Trump said, adding that the US would be better off without trade pacts such as the North American Free Trade Agreement.
Canada and Mexico, the other members of Nafta, have been frustrated by what they see as unacceptable US demands in slow-moving talks to modernise the deal.
Although Trump said the tariffs are necessary to protect US industry and workers, Canada and the EU have denounced them as illegal and are preparing retaliation, raising the prospect of a tit-for-tit escalation.
US stock indexes opened lower on Friday partly due to investor nervousness over the G7 summit.
French President Emmanuel Macron warned Trump in a rare rebuke on Thursday that the other six members of the G7 might form their own group, adding that no leader "is forever."
British Prime Minister Theresa May took a more measured tone, telling reporters she wanted the EU to use restraint in retaliation against US tariffs and that the response must be proportionate and legal.
Trump showed no sign of backing down on Friday after accusing both France and Canada of imposing massive tariffs on US goods, and then lashing out at Trudeau for "being so indignant."
In Germany, top officials called for Europe to remain unified in the face of rising trade tensions with the United States even as they maintained that America remained its closest partner outside the continent.
At a joint press conference on Thursday, Macron stressed: "A trade war doesn't spare anyone. It will start first of all to hurt US workers."
Trudeau said: "We are going to defend our industries and our workers."
Trudeau, for his part, said Trump's action would hurt American workers as well as Canadians.
"If I can get the president to actually realise that what he's doing is counterproductive for his own goals as well, perhaps we can move forward in a smarter way," Trudeau said.
As tempers frayed, Trump had a ready retort, via tweet: "Please tell Prime Minister Trudeau and President Macron that they are charging the US massive tariffs and create non-monetary barriers. The EU trade surplus with the US is $151 Billion, and Canada keeps our farmers and others out. Look forward to seeing them tomorrow."
Later Thursday, Trump tweeted: "Prime Minister Trudeau is being so indignant, bringing up the relationship that the US and Canada had over the many years and all sorts of other things...but he doesn't bring up the fact that they charge us up to 300 per cent on dairy - hurting our Farmers, killing our Agriculture!"
A few hours later, he added, "Take down your tariffs & barriers or we will more than match you!"
This marks Trump's second summit of the G7, an informal gathering that meets every year under a rotating chairmanship. The member countries are Canada, France, Italy, Japan, Germany, the United States and Britain. The European Union also attends. Trump is set to hold a series of group and one-on-one meetings, including with Trudeau and Macron.
Under Trump, the US has abandoned its traditional role in the G7. His predecessors pressed for freer global trade and championed a trading system that required countries to follow World Trade Organization rules. Trump's policies have been more protectionist and confrontational, driven by a perception that the US has been the victim of poorly conceived trade deals.
Relations have hit such a low that a key question now is whether the seven countries can agree on a joint statement of priorities at the conclusion of the meeting. A gathering of G7 finance ministers days earlier concluded last week with a message of "concern and disappointment" for Trump from the other six countries. France's finance minister described the group as "far more a G6 plus one than a G7."
Macron made clear on Thursday that the other six countries wouldn't hesitate to go it alone. On Twitter, he said: "The American President may not mind being isolated, but neither do we mind signing a 6 country agreement if need be."
Trump's top economic adviser, Larry Kudlow, was vague Wednesday on the outcome of the summit, saying: "For these kind of decisions, let them meet first. Let them meet; let them discuss. And then we'll see what happens."
Tension has been building over a year of policymaking that has distanced the US from traditional allies, including by Trump's decisions to withdraw the US from the Paris climate accord and the Iran nuclear agreement. The new tariffs - 25 per cent on imported steel, 10 per cent on aluminum from Canada, Mexico and the European Union - threaten to drive up prices for American consumers and companies and heighten uncertainty for businesses and investors around the globe.
Canada and other US allies are retaliating with tariffs on US exports. Canada is waiting until the end of the month to apply them with the hope the Trump administration will reconsider.
Meanwhile, talks to renegotiate the North American Free Trade Agreement that eliminated most tariffs and duties between the US, Canada and Mexico appear to have ground to a halt. Trump injected further uncertainty recently when he floated the idea of replacing Nafta with two separate trade deals, one with each country.
Sebastian Mallaby, a senior fellow with the Council on Foreign Relations, described the relationships between the US and the rest of the G7 as at a "new level of crisis," saying that it was not just about trade but "a general US attitude towards the system."
Despite the conflict, Mallaby predicted that the countries would still seek to work with the US, calling it "the indispensable country."
Likewise, Macron described the moment as a period of "great challenges," but also defended his efforts to befriend the American president, saying the US is a historical ally and "we need them."