Since 1976, the US president has met annually with the heads of America’s most important allies and trading partners. For a while, the group included post-Soviet Russia, but since Russia’s 2014 occupation of Crimea, the participants are limited to the US, Canada, Japan, and four of the largest economies in the European Union: Germany, France, Great Britain and Italy.
The agenda for the meetings, dubbed the G7 (Group of Seven), are usually dominated by routine discussions of shared economic and trade issues.
Sometimes, larger geopolitical issues, such as Russia’s 2014 invasion of Crimea, intrude on the agenda, but no dispute had ever broken out before at a G7 meeting that was serious enough to disrupt the harmony and cooperation between the longtime allies.
This year’s meeting, held at a Canadian resort in Quebec last weekend, was a glaring exception to that rule.
At the very last moment, a carefully-worded statement of agreement between the seven G7 members collapsed due to a nasty confrontation which broke out between President Donald Trump and Canadian Prime Minister Justin Trudeau over newly imposed US tariffs on imported Canadian steel and aluminum.
Relations between Trump and the other G7 leaders were already strained by Trump’s decision last summer to withdraw from the Paris climate change agreement, over the strenuous objections of allied leaders. The Paris deal was signed in 2015 by Barack Obama. Trump was able to withdraw from it because it was never confirmed by the US Senate.
President Trump ran for the presidency promising to return fairness to international trade and not to let other countries take advantage of the United States. Tensions increased on March 1, when Trump announced a 25% tariff on imported steel and 10% on imported aluminum to protect the strategically vital US steel and aluminum industries from unfair foreign competition. The statement generated angry protests from Canada, Mexico, the EU and other countries exporting steel and aluminum to the US. Trump responded by announcing a temporary waiver period for individual countries to negotiate bilateral trade agreements, but when the waiver period ended without an agreement between the US and Canada, Trump allowed the tariffs on Canadian steel and aluminum to go into effect.
INGREDIENTS FOR CONFRONTATION
These were the ingredients which eventually led to a public exchange of insults between Trump and Trudeau as the two-day G7 meeting was winding down. Tense negotiations between Trump and the other leaders had led to a final statement which papered over their disputes over Trump’s tariffs and his demands for the renegotiation of existing free trade agreements such as NAFTA (North American Free Trade Agreement).
After the communique was finalized, Trump left the G7 meeting a few hours early, in order to arrive in Singapore on time for his summit with the head of North Korea. Shortly after Trump’s departure, Trudeau blasted Trump’s tariff policies during a televised news conference. Trudeau announced that Canada would “move forward with retaliatory measures on July 1,” imposing its own tariffs on American-made goods coming into Canada.
Trudeau said he found Trump’s invocation of US national security as a justification for the tariffs on steel and aluminum imports “kind of insulting [to] the Canadians … [who] stood shoulder to shoulder with American soldiers in far off lands in conflicts from the First World War onward.” He then declared, “I have made it very clear to the President that it is not something we relish doing, but it something that we absolutely will do. Canadians, we’re polite, we’re reasonable, but we also will not be pushed around.”
Trump was watching the press conference aboard Air Force One and was infuriated. He immediately tweeted, “PM Justin Trudeau of Canada acted so meek and mild during our G7 meetings only to give a news conference. . . [that was] very dishonest and weak. Our tariffs are in response to his of 270% on dairy!
“Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive tariffs to our US farmers, workers and companies, I have instructed our US representatives not to endorse the communique as we look at tariffs on automobiles flooding the US market!”
ACCEDING TO TRUMP’S BASIC DEMAND
The key paragraph in the G7 communique talked about the changes needed in the international trading system. It said, “We commit to modernize the World Trade Organization (WTO) to make it more fair as soon as possible. We strive to reduce tariff barriers, non-tariff barriers and subsidies.” While the language of the communique was deliberately vague, it was an endorsement, in principle, of the kinds of fair and free trading reforms that Trump has been demanding.
On the other hand, no agreement was reached on the dispute over the Paris agreement, so there was nothing new in the communique on the issue of climate change.
Trump’s angry tweets superseded a statement he had issued just a few minutes earlier applauding the communique. “Just left the G7 Summit in beautiful Canada. Great meetings and relationships with the six country leaders especially since they know I cannot allow them to apply large tariffs and strong barriers to U.S.A. Trade.” Trump declared. “They fully understand where I am coming from. After many decades, fair and reciprocal Trade will happen!” But the optimistic closing message of friendship and cooperation the G7 leaders had worked so hard to agree upon was undermined by Trudeau’s statement.
DEEP DIVISIONS EXPOSED
Throughout the two-day meeting, the G7 heads of state tried to camouflage the differences between them, but even before the open clash between Trump and Trudeau, there were obvious signs of the tensions simmering between Trump and the others. One of the most telling news photos released during the summit depicted German Chancellor Angela Merkel standing over and lecturing to a seated President Trump with his arms crossed, looking back at her stony-faced.
According to a French participant, that picture was taken during an “extraordinary” one-sided conversation. The other G7 leaders took turns citing trade data and arguing with Trump that his “America First” trade agenda, epitomized by new tariffs on imported steel and aluminum, was unjustified. Trump responded with “a long, frank rant,” citing the same arguments he made while he was running for president that the United States economy was suffering from unfair treatment from its main trading partners, a contention denied by French President Emmanuel Macron and Japanese Prime Minister Shinzo Abe.
Trump remained firm in his conviction that the US was the injured party in the trade dispute, insisting that the high tariffs being imposed on American-made goods were “ridiculous and unacceptable.” He insisted that he was determined to stop the practice of America’s trading partners treating it “like a piggy bank that everybody is robbing.”
HISTORY OF THE TRADING SYSTEM
The United States was largely responsible for building up the current international trading system. Following the end of World War II, which decimated the economies of Western Europe and Japan, the United States embarked on a massive reconstruction project, through the Marshall Plan and other generous foreign aid programs. The system was supposed to be built on the principle of free trade, with the US cutting its tariff rates in step with other developed countries, but some exceptions were made. The US gave some less-developed countries access to its markets, with the hope of increasing wages and improving the quality of life there. It also permitted those countries to impose high tariffs and other trade barriers to protect and nurture their domestic industries and agriculture.
Trump argues that it is now long past time for those obstacles to free trade to be eliminated. The economies of Europe and Japan no longer need that kind of help, and because of its huge accumulated trade debt, the US cannot afford to continue subsidizing its competitors in the international marketplace.
Steel and aluminum are not the only imported goods upon which Trump has imposed tariffs to protect US industries from unfair foreign competition. In February, he announced a 30% tariff on foreign-made solar panels by Chinese and Taiwanese manufacturers, who control 80% of the US market. Over the last five years, nearly 30 American solar panel manufacturers have been driven into bankruptcy.
At the same time, the Trump administration slapped a 50% tariff on imported washing machines in response to complaints from US appliance-maker Whirlpool about unfair competition from South Korean appliance manufacturers LG and Samsung. The Korean companies have been fighting Whirlpool’s trade complaints for nearly a decade and anticipated the new tariffs by announcing plans to build new washing machine factories in Ohio, Kentucky, South Carolina and Tennessee.
TRUMP CAME LATE AND LEFT EARLY
President Trump arrived late to the G7 meeting, at a luxury resort in La Malbaie, Quebec. He left early in order to get to Singapore on time to prepare for the historic summit with North Korean leader Kim Jong Un. Reportedly, the European leaders who had arrived on time were huddling together to work out a common strategy for confronting Trump when their conversation was drowned out by the noise of Trump’s arriving helicopter. One participant in that impromptu meeting later told a reporter, “the EU understands that the only way with Trump is strength. If you give in now, he will come back tomorrow for more.”
TRUDEAU ACCUSED OF A “BETRAYAL”
According to Trump’s chief economic advisor, Larry Kudlow, the president was particularly angered by Trudeau’s post-G7 statement because the US and Canada had come so close to reaching a comprehensive trade agreement. Kudlow said the prime minister “really kind of stabbed us in the back. . . It was a betrayal,” he said.
Kudlow said expectations for progress on trade issues going into the G7 meeting had always been low, because it was being held in the shadow of the Singapore summit. “All the punditry was saying, A, President Trump might not even go to G7, B, we will never sign a communique because, C, we’re not going to work with other people.
“Well,” Kudlow said, “we did [negotiate] in good faith. I personally negotiated with Prime Minister Trudeau, who, by the way, I basically liked working with. . . until this sophomoric play. I mean, we went through it. We agreed. We compromised on the communique. We joined the communique in good faith. . .”
After achieving that kind of progress, Kudlow said, Trudeau behaved unacceptably. “You don’t walk away and start firing bullets, not after you pull a treaty or a deal together.”
Kudlow believes that Trudeau did it for Canadian domestic political consumption but pointed out that the whole world listened to what he said.
“You just don’t behave that way. It is a betrayal. He is not just double-crossing President Trump, but the other members of the G7, who were working together and pulling together this communique. You know, you never get everything you want. There are compromises along the way. President Trump played that process in good faith.”
U.S. AND CANADA WERE CLOSE TO A DEAL
“We were very close to making a deal with Canada on NAFTA … then we leave and he pulls this sophomoric political stunt for domestic consumption. . . I’m sorry. It is a betrayal. That is a double-cross. It pains me, because I like Trudeau. I was working with him. We were together putting words on paper. . . when it comes to reforming the international system. They all agreed. This is so important.” Kudlow said.
Trump’s chief trade advisor, Peter Navarro, reinforced Kudlow’s message in an interview with Fox News. “There’s a special place… for any foreign leader that engages in bad-faith diplomacy with President Donald J. Trump and then tries to stab him in the back on the way out the door. That’s what bad-faith Justin Trudeau did with that stunt press conference. That’s what weak, dishonest Justin Trudeau did,” Navarro said angrily, adding that he was speaking on behalf of the others on the Air Force One flight to Singapore in condemning Trudeau’s comments.
Navarro said that by making such provocative post-meeting comments the Canadian leader made “one of the worst political miscalculations. . . in modern Canadian history. All Justin Trudeau had to do was take the win. President Trump did the courtesy to Justin Trudeau to travel up to Quebec for that summit. He had other things, bigger things on his plate in Singapore.
“He did [Trudeau] a favor,” Navarro added. “He was even willing to sign that socialist [end of meeting] communique. And what Trudeau did as soon as the plane took off from Canadian airspace, [was to] stick our president in the back. That will not stand.”
MEDIA CRITICIZED FOR DISTORTED G7 REPORTING
Navarro also took the American media to task for its distorted reporting about what happened at the G7, and why Trump had to react to Trudeau’s challenge the way he did. “The American press needs to do a much better job of [explaining] what the Canadians are getting ready to do because it’s nothing short of an attack on our political system. It’s nothing short of Canada trying to raise its high protectionist barriers even higher on things like maple syrup and other goods.”
Navarro then said, “the Canadians are totally bungling our trade relationships and it’s due to their leadership. Take NAFTA, for example. We would have a great deal with NAFTA, by now, if the Canadians would spend more time at the bargaining table and less time lobbying Capitol Hill and our press and state governments here. They are just simply not playing fair.”
Kudlow offered another reason the president could not afford to ignore Trudeau’s insulting remarks. Trump could not “let a Canadian prime minister push him around” on the eve of his crucial summit with North Korean leader Kim Jong Un or “permit any show of weakness on the trip to negotiate with North Korea. . . Kim must not see American weakness.”
His economic advisor argued that, knowing where Trump was going next, the G7 allies should have been more supportive. “They should have said to [Trump], ‘You are negotiating with the crazy nuclear tyrant in North Korea, and we are behind you.’” Instead, they “stabbed him in the back.”
TARIFFS AND NAFTA ADD TO THE DISPUTE
Trudeau and the other G7 leaders have also been trying to block Trump’s efforts to force a renegotiation of unfair international free trade agreements which have cost tens of millions of American jobs over the past 25 years and put American industry at a severe competitive disadvantage.
During the presidential campaign, Trump railed against NAFTA and promised to renegotiate the terms of the agreement with Canada and Mexico. He also pledged to protect what is left of America’s once mighty industrial base. Trump’s proposals are inter-related. He is using the aluminum and steel tariffs as bargaining chips in negotiations to reform the other imbalances in international trading system.
WILL A TRADE DISPUTE UNDERMINE US ALLIANCES?
The G7 powers who are benefitting from the imbalances and subsidies in the current system, at America’s expense, have reacted to Trump’s tariff announcement with anger. Critics of Trump’s trade policy have been supported by those who are profiting from the globalist free trade system in this country, including some prominent Republicans, who have warned that Trump’s tariffs will touch off a ruinous international trade war.
Arizona Senator John McCain, who is home fighting a grim diagnosis of brain cancer, expressed objections to Trump’s rejection of the G7 closing communique. McCain wrote in a tweet, “To our allies: bipartisan majorities of Americans remain pro-free trade, pro-globalization and supportive of alliances based on 70 years of shared values. Americans stand with you, even if our president doesn’t.”
In response to McCain’s tweet, Kudlow said on CNN, “President Trump is essentially doing what John McCain wanted him to do with respect to free trade.”
Kudlow noted that during the two days of meetings in Quebec, “President Trump made it clear, time and again. . . that he wants to reinstitute a process of free trade, no tariffs, no tariff barriers, no quotas and subsidies.”
In a separate interview on CNN, Democrat Senator Dianne Feinstein criticized Trump for rejecting the communique. “This agreement is with our best allies. And it seems to me, not to sign a statement of solidarity which stands for everything that we stand for, is a big mistake. I understand the President was upset,” Feinstein said. “The President could have said that, but to walk away from our allies in this way, I think, is a mistake.”
TOO EARLY TO LET RUSSIA BACK IN
Feinstein also rejected Trump’s suggestion to consider readmitting Russia to the group’s annual meetings.
In 1997, during the period when the Russian government was moving towards democracy, the members of the G7 began inviting Russia to attend their annual meetings, and the group renamed itself the G8. But after Vladimir Putin came to power in 2000, the Russian government became hostile to the West and started moving away from democracy.
The turning point came in 2014, when Russia invaded and annexed the Crimea from the Ukraine. In punishment for its defiance of international law, Russia was expelled from the annual meetings, which again became known as the G7.
Because Putin remains unrepentant and hostile to the US and its allies, Senator Feinstein says it would be a serious mistake to invite Russian to attend the meetings again.
“Not only did they seize Crimea, but they also interfered in the democratic election in the United States. That is a sacrosanct territory. . .
“I believe Putin gave instructions to the intelligence services of that country to do just that and mix it up in the election. That is unacceptable. So, as far as most of us are concerned,” Feinstein declared, “Russia has not yet apologized. Russia has not yet said this will never happen again,” and therefore does not deserve to be readmitted to the G7.
In contrast, Congressman Peter King of New York is one of the few Republicans on Capitol Hill who has publicly endorsed Trump’s tactics at the G7. He said Trump’s pushback to Trudeau was a useful “warning shot to Kim Jong-Un” on the eve of Trump’s Singapore summit meeting with the North Korean leader. King added that “This is the Trump style of getting things done.” As to whether Trump’s public clash with Trudeau and the G7 allies will prove to be a successful negotiating strategy, the congressman said, “It depends on how it turns out. This president lives on a high wire, and so far, it’s been working.”
TRUMP UNAFRAID OF A TRADE WAR
Trump has previously rejected warnings from critics that his tariffs will lead to a trade war that will ultimately result in more damage than benefits to the American economy. He has argued that it would be easy for the US to win such a trade war, because it would inevitably lead to a sharp reduction in America’s chronic deficit with its G7 trading partners. He believes that the threat of the tariffs will help achieve his trade goals with China and the other countries which have taken unfair advantage of the US in recent decades.
The globalists whose thinking dominates the economic policies of America’s trading partners argue that Trump’s “unprecedented” policies would undermine the “rules-based international order,” that has been built up since the end of World War II.
That order is totally dominated by the bureaucracy of multilateral institutions such as the International Monetary Fund and the European Union.
Its rules have permitted the EU and Canada to engage in protectionism which has tilted the economic playing field against the US. The excessive regulations have stifled the growth and creativity of the economies they control. At the same time, people living in those countries are growing increasingly resentful at the creeping infringement by those bureaucracies on every aspect of their daily lives and personal freedoms, from the kind of cars they are permitted to drive to the kinds of foods they can consume.
TRUMP LEADS THE REVOLT AGAINST THE “INTERNATIONAL ORDER”
That is why the British people voted in 2016 to leave the European Union, and why the most powerful advocates for the European status quo, such as Angela Merkel, are struggling to retain political control over their governments.
The highly vaunted “rules-based international order” has proven to be even more ineffective at maintaining world peace. The order failed to stop Russia from invading Crimea and Ukraine. The order stood idly by as Syria descended into bloodshed and chaos. It failed to stop the rise ISIS. It did nothing to prevent Iran from destabilizing the Middle East while giving it a clear path to obtaining nuclear weapons. It didn’t stop China from intimidating its neighbors and challenging US power in the Western Pacific. And over a period of more than 20 years, it did nothing to stop North Korea from obtaining nuclear weapons.
In the United States, liberals like Barack Obama have argued that increasing taxes and the power of government are the only way to counter the income inequality and government dependency that has locked so many Americans into lives of poverty and frustration. The oligarchy of political power brokers and corporate interests who gained control over the permanent Washington establishment through their money and influence has rigged the system. Eventually, the thin veneer of American democracy was exposed, as voters realized it didn’t matter much which party or candidates they cast their ballots for, because the same elites would remain in control behind the scenes.
Grassroots protests and reform movements, such as the Tea Party, were frustrated by the power of the “swamp” in Washington to corrupt their candidates once in office. Trump recognized that frustration and attacked its source, the swamp itself, launching a political fight-to-the-death.
When he ran for president, Trump argued that high taxes and excess government regulation were the root causes behind the problems which have frustrated so many middle-class and working-class Americans, not their solution. Trump’s “Make America Great Again” slogan restored their self-pride and hope for the country’s future.
The accelerating rate of growth and job creation triggered by his free market, supply-side economic policies are proving Trump right. Millions of American workers are coming off of the welfare and unemployment rolls and rejoining the labor force. The new employment opportunities are strongly benefitting America’s long disadvantaged minority and under-educated workers. They have also restored business and investor confidence. As a result, prospects for sustained growth and the restoration of broad-based American prosperity are the strongest since the Reagan area.
EXTENDING TRUMP’S APPROACH TO WORLD TRADE
With the outcome of the G7 meeting in Quebec, that fight has now expanded to include America’s traditional allies and trading partners, whose leaders are also agents of the same kind of closed political-economic system on a global scale.
Trump believes that by extending his free market approach to America’s trading partners, by reforming agreements such as NAFTA and eliminating artificial barriers to international trade, he will empower the rest of the global economy to share in America’s broad-based prosperity.
Confident in his negotiating skills, Trump believes that he can use the added leverage he is getting from the new tariffs to jumpstart the process of reforming the entire international trading system.
Trump began by granting temporary waivers on the new tariffs to Canada, Mexico, the European Union, Australia, South Korea, Brazil, and Argentina. He gave them until May 1 to negotiate broader bilateral trade deals. The administration was able to finalize deals with South Korea, Australia, Brazil and Argentina by the deadline, but not with Canada, Mexico and the European Union. As a result, Trump ordered the steel and aluminum tariffs to go into effect for those countries on May 31, which added new urgency to the G7 talks in Quebec.
G7 SHARPENED DIFFERENCES WITH US ALLIES
In the short term, the G7 sharpened the differences over trade between the US and its allies. Trudeau’s foreign minister, Chrystia Freeland, continued the criticism of Trump’s negotiating style. “Canada does not conduct its diplomacy through ad hominem attacks,” Freeland said. “We don’t think that is a useful or productive way to do business, and perhaps we refrain particularly from ad hominem attacks when it comes to our relationship with our allies.”
French Prime Minister Emmanuel Macron was quick to announce his government’s support for Trudeau’s criticism of Trump.
German Foreign Minister Heiko Mass said that Trump’s decision to reject the agreement was “actually not a real surprise,” because it was consistent with Trump’s previous actions backing away from the Paris Climate Agreement and the Iran nuclear deal. “In a matter of seconds, you can destroy trust with 280 Twitter characters,” Mass added.
German Chancellor Merkel kept a relatively low public profile following the G7 meltdown, but she did say in an interview that the meeting’s results were “sobering and a bit depressing.” She admitted that “it’s hard. . . but that’s not the end.”
British Prime Minister Theresa May also announced her support for Trudeau’s “skillful” handling of the G7 meeting. She said she had been “very clear” that the dispute over US tariffs on European steel was damaging and should not be allowed to escalate into a full-blown trade war.
May added that US concerns that other countries were “not playing by the rules” needed to be resolved multi-nationally, which “cannot be done by taking unilateral action against your partners.”
TRUMP PRESSING THE ATTACK
But Trump was not willing to let the clash cool down. Shortly after landing in Singapore, he issued a new series of tweets criticizing Trudeau in particular and the unfair nature of the economic relationship between the US and its European allies.
The president tweeted, “Fair trade is now to be called “Fool Trade” if it is not reciprocal. According to a Canadian release, they make almost $100 billion in trade with U.S. (I guess they were bragging and got caught!) Minimum is $17 billion. [Canada] taxes dairy from us at 270%. Then Justin [Trudeau] acts hurt when called out!
“Why should I, as President of the United States, allow countries to continue to make massive trade surpluses, as they have for decades, while our farmers, workers and taxpayers have such a big and unfair price to pay? Not fair to the people of America! An $800 billion trade deficit! And add to that the fact that the U.S. pays close to the entire cost of NATO-protecting many of these same countries that rip us off on trade. (They pay only a fraction of the cost-and laugh!) The European Union had a $151 billion surplus. They should pay much more for [their] military [protection]!
“Germany pays 1% (slowly) of GDP towards NATO, while we pay 4% of a much larger GDP. Does anybody believe that makes sense? We protect Europe (which is good) at great financial loss, and then get unfairly clobbered on trade. Change is coming!
“Sorry, we cannot let our friends, or enemies, take advantage of us on trade anymore. We must put the American worker first!” Trump concluded before turning his full attention to the Singapore summit.
The deep trade dispute between the US and its closest allies which the G7 meeting exposed remains unresolved. Neither side showed any sign of compromise, as all eyes turned to watch the historic summit in Singapore unfold. The success or failure of that summit will have a major impact on Trump’s personal prestige in the international community. If it does succeed, Trump is certain to use it to press home his demands on all of America’s allies for the fundamental reforms of foreign trade agreements that he promised the American people.