Trump Watch: G7, the Gig is Up!

This G7 was like no G7 ever since it was founded in 1997.  Even before leaving for Canada, Trump rocked the boat, suggesting the G7 should be a G8, with Russia back in – conveniently forgetting why Russia was kicked out in 2014 (for invading Crimea and abetting rebels in Eastern Ukraine).

Then he turned up late. A bilateral meeting with Macron had to be postponed. He missed most of a working breakfast on the issue of women, he skipped the climate change meeting. He left nearly a whole day early to fly to Singapore for his “historic nuclear summit” with North Korea’s dictator – even though this meeting is still two days off.

In the end, Trump blew it up, refusing to sign onto a joint communiqué he had agreed to before leaving. Expect the G7 never to be the same again – at least not until America produces another President.

In his news conference before leaving, Trump was his usual aggressive self, grousing about unfair tariffs slapped on the United States by its closest allies – a claim roundly rejected by economists. Far from being huge as Trump claims, average trade-weighed tariffs are marginal: the latest WTO data (2015) shows that for the EU they stood at 3 percent, Canada at 3.1 percent and the US was slightly lower, at 2.4 percent.

The problem is that they vary by product and in the US, states slam on additional barriers. Not to mention Buy American laws that keep foreigners out of US government procurement. Moreover, it appears that Trump confuses the European VAT for a tariff. In short, the US trade deficit is not caused by tariffs but by Americans’ purchasing preferences.

Once on the plane, he tweeted his withdrawal, threatening future tariffs on automobiles and accusing Trudeau of “false statements”:

Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive Tariffs to our U.S. farmers, workers and companies, I have instructed our U.S. Reps not to endorse the Communique as we look at Tariffs on automobiles flooding the U.S. Market!

— Donald J. Trump (@realDonaldTrump) June 9, 2018

Then he doubled down with insults, calling Trudeau “very dishonest and weak”:

PM Justin Trudeau of Canada acted so meek and mild during our @G7 meetings only to give a news conference after I left saying that, “US Tariffs were kind of insulting” and he “will not be pushed around.” Very dishonest & weak. Our Tariffs are in response to his of 270% on dairy!

— Donald J. Trump (@realDonaldTrump) June 9, 2018

Something like this has never happened before, and the fact that the American President did it makes it a watershed event. It’s not just a matter of being astonishingly rude to democratically elected colleagues. It’s a matter of starting a trade war with allies that jeopardizes America’s leadership and threatens global prosperity. World politics won’t ever be the same again.

The G7 communiqué had blandly stated that members agreed on the need for “free, fair and mutually beneficial trade”and would “strive to reduce tariffs, non-tariff barriers and subsidies”  – a classic liberal trade mantra, one that apparently Trump could agree to, since it calls for “reciprocal” treatment of trade partners. Merkel and Macron must have believed they had brokered a deal that would help resolve the looming US-Europe trade war started by Trump’s steel and aluminum tariffs.

Not so. John Bolton, the man Trump trusts on foreign policy, gloated:

Just another #G7 where other countries expect America will always be their bank. The President made it clear today. No more. (photo by @RegSprecher) pic.twitter.com/emAVNqRqhc

— John Bolton (@AmbJohnBolton) June 9, 2018

It is a safe bet that none of the six other leaders (plus Donald Tusk, the President of the European Council who was also there) saw it coming. Least of all, Justin Trudeau, the Canadian Prime Minister and host of the meeting. His news conference contained nothing he hadn’t already said before, and here is the section that angered Trump:

Not a single “false statement”, merely the observation that Canada needs to move forward with applying retaliatory measures “equivalent to the tariffs America unjustly applied” to it. I have sadness in my heart when I see what Trump is doing, not just to Trudeau, but to the world as we know it.

Update (11 June): Once in Singapore, Trump must have realized the extent of the damage done because he went to work on Twitter, four tweets to justify his position vis-à-vis America’s allies, leading to his conclusive one. No suprise there, it’s MAGA all over:

Sorry, we cannot let our friends, or enemies, take advantage of us on Trade anymore. We must put the American worker first!

— Donald J. Trump (@realDonaldTrump) June 11, 2018

Putting his three preceding tweets together, this is the statement Trump made to defend himself against his G-7 fellow members:

“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 & Taxpayers have such a big and unfair price to pay? Not fair to the PEOPLE of America! $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-should pay much more for Military!

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!”

Yes, change is coming, but not the good kind. A trade war won’t help American workers: Overtime, as rising trade barriers impact the global economy, they’ll find everything is more expensive and they’ll lose their jobs. And so will everyone else. The country that will be blamed for a world-wide recession will be Trump’s America.

Unless something else happens, with China rising, a possibility explored below.

 G7: An Uncertain Future

One needs to remember that the post-World War II order was built by America in the lead. This was the case for every institution from the United Nations to the World Bank and the International Monetary Fund and of course, the G7. And it is why you see people like Christine Lagarde, the head of the IMF, attending the G7.

What Trump did is stunning, and it is stunning precisely because it wasn’t done by another G7 member, it was done by the President of the United States. It’s like the architect who built the house deciding to take a wrecking ball to it and bash it down until there’s nothing left but rubble.

The world moves on to focus on the Trump-Kim Jong Un meeting. But the damage is done. Out of the rubble, the new world coming up won’t be built by Trump. China is already busy working on it. Last year, at the World Economic Forum, China promised to lead on free trade. Now, a meeting of the Shanghai Cooperation Organization (SCO) including Russia, took place at the same time as the G7. This is no coincidence. And China is hailing the entrance of India and Pakistan in the bloc.

Putin dismissed the G7 meeting as “creative babble” and gleefully noted that the countries that are part of the Shanghai Cooperation Organization are larger than the G7.

It is probable that Europe will also gear up, prodded by Trump’s policies. Germany is not likely to take kindly to a tariff war on its car industry. Expect some real changes at the upcoming European Council meeting at the end of June. And perhaps an opening of the EU to Russia – after all, the newcomer in the EU, Italy’s Prime Minister Giuseppe Conte is interested in seeing the sanctions on Russia eventually lifted and he was the only one at the G7 who supported Trump’s idea of a G8.

The next G7 meeting is to take place in France, in Biarritz at the end of summer. France’s reaction to Trump was swift: “International cooperation cannot be dictated by fits of anger and throwaway remarks,” President Emmanuel Macron’s office said in a statement to AFP.

Next year, who knows, the G7 could become the G6+1, where the one is not necessarily the US. It could be Russia.

And why not a G6+2, with Russia and China, and America left out? With Trump acting like the proverbial bull in the china shop, this could happen. Or looking further into the future, why not a “partnership agreement” between the European Union and the SCO?

But there is another aspect that cannot be ignored: Trump is setting a precedent for breaking up agreements after he has signed on. He seems to think he is free to break his word and that nobody will mind because he is the biggest, most powerful man on earth.

This is likely to make Kim Jong Un think twice: Clearly, any agreement the two men come to on June 12 can be reversed by Trump on a whim.

Good luck with that, Mr. Trump.

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Editors Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com 

Featured Image: President Donald Trump with German Chancellor Angela Merkel and IMF head, Christine Lagarde in the back. Photo credit: Reuters – Yves Herman