OTTAWA (Reuters) – Leaders of the Group of Seven rich nations headed for a summit in Canada on Thursday more divided than at any time in the group’s 42-year history, as U.S. President Donald Trump’s “America First” policies risk causing a global trade war and deep diplomatic schisms.
In a bid to rebuild America’s industry, Trump has imposed hefty tariffs on steel and aluminum imports, including those from key G7 allies like Canada, Japan and the European Union.
He has threatened to use national security laws to do the same for foreign car imports and has walked back on environmental agreements and an international deal to prevent Iran from building a nuclear bomb.
French President Emmanuel Macron, who has invested in a warm personal relationship with Trump, said that the other G7 nations should remain “polite” and productive but warned that “no leader is forever”, a sign that Europe would not surrender meekly to the U.S. president.
Trump will come face-to-face at the gathering in Charlevoix, Quebec, with world leaders whose views do not chime with his on a range of issues from trade to the environment as well as Iran and the construction of a new U.S. embassy in Jerusalem.
Ahead of the summit, Trump signaled that he was in no mood to compromise at a meeting with Japanese Prime Minister Shinzo Abe, who has tried to cultivate a friendly relationship with the American president.
Trump said he would raise the issue of U.S. car imports with Abe at a meeting in Washington.
Abe is not the only world leader to have tried charming Trump and failed to come away with concessions from the U.S. leader. Macron, who appeared to have built a warm relationship, said that the so-called “G6” leaders would not spark a fight at the summit.
“In this environment, above all we always have to stay polite, stay productive and try to convince (them), to keep the United States on board because they are our historical ally and we need them,” Macron told a news conference held with Canadian Prime Minister Justin Trudeau in Ottawa.
The U.S. president also has frosty relations with Trudeau, the summit host. Pleas by the other member countries for exemptions from the U.S. steel and aluminum tariffs, which went into effect on June 1, have fallen on deaf ears in Washington.
The Canadian leader is embroiled in rows with Washington over steel and aluminum and negotiations over the North American Free Trade Agreement where Trump’s negotiators have tried to bulldoze Canadian and Mexican objections to a modified pact.
Macron stressed however that the United States was no longer the sole economic superpower in the world and urged other industrialized countries to stick together.
“We must not fall apart. The six other nations of the G7 represent a market that is larger than the American market,” Macron said.
His plea for unity may fall, even within the European Union. Germany has suggested making accommodations over trade with the United States for fear of triggering a ratcheting up of tensions over cars that would embroil companies like BMW and Mercedes.
Europe faces renewed domestic economic and political challenges in addition to those posed by Trump’s unilateralism.
One source with knowledge of the matter said that Italy wanted to “create as much space as possible to continue the dialogue with the U.S.”, noting that new Italian Prime Minister Guiseppe Conte, a political novice, would be treading carefully in Canada because he “needs to see the dynamics of the group.”
Japan is also expected to take a less confrontational approach than its G7 peers, while still quietly pressing its case on trade.
Abe too has more at stake than tariffs.
Japan fears being left to one side if Trump and North Korean leader Kim Jong Un strike a deal at a summit in Singapore next week.
Japan worries that there will be no resolution of the issue of Japanese citizens abducted by the North and that Trump would only deal with North Korea’s ability to strike the United States, and pay less attention to shorter range missiles that could still target Japan.
Despite the lobbying and pleas, Trump has pressed ahead with tariffs as well as pulling out of the Paris climate accord. Intense diplomacy from Europe to save an international nuclear agreement with Iran also failed.
At the same time as taking on Europe and allies like Japan. Trump has told China, the world’s second largest economy, to cuts its massive trade surplus with the United States. Washington has also threatened tariffs on imports of Chinese goods unless Beijing stops stealing American companies’ intellectual property.
Economically too, Europe may have more to fear if Trump does go for auto tariffs.
Its recovery from the 2008-9 financial crisis has been far slower than that of the United States where the Federal Reserve is on the cusp of another rate rise while the European Central Bank is still using crisis-era measures.
Financial markets around the world were battered by Trump’s trade threats, although they have recovered somewhat, they are still vulnerable and Italy’s new government is also a risk. Trump may have less to fear than slow-growing Europe and Japan from a trade war in terms of economic losses if the “G6” pushes back on tariffs.
“This is unlikely to deter President Trump given the United States’ widening $570 billion trade deficit, particularly if he feels cornered,” said Olivier Desbarres of economic strategy consultancy 4X Global Research.
“This could in turn rattle equity markets and an already under pressure Mexican Peso and stymie any upward trend in the range-bound Canadian Dollar and recovering Euro.”
Reporting by David Ljunggren; Additional reporting to Roberta Rampton in Washington, Giselda Vagnoni in Rome and William Mallard in Tokyo; Writing by David Chance; Editing by Alistair Bell