Trade Tensions Take Center Stage at G7 Summit

Trump refuses to back off from tariffs and says US will no longer be world's 'piggy bank'
June 10, 2018 Updated: June 10, 2018

QUEBEC CITY—As President Donald Trump seeks to reform decades-old trade practices that have put the United States at a disadvantage, the U.S. partners in the G7 have resisted changes to the status quo. As a result, at least temporarily,  a kind of cold war has broken out between the United States and its allies.

The Group of Seven (G7) summit that took place in Charlevoix, Quebec, ended on June 9, with a further escalation of tensions over trade, as a press conference held by the host, Canadian Prime Minister Justin Trudeau, evoked a strong response from Trump.

A week before the summit, Trump imposed tariffs on steel and aluminum imported from Canada, Mexico, and the European Union.

Trudeau called Trump’s tariffs “illegal and unacceptable” and said that Canada would impose equivalent counter-measures, effective July 1.

“As Canadians, we are polite, we’re reasonable, but also we will not be pushed around,” the prime minister said.

Trump was quick to slam Trudeau from aboard Air Force One as he headed to his summit with North Korean dictator Kim Jong Un in Singapore and instructed U.S. officials to pull out from the communiqué signed by the other G7 members.

“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,’” Trump wrote on Twitter.

“Very dishonest & weak. Our Tariffs are in response to his 270 percent on dairy!” he continued.

Under the North American Free Trade Agreement (NAFTA) signed by Canada, the United States, and Mexico, tariffs on nearly all products were eliminated progressively by January 2008.

However, Canada still maintains high tariffs on dairy, poultry, and egg products, according to a report by the Office of the U.S. Trade Representative (USTR). The report states that Canada’s regulations have an adverse impact on U.S. dairy product exports.

In addition, Canada’s existing supply-management systems that regulate its dairy, chicken, turkey, and egg industries impose tariff-rate quotas for imports. And this limits the ability of U.S. producers to raise exports to Canada above the quota levels. Under the current system, U.S. imports exceeding quota levels are subject to excessively high tariffs, such as 245 percent for cheese and 298 percent for butter.

There are some other barriers as well, including restrictions on U.S. grain exports, states the USTR report.

The U.S. goods trade deficit with Canada increased 60 percent in 2017, reaching $17.5 billion.

“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!” Trump wrote in a Tweet while on the way to Singapore.

Trade Barriers on American Goods

Leaders of the world’s major industrialized democracies met in Canada at a time of heightened tension over trade between the United States and other G7 members. In retaliation for Trump’s tariffs, Canada and the EU have threatened to slap tariffs on American exports.

By getting tough on duties, Trump has created a bargaining chip to force other countries to lower their tariffs and trade barriers to American goods.

At the summit in Canada, the president proposed a deal to erase all tariffs, trade barriers, and export subsidies between the G7 countries, which include the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom.

“You go tariff-free, you go barrier-free, you go subsidy-free. That’s the way you learn at the Wharton School of Finance,” Trump said during a press conference in La Malbaie, Quebec.

Trump had bilateral meetings on the first day of the summit with Trudeau and French President Emmanuel Macron.

He said that the talks on trade were not contentious, but the language was strong.

“The United States has been taken advantage of for decades and decades, and we can’t do that anymore,” Trump said.

“We’re like the piggy bank that everybody’s robbing,” Trump complained. “And I don’t blame other leaders for that. I blame our past leaders.”

U.S. tariffs remain among the lowest in the world, the product of bipartisan policies that have advocated for progressively freer trade since World War II.

The U.S. goods trade deficit with the EU was $151.4 billion in 2017, according to the USTR report.

U.S. exporters and investors face significant barriers to entering or expanding their businesses in certain sectors of the EU market.

The average agricultural tariff is 10.9 percent, for example. The EU also imposes a high levy for some nonagricultural goods such as autos. The EU applies a 10 percent duty on passenger vehicles while the United States imposes a maximum 2.5 percent duty.

This trade imbalance would change, Trump said. “They have no choice. If it’s not going to change, we’re not going to trade with them.”

“There’s no reason that we should have a big trade deficits with virtually every country in the world,” Trump said. “It’s the fault of the people that preceded me.”

Both trade deficits and North Korea issues should have been fixed decades ago by former presidents, he added.

‘Stab in the Back’

Senior White House advisers excoriated Trudeau on June 10 over his announcement of retaliatory tariffs against the United States.

White House National Trade Council Director Peter Navarro and National Economic Council Director Larry Kudlow both likened Trudeau’s move to a stab in the back.

“There’s a special place in hell 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,” Navarro told Fox News on June 10. “And that’s what bad faith Justin Trudeau did with that stunt press conference. That’s what weak, dishonest Justin Trudeau did.”

Kudlow described Trudeau’s move as betrayal, especially considering the crucial timing leading up to the summit with North Korea, a time when the United States leader needs to project maximum strength.

“POTUS is not going to let a Canadian prime minister push him around on the eve of this,” Kudlow told CNN on June 10. “Hе is not going to permit any show of weakness on the trip to negotiate with North Korea.”

“[Trudeau] did a great disservice to the whole G7,” he added.

Kudlow noted that Trudeau’s statement about American tariffs was not factual, since Canada has its own set of tariffs on U.S. goods, including a 270 percent tariff on American milk.

Trudeau’s July 1 tariffs total $13 billion worth of American goods, including items like orange juice, lawn mowers, and whiskey. The items were selected because they could be substituted with Canadian-made goods or those imported from other countries.

At the G7 summit, Trump told Trudeau that it would be a mistake to go ahead with the tariffs. Kudlow described Trudeau’s move as much more than a misstep on trade.

“And I’ll tell you this, to my friends in Canada, that was one of the worst political miscalculations of a Canadian leader in modern Canadian history,” Navarro said. “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.

“And what did Trudeau do as soon as the plane took off from Canadian airspace? Trudeau stuck our president in the back. That will not stand.”

Epoch Times reporter Ivan Pentchoukov contributed to this report.

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