FRANKFURT (BLOOMBERG) - US Treasury Secretary Steven Mnuchin received an earful from global finance chiefs on Thursday (May 31) after the Trump administration imposed steel and aluminium duties that sparked swift trade responses.
Canadian Finance Minister Bill Morneau acknowledged that trade has taken centre stage at a meeting of finance ministers and central bankers from the G-7 nations in a Canadian ski resort near Vancouver.
On his arrival, German Finance Minister Olaf Scholz said the US levies on imported metals from the European Union, Mexico and Canada are probably illegal.
"The decision by the US government to unilaterally implement tariffs is wrong, and - from my point of view - also illegal," Mr Scholz told reporters ahead of his talk with Mr Mnuchin.
"We have clear rules, which are determined at the international level, and this is a breach of those rules."
Canada and the European Union have said they will take immediate steps to retaliate, with Canada imposing tariffs on US$12.8 billion (S$17.1 billion) of US goods, ranging from steel to whisky and maple syrup. The Trump administration said it is imposing tariffs on national security grounds.
The trade wars are hijacking a summit that was initially seen as an opportunity to tout the successes of the global economic upswing, and severely testing the resiliency of the Western economic alliance represented by the G-7. The IMF projects the world economy will grow this year and next at its fastest pace since 2011.
"I don't want to kid you, we will need to talk about this first and foremost," said Mr Morneau, who is chairing the meetings beginning with a dinner on Thursday in Whistler, British Columbia.
"We think it's absurd that Canada is considered in any way a security risk, so that will be very clearly stated by me," said Mr Morneau, who attended Mr Mnuchin's wedding last year and said he considers the Treasury Secretary a friend.
"I have every expectation that our other allies around the table will express the same sentiment."
Mr Mnuchin held a string of bilaterals in the first few hours after his arrival in Whistler, meeting individually with Japan's Taro Aso, Mr Scholz and Morneau. A Treasury Department readout of the meeting with Mr Aso made no mention of trade coming up in the discussions.
In imposing the tariffs,President Donald Trump invoked a seldom-used section of a 1960s trade law that allows him to erect trade barriers when imports imperil national security. Mr Trump in March imposed 25 per cent duties on imported steel and 10 per cent on aluminium, but he gave temporary reprieve to a handful of allies for further talks to take place.
The security designation has been particularly grating, with Mr Scholz calling the move spurious.
"We'll always be ready to talk about reaching common agreements on trade policy but that's only possible if unilaterally implemented tariffs are lifted," Mr Scholz said.
"In the world we live in, it's right to focus on a rules-based, free trade system. Protective tariffs don't lead to prosperity, for no one."
The finance ministers, along with their central bankers, will kick off the official part of the meetings with dinner on Thursday, and hold talks all day on Friday and in the morning on Saturday. Mr Mnuchin is scheduled to speak to the media on Saturday afternoon after the meeting ends.
Frictions in Whistler this weekend could foreshadow even more high-drama at a G-7 leaders' summit next week in Quebec that Mr Trump will attend.
Things are already getting nasty. At a separate press conference in Ottawa, Prime Minister Justin Trudeau revealed that Mr Trump refused a face-to-face meeting request - through Vice-President Mike Pence as intermediary - unless the Canadians made a key concession in negotiations for a new North American Free Trade Agreement.
Mr Jean-Claude Juncker, head of the European Commission, said in a speech on Thursday that "whenever I'm thinking about Trump, I'm lost".
While trade is front and centre, the G-7 officials will also need to deal with other potential menaces to the global economy, starting with the Italian political crisis.
The days leading up to the meeting have seen the political storm in Italy rekindle memories of the last euro crisis. While the prospects of fresh elections are fading with the formation of a new government - which faces votes of confidence next week - Italy's new populist administration has a program for fiscal expansion that poses a challenge to European rules.
Investors have also been on edge in recent weeks over the prospects of emerging markets - with Argentina and Turkey at the centre of the rout. Argentina is in talks with a the IMF on a credit line or loan that would help the country halt a run on its currency.
The catalyst of much of the recent turmoil has been tightening US monetary policy, and the weekend's meeting is the first official appearance by Federal Reserve Chair Jerome Powell at a G-7 summit. The G-7 central bank officials will meet separately from finance ministers on Friday to discuss, among things, how uncertainty is factoring into monetary policy.
Other themes on the official G-7 agenda are development finance, empowering women, cyber risks to the global financial system, international tax cooperation and the impact of technological change.