Trump to stick with hard line on trade but unilateralism will face heat at G-7 summit

US President Donald Trump is not backing down from the tough line he has taken on trade, the White House's top economic adviser says, setting the stage for a showdown with top allies at this week's G7 summit in Canada.
US President Donald Trump (left), with his economic adviser Larry Kudlow, speaks during a meeting in the Roosevelt Room at the White House in Washington, DC, on May 11, 2018.
US President Donald Trump (left), with his economic adviser Larry Kudlow, speaks during a meeting in the Roosevelt Room at the White House in Washington, DC, on May 11, 2018. PHOTO: AFP

WASHINGTON - President Donald Trump heads on Friday (June 8) to Quebec, Canada for an annual Group of 7 (G-7) summit which some analysts say looks more like a G-6 plus one, underlining the US’ unilateralism - and thus isolation - as fears mount of a spiralling trade war.

The US sees it differently. President Trump has railed against the US' trade deficits and has placed a range of tariffs on imports from several countries - rivals and allies alike.

“Trump’s trying to fix this broken system," the President’s top economic adviser Mr Larry Kudlow told journalists at the White House on Wednesday. Mr Trump is “probably the strongest trade reformer of the past 20 years,” he said. 

"The World Trade Organisation has become completely ineffectual, and even in the rare moments when it makes decisions, important countries don’t even abide by them,” he added.

“For the last 20-some odd years, we’ve seen a lack of discipline. Tariffs and non-tariff barriers have gone up. The United States has the lowest average tariff in the world. Our tariff rates are much lower than our competitors; his point is we should have a level playing field.”

There are “disagreements” he said. But “The President is at ease with all these tough issues” and would be “sticking to his guns.”

And in answer to a question whether the United States will respect World Trade Organisation (WTO) decisions on disputes Mr Kudlow said “We are bound by the national interests here more than anything else.”

“International multi-lateral organizations are not going to determine American policy.”

The G-7 groups Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. But after collective irritation especially of the US’ European allies with Mr Trump’s withdrawal from the Paris Agreement on climate change, and the Iran nuclear deal, they were “no longer hiding behind pleasantries,” said Ian Bremmer, president of the Eurasia Group.

Canada’s Prime Minister Justin Trudeau, who is hosting the summit in the riverside town of  La Malbaie, a two-hour drive from Quebec City, has slammed Mr Trump’s tariffs on Canadian steel and aluminium, calling the President’s action “insulting” and “totally unacceptable” and responding with retaliatory tariffs.

 
 
 

And President Trump reportedly had a tense phone call with President Emanuelle Macron last week when the French leader criticised his tariffs.

“Trump's America First isn't isolationist, but it is strongly unilateralist, which stands in direct opposition to the US-led multilateral institutions of the post war order,” Mr Bremmer told The Straits Times.

President Trump is trying to rewrite the terms and conditions of the international order specifically with regard to trade, security, and international agreements and organisations, by “leveraging the dollar, market access, and military advantages,” said Dr Inderjeet Parmar professor of professor of international politics at the City, University of London.

President Trump is trying to restructure US trading relations with all major trading partners at one time, but paying no heed to the institutions and diplomatic etiquette that leaders normally use when dealing with their peers, Mr Rod Hunter, a partner at the international law firm Baker McKenzie, told The Straits Times.

“This approach may work in the short term and in limited cases, but it’s not clear it’s a winning strategy over time,” said Mr Hunter, who was senior director for international economics at the White House's National Security Council under President George W. Bush.

“The United States needs allies for a range of issues. Will US allies be willing to be supportive in other contexts - say, dealing with Iran? Moreover, leaders of democratic countries have their own politics. Will their electorates allow them to support Trump initiatives?” he said.

Canadian Prime Minister Trudeau has his own ideas. He wants the G-7 to make a commitment to girls’ education. Women’s rights advocates are urging member countries to spend US$1.3 billion (S$1.7 billion) to close the global education gap between boys and girls. More than 40 environmental groups are urging the G-7 to sign a charter aiming to reduce the use of plastics.

President Trump could drive a hard bargain in return for American support on those issues. But trade tensions risk gridlock.

Mr Kudlow, though, on Wednesday shrugged off tensions with Canada as a “family quarrel.”

“I have no doubt that the United States and Canada will remain firm friends and allies whatever short term disagreements may occur,” he said.

Coming on top of Brexit, a broader weakening of Europe, the rise of China and its creation of new architecture, and Russia’s willingness to undermine the US, under the Trump administration the US-led order has “crumbled more quickly than it otherwise would have,” Mr Bremmer said.

“It will be the most dysfunctional G-7 meeting - by a long margin - since its first in 1975. 

“The Europeans, Japanese, and Canadians all feel like they've been wrong footed by the American President on trade.”