Six of the seven nations part of the G7, have issued a statement expressing their “unanimous concern and disappointment” regarding the tariffs imposed by US President Donald Trump. The statement, addressed to US Treasury Secretary Steven Mnuchin, is a rare show of division among the nations of G7 and could indicate the further isolation of the United States from the international community.
The G7 is a group of advanced economies that came together to promote mutual cooperation and trade. It is also called as Group of Seven and it consists of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States. These countries represent 62% of global net wealth ($280 trillion), 46% of global nominal GDP evaluated at market exchange rates, and 32% of global purchasing-power parity GDP. The genesis of G7 can be traced back to the 1970s, when the concept for a forum for the world's major industrialized countries was floated prior to the 1973 oil crisis.
Protectionism has become a defining theme for world leaders, especially US President Donald Trump. He pulled US out of the Trans-Pacific Partnership, details of which can be found here. He was also a vocal critic of NAFTA while campaigning. He said, “NAFTA is the worst trade deal maybe ever signed anywhere, but certainly ever signed in this country.”
In May 2018, the United States stunned the international community by announcing that it would be imposing tariffs on aluminium and steel imports from Canada, Mexico, and the European Union. The US has levied a 25 percent tariff on steel imports and a 10 percent tariff on aluminium imports from the EU, Canada, and Mexico.
The news was met with condemnation by all the nations that would be affected by it. Canada, which is one of US’s closest allies, spoke harshly against its trade and security partner. Canadian Prime Minister Justin Trudeau said, “Today’s decision belongs entirely to the U.S. administration. That was their choice. The Trump administration simply doesn’t understand its measures will hurt Americans.” France, UK, and the European Union also have condemned the latest development. The European Union has noted that it would be imposing counter measures against the US. This has escalated fears of a trade war between US and some of its closest allies.
Now, six of the seven nations which form the G7, have issued a statement expressing their “unanimous concern and disappointment” regarding the tariffs. The US is the seventh member of the group. French Finance Minister Bruno Le Maire said that Steve Mnuchin remains isolated from his counterparts during the summit. “Unfortunately, we are going to have a G6 plus one with the United States alone against everyone and running the risk of economic destabilisation,” Le Maire told reporters. He added, “Our entire objective is to bring the American authorities back to good sense and reason,” Le Maire said.
“We’re concerned that these actions are actually not conducive to helping our economy, they actually are destructive, and that is consistently held across the six countries that expressed their point of view to Secretary Mnuchin,” Canadian Finance Minister Bill Morneau said at a news conference after the meeting ended in the Canadian mountain resort town of Whistler, British Columbia.
Steve Mnuchin has maintained that the US is well within reason regarding the imposition of tariffs. “I don’t think in any way the U.S. is abandoning its leadership in the global economy, quite the contrary. I think that we’ve had a massive effort on tax reform in the United States which has had an incredible impact on the U.S. economy,” Mnuchin said.
US President Donald Trump himself has weighed in on the situation. During the meeting, President Donald Trump took to his Twitter platform to note that “the United States must, at long last, be treated fairly on Trade. If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!”
Our assessment is that the international community has openly turned hostile towards the US on a number of issues including climate change and trade. The latest development has put the future of NAFTA at risk and could sour US ties to its neighbours and European allies. There is a greater concern – if these nations also impose counter measures, then there remains a chance for a large scale trade war amongst the most developed economies in the world.