Allies’ public rebuke of the U.S., retaliatory moves test Trump ahead of G-7 meeting

U.S. Commerce Secretary Wilbur Ross on Sunday arrived at the Diaoyutai State Guesthouse in Beijing to meet with Liu He, China’s economic czar, for trade negotiations as the two countries edged closer to imposing tariffs on one another.
U.S. Commerce Secretary Wilbur Ross on Sunday arrived at the Diaoyutai State Guesthouse in Beijing to meet with Liu He, China’s economic czar, for trade negotiations as the two countries edged closer to imposing tariffs on one another. PHOTO: ANDY WONG/PRESS POOL

The Trump administration showed no sign of backing down from restrictive tariffs in the face of pushback from allies and China over the weekend, isolating the U.S. and complicating the president’s meeting later this week with leaders of Washington’s staunchest partners.

Top finance officials from the Group of Seven leading nations met in Canada, where the non-U.S. members issued a public rebuke of Washington’s new steel and aluminum tariffs. Those six—the host Canada, along with France, Germany, Italy, Japan and the U.K.—adopted a formal statement Saturday expressing their “unanimous concern and disappointment.”

The following day in China, Beijing said it wouldn’t abide by any agreement to buy more U.S. products without assurances that the U.S. wouldn’t go ahead with plans to hit it with tariffs on $50 billion on Chinese imports.

But even with retaliatory moves under way in China as well as in Europe and North America, there was no sign over the weekend that the administration was wary of inching closer to a trade war.

“When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War!” President Donald Trump said in a Twitter message Saturday. “The U.S. has been ripped off by other countries for years on Trade, time to get smart!”

The disputes come just as the Trump administration has its arms full of difficult negotiating tasks. Most immediately, Mr. Trump himself now must face leaders of countries who have termed his policies extreme, unwise and in some cases illegal when he arrives in Quebec for a summit of G-7 heads of state scheduled for Friday and Saturday.

That will be followed by a planned summit with North Korea in Singapore just three days later, on June 12. Mr. Trump also is facing European opposition to his push to rewrite the 2015 Iran nuclear deal, and is planning for a summit with Russian President Vladimir Putin.

Still, the push to impose tariffs is causing the most immediate friction. The White House has said the tariffs imposed last week—25% on steel and 10% on aluminum from Canada, Mexico and the European Union—were designed to address the role steel imports have played in undermining the viability of the U.S. steel industry, without which the country would have difficulty mobilizing for its defense.

The administration has signaled its intent to use a similar security argument to affix tariffs on cars from Germany and Japan, and industrial supplies from China.

In response to the tariffs, the administration absorbed one punch after another. Canadian Prime Minister Justin Trudeau called the U.S. move “frankly insulting and unacceptable” in a televised interview Sunday, while his foreign-affairs minister compared it to pre-Depression U.S. policies.

Global Trade Tensions Intensify

“We know that beggar-thy-neighbor policies don’t work. That was the lesson of the 1920s and the 1930s,” said the minister, Chrystia Freeland, on CNN. “And I really hope people will take some time to reflect on the lessons of history, and not go down that path again.”

Mário Centeno, the Portuguese finance minister who participates at the G-7 by virtue of being president of the Eurogroup, the association of eurozone finance ministers, described the U.S. position within the G-7 in stark terms.

“We can say the U.S. went into the tariff issue alone and they remain alone around the table,” said Mr. Centeno in an interview.

With U.S. lawmakers set to return from a Memorial Day break, many top Republicans such as Sen. Orrin Hatch, chairman of the Senate Finance Committee, are warning the administration to change course. In March, more than 100 congressional Republicans urged Mr. Trump in a letter to avoid tariffs.

The decision to impose tariffs contributed to volatility in global financial markets and led to predictions of potentially adverse economic impacts.

Economists warned that retaliation leading to increased trade barriers on the order of those that existed in the early 1990s could cost thousands of American jobs and even point the U.S. toward recession. Business groups said the number of jobs lost, in the worst case scenario, could climb into the millions.

As the weekend’s dust was settling, Mr. Trump’s top economic adviser, Lawrence Kudlow, played down the eruption. He said tariffs are necessary to close loopholes and “correct several decades of abuse” in global trade, telling Fox News that Mr. Trudeau, in particular, was overreacting to a “family feud.”

“The president has a quiver of tools, and tariffs are part of that quiver,” he told The Wall Street Journal.

The G-7 gathering was held for finance chiefs in advance of the summit of those countries’ top leaders. The G-7, a club of industrialized nations formed around common interests, rarely issues such strong condemnation aimed at one of its members.

More unlikely is the fact that the target of the criticism is the U.S., which has done more than any other country to establish the free-trade principles upon which the global economy functions today.

“I do not ever recall an instance where the U.S. was singled out for rebuke,” said Daniel Price, managing director of Rock Creek Global Advisors, who represented the George W. Bush administration for G-7, G-20 and Asia-Pacific Economic Cooperation summits. “Traditionally, the U.S. has been a driver of G-7 unity, and typically leads efforts to reach consensus. On trade, the U.S. has quite dramatically become a source of discord and division.”

As the source of the consternation, Mr. Trump now must face G-7 leaders in five days’ time. As he does, other countries are adopting a wary stance even if they have so far been spared by Mr. Trump.

“Trump is trying to get rid of bilateral trade deficits,” said former U.S. Trade Representative Carla Hills, a Republican critic of the Trump administration’s trade strategy. “He’s lining up [trade disputes] one by one.”

Ms. Hills said she thinks the administration has taken the wrong strategy on China by fighting first with allies over steel and aluminum, especially given that U.S. complaints about China mirrored those of Washington’s friends.

“It would have been more effective if we joined with six of our closest allies and acted together,” she said. “Instead, we went after our allies and acted unilaterally” on China.

Treasury Secretary Steven Mnuchin, who attended the G-7 finance officials’ meeting, denied the U.S. was left outside the consensus on all matters and insisted Washington is playing a central role. “I don’t think in any way the U.S. is abandoning its leadership in the global economy,” Mr. Mnuchin said.

“These are our most important allies,” Mr. Mnuchin said. “We’ve had longstanding relationships with all these countries that are very important across all different aspects.”

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Bob Davis at bob.davis@wsj.com

COURTESY: WSJ

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