Trump and other leaders clash on trade at G7 summit

Merkel pushes back against renewed Trump criticism of surplus

TAORMINA, Italy, May 27, (RTRS): Leaders from the world’s major industrialised nations began talks on Friday at a G7 summit in Sicily which is expected to expose deep divisions with US President Donald Trump over trade and climate change.

The two-day summit, at a cliff-top hotel overlooking the Mediterranean, began a day after Trump blasted NATO allies for spending too little on defence and described Germany’s trade surplus as “very bad” in a meeting with EU officials in Brussels.

“No doubt, this will be the most challenging G7 summit in years,” Donald Tusk, a former Polish prime minister who chairs summits of European Union leaders, said before the meeting.

White House economic adviser Gary Cohn predicted “robust” discussions on trade and climate.

Trump was elected in November after a campaign in which he rejected many of the tenets that the Group of Seven has stood for, including free trade, multilateralism and the liberal democratic values.

European leaders, including German Chancellor Angela Merkel and new French President Emmanuel Macron, had hoped to use the summit to convince Trump to soften some of his stances.

But diplomats conceded as the talks began that the United States was unlikely to budge, meaning the final communique could be watered down significantly compared to the one the G7 unveiled at its last summit in Japan.

The summit kicked off with a ceremony at an ancient Greek theatre overlooking the sea, where war ships patrolled the sparkling blue waters. Nine fighter jets soared into the sky above Taormina, leaving a trail of smoke in the red-white-green colours of the Italian flag.

The leaders then adjourned to the San Domenico Palace, a one-time Dominican monastery that is now a luxury 5-star hotel. During World War Two, it housed Nazi air force chiefs.

In a private meeting with European Commission President Jean-Claude Juncker, Trump also denounced the German trade surplus as “very bad” and complained about the large number of German cars being sold in the United States, officials said.

Summit

Juncker tried to play down the comments ahead of the summit. But they underscored ongoing policy divisions between Trump and his partners four months after he took office.

Trump is attending his first major international summit but is not the only G7 newcomer. Macron, Italian Prime Minister Paolo Gentiloni and British Prime Minister Theresa May will also be attending the elite club for the first time.

Chancellor Angela Merkel pushed back on Friday against renewed criticism of Germany’s trade surplus from US President Donald Trump, who told EU officials Germany was “very bad” on trade and suggested it was selling too many cars in the United States.

Merkel told reporters she had explained to Trump during a G7 summit in Sicily that the surplus was due in part to factors out of Germany’s control and had also highlighted the extent of job-creating German direct investment in the United States.

The two agreed to set up a working group that will exchange information on bilateral economic ties, a step German officials said was designed to forestall any punitive measures from Washington based on an incomplete picture of the relationship.

The exchange between the leaders came after German media reported on Friday that Trump had sharply criticised Germany in a private meeting on Thursday with European Commission President Jean-Claude Juncker and European Council President Donald Tusk.

Spiegel reported that Trump had told Juncker and Tusk: “Look at the millions of cars that they are selling in the United States. It’s horrible. We’ll stop it.”

White House economic adviser Gary Cohn confirmed some details from the reports, but played them down. “He said they’re very bad on trade, but he doesn’t have a problem with Germany,” Cohn told reporters in the resort town of Taormina.

Cohn said Trump had pointed out during the meeting with Juncker and Tusk that his father had German roots in order to underscore the message that he had nothing against the German people.

Trump’s spokesman Sean Spicer said Trump had “tremendous respect” for Germany and had only complained about unfair trade practices in the meeting. Earlier, Juncker called the reports “exaggerated”. “The record has to be set straight,” Juncker said. “It’s not true that the president took an aggressive approach when it came to the German trade surplus.”

But the persistent focus on Germany’s surplus has unsettled Merkel’s government.

Peter Navarro, a Trump trade adviser, has repeatedly criticised Germany and suggested it is deliberately pushing down the value of the euro, an argument the Germans reject, noting that the currency’s strength is largely determined by policies of the independent European Central Bank.

The German trade surplus, which reached a record 253 billion euros ($283 billion) in 2016, has also been a source of contention within Europe, with Berlin’s partners encouraging it to do more to promote domestic demand.

The United States had a $64.9 billion trade deficit with Germany in 2016, according to US government data, down from a $74.8 billion deficit the year before.

Trump’s attack on German automakers has raised eyebrows, in part because firms like BMW, Daimler and Volkswagen – like their Japanese and Korean rivals - build many of their cars in the United States.

Together, the three big German automakers employ tens of thousands of people at US factories and dealerships, and operate large vehicle assembly factories in several states that voted for Trump in the 2016 election, including South Carolina, Alabama and Tennessee.