Arriving in Mediterranean costal port of Biaritz, Framce for the G7 summit, 73-year-old Donald Trump arrived with great uncertainty after yesterday’s tweets increasing the trade war with China. While no one know for sure the effect of Trump’s trade war on the global economic slowdown, what’s known for sure is the seven largest economies don’t know what to do about. Trump insists that China continues to take advantage of the U.S., especially on pirating intellectual property, not to mention slapping U.S. farmers with quotas and tariffs on agricultural imports. Britain, France, Canada, Italy, Japan the U.S. all have economic challenges, offsetting a global slowdown that could turn into a recession without urgent central bank intervention. Central banks in Europe and Japan have slashed interest rates, much the same as the U.S. Federal Reserve Board cut 25 basis points off the federal funds rate July 31.
Fed Chairman Jerome Powell told the annual retreat in Jackson Hole, Wyoming that he would do whatever was needed to keep the “expansion” going. Yet in 2018, Powell hiked the federal funds rate four times, believing that inflation exceeded the Fed’s target of two percent. After a year of rate hikes, U.S. Gross Domestic Product started to slow from 2.9% in 2018 to 2.1% in Q-2 2019. Powell has reason to believe that based on the latest metrics that Q-3 could dip well below 2%, leaving U.S. GDP slowing down, maybe stalling out. Finance ministers for the G7 worry that Trump’s China trade war could shave off at least one-half-percent off Europe and Asia’s GDP. “I am very concerned. The UK is at risk of being implicated in this. This is not the way to proceed,” said newly minted U.K. Prime Minister Boris Johnson, more worried about what will happen Oct. 31 when Britain exits the European Union.
Worries about the U.S.-China trade war are overblown in the U.K., where the real damage to the economy stems from Brexit, where Britain will no longer enjoy the economic benefits of EU membership. No one, including Johnson, knows what will happen Oct. 31, when the U.K. exists the EU, with-or-without an agreement. Johnson’s worry about Trump’s tit-for-tat with Chinese President Xi Jingping pale in comparison to what happens if he can’t get an acceptable Brexit deal with the EU. “I want to see a dialing down of tensions,” Johnson said, signaling to Trump that the U.K. has more on its plate than to worry about Trump’s trade war with China. French President Emanuel Macron practically stood on his head to please Trump, wining-and-dining him at the swanking Hótel du Palais on the Basque Mediterranean coast. G7 leaders have more on the their plate than Trump’s spat with Beijing.
Trump wants France to end its tariffs on California wine, where French wine suppliers pay a premium for Napa wine, while at the same time, openly accept French wine and Champagne in U.S. markets. Trump’s all about “fair” trade with EU and Asian countries, something he believes he’s responsible to correct trade discrepancies. Calling Trump a “very special guest,” Macron did his utmost to make the U.S. president comfortable heading into the weekend talks. “Donald Trump confirmed that he does not see a conflict,” said an unnamed French official, when asked about rising tensions in the Persian Gulf. “We have found major points of convergence,” he added, saying there’s agreement on the Brazilian Rainforest. Wildfires in Brazil threaten to decimate a good portion of the Rainforest responsible for some 20% of the world’s oxygen supply, something frightening EU environmentalists.
Anti-capitalist protesters in Bayonne turned violent when activists tried to breach police barricades, prompting French law enforcement to use water cannons to disperse crowds. Like the Occupy Movement in the U.S., anti-capitalist protesters, largely communists, like to make waves at any G7 or G20 event. “It is important to show that people are mobilized and do not accept the world there are offering us,” said 47-year-old Elise Diest from Bizi, Corfu, Greece. G7 officials want to offer as much help to conservative Brazilian President Jair Bolsonaro, who’s said Brazil lacks the resources to fully contain runaway wildfires in the Amazon Rainforest. Macron has his hands full keeping G7 leaders focused on a constructive agenda, not on getting between Trump’s trade war with China. EU officials want Trump to let Europe handle its own affairs with Tehran.
Looking at the G7 agenda, Macron needs to find common ground dealing with Amazon wildfires, not try to resolve the U.S. foreign policy with Iran and China. Unlike the EU, the U.S. has no vested interest like the EU in cheap Iranian oil. EU’s energy needs lead it to business with Russia and Iran, something not needed in the U.S. All G7 countries can agree that the upcoming Brexit talks with Johnson are critical to the EU and U.K.’s economic health going forward. EU officials so far have offered Johnson nothing more than they offered former British Prime Minister Theresa May. If Britain crashes out of the EU with no-deal Oct. 31, it has far greater economic consequences than the U.S.-China trade war. When Macron opens the summit today, he wants “to convince all our partners that trade tensions are bad for everyone,” appealing to the U.S., EU and U.K. to find common economic ground
