G-7 Leaders Should Use the Summit To Talk Walk Back Trump on Trade
Judging by last year’s summit in Quebec, during which President Trump left early and didn’t endorse the joint communique, this weekend’s 45th G-7 meeting of the seven major industrialized economies may very well turn into a circus. And if so, the elephant in the room is likely to be President Donald Trump’s trade policy.
The President’s imposition of tariffs on Chinese goods and his constant threats to take further action have been hammering global markets. Further exacerbating matters, Trump suggested at a recent campaign rally that the European Union could soon be in the crosshairs for additional tariffs.
So while storm clouds are looming as Trump and other G-7 leaders meet in Biarritz, France, there’s also a silver lining. These leaders have a golden opportunity, in person, to collectively convince the President to dial back his protectionist tendencies and to avoid an escalation of the trade war. And that result is not out of the question. Despite his flair for the dramatic, the President has shown restraint when presented with the right arguments.
Last summer, for example, in advance of what was expected to be a contentious meeting with EU Commission President Jean-Claude Juncker, Trump took to Twitter to warn the EU to stand down on tariffs, barriers, and subsidies or risk a trade war. But after a day of discussions, the two men emerged with a handshake agreement to resolve certain trade issues and work towards zero tariffs.
In the last few months, Trump has also seen how progress on trade can buoy the stock market, an indicator that he often relies upon to demonstrate the success of his economic policies. After the US reached an agreement on tariffs with Mexico in June, stocks rose and the Dow snapped a six-week slide. The same thing happened last week, after Trump’s decision to delay a 10 percent tax on some Chinese goods until December 15.
The explanation for the China decision may even be a watershed moment, as it marked the first time that the President recognized that tariffs on China could hurt consumers. “We’re doing this for Christmas season,” he explained, “just in case some of the tariffs would have an impact on US customers.”
News accounts from across the country and economic studies have reinforced the harmful effects of the current set of tariffs along with any new increases. Earlier this week, JP Morgan estimated that tariffs on China will cost American families $1,000 per year, an increase from the $600 cost of the first two rounds of China tariffs. In March of this year, academics from Yale, UCLA, Berkeley, and Columbia estimated that the trade war has resulted in $69 billion of annual costs on American consumers and producers. And this amount doesn’t even include the latest round of tariff threats from the Administration.
At the same time that the President is confronted with the negative impacts of a trade war, he should also be reminded of the helpful benefits of free trade, both for the US and our allies. One good example is the export of US liquefied natural gas. In 2018, the US exported a record amount of natural gas, marking the second year in a row that the US was a net exporter. With free and open trade of natural gas, the US has been able to take full advantage of its domestic natural gas boom (the US leads Russia as the world’s top natural gas producer) to expand lucrative new markets in Japan, South Korea, Chile, and the UK.
The global economy is showing a number of warning lights, and G-7 leaders will be looking for ways to extend and expand the economic recovery. In those conversations, trade policy is likely to be the elephant in the room. President Trump, despite his propensity for verbal and Twitter fireworks, has shown that he can be reasonable on trade, especially as he looks toward his 2020 reelection campaign. So let’s hope for a productive and drama-free summit.
