G7 struggle to lighten darkening economic outlook

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A work session in the Casino of Biarritz | Ian Langsdon/AFP via Gety Images

National leaders leave annual summit with few promises for global economy.

BIARRITZ, France — There were none of the customary references to “prosperity,” “economic growth” or “mutually beneficial trade” as leaders of the world’s richest democracies closed out their annual G7 summit on Monday.

And with good reason: They can’t make any promises.

The fragile global economy, rattled by trade wars and protectionism, which seemed on the precipice of a painful downturn as leaders convened their meeting Saturday on the French Basque seacoast, remained just as vulnerable as the delegations packed their bags and headed home.

U.S. President Donald Trump arrived in France after sharply escalating his trade war with China — perhaps the gravest threat to the world economy, as the planet’s two largest markets remain locked in a bitter exchange of punitive tariffs. Even some gentle chiding by U.K. Prime Minister Boris Johnson did nothing to convince Trump to contemplate a truce.

After Trump briefly suggested on Sunday that he had second thoughts about jacking up tariffs again, an aide clarified that the president’s only regret was not raising the levies even higher.

Trump did not escalate previous threats that he had made against the Europeans and he was uncharacteristically friendly to Merkel.

French President Emmanuel Macron, German Chancellor Angela Merkel and other G7 leaders used the summit to make a strong lobbying push, aimed at stopping Trump from further disintegrating global trade flows. But by the end, they only seemed to have patched up a bit of the worst damage done by the self-appointed “tariff man” by persuading him to soften his rhetoric against China, which had seemed to reach maximum bluster when he ordered American companies to shut operations there.

Monday raised a bit of hope for a détente with Beijing, with Trump declaring that the Chinese wanted to continue to negotiate, and he praised the talks he has been engaged in with them in recent months as “very meaningful.”

Trump also did not escalate previous threats that he had made against the Europeans and he was uncharacteristically friendly to Merkel, calling her a “brilliant woman,” while expressing optimism that the EU and U.S. could reach a trade deal “very soon.”

And as a silver lining, the U.S. and France appeared to reach a truce on their digital services tax spat — although Trump refused to publicly renounce his threat to impose punitive tariffs on French wine. In one other small bright spot, Washington agreed a preliminary trade deal with Japan.

No shortage of disagreement

None of those developments were particularly reassuring for advocates of free trade, however. There is no indication that the U.S. and China are in reality any closer to de-escalation, and past months have shown that Trump predictions of an upcoming “deal” with China tend to be short-lived: Sometimes, they only last until his next tweet.

The EU’s trade talks with Washington also remain gridlocked as disagreement persists over Washington’s demand to expand the talks to include agriculture products. Despite the positive chatter at the Merkel-Trump meeting, neither of the leaders suggested any clear escape route from this standoff.

Meanwhile, the U.S.-Japan deal, while encouraging on its surface, on closer inspection contains provisions that are deeply worrying for the EU, which like Japan is under threat for tariffs on automobiles. Trump admitted outright on Monday that his blackmailing strategy of threatening sky-high tariffs on Japanese carmakers had forced Tokyo to make concessions, describing his auto tariffs as “one of the reasons why we did this deal.”

More fundamentally for all of the countries, there was still no progress this weekend on preventing the World Trade Organization and the wider system of global trade rules from falling apart when the WTO’s dispute resolution body effectively becomes inoperable at the end of this year.

The G7’s one-page statement, issued by Macron, noted that “the G7 wishes to overhaul the WTO to improve effectiveness,” but Trump made immediately clear at his closing press conference that he was not satisfied with the scope of proposed reforms.

The text further called on finance ministers “to closely monitor the state of the global economy” — a rather somber statement compared to past declarations expressing shared resolve to spur growth and improve living standards.

France’s President Emmanuel Macron and U.S. President Donald Trump in Biarritz

It was hardly an expression of confidence — in the economy, or in each other. And the declaration’s overall tone suggested that the G7 club is no longer aimed at making sure the rich get richer, and the poor benefit, too. Now, it seems everybody is just trying to stay afloat.

At his closing press conference, Macron sounded more enthusiastic, saying that G7 leaders had agreed “to accelerate with a very realistic agenda … to change the rules of world trade.” But translating those words into a written agreement, let alone into concrete action, will not be an easy task.

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