G7 Nations Agree to Address Imbalances 05/23 06:05

   Top finance officials from the world's seven wealthiest democracies set 
aside stark differences on U.S. tariffs after two days of talks and agreed to 
counter global "economic imbalances," a swipe at China's trade practices.

   BANFF, Alberta (AP) -- Top finance officials from the world's seven 
wealthiest democracies set aside stark differences on U.S. tariffs after two 
days of talks and agreed to counter global "economic imbalances," a swipe at 
China's trade practices.

   In a communiqu issued Thursday, the Group of Seven finance ministers and 
central bank governors, meeting in the Canadian Rockies, left out their 
traditional defense of free trade and toned down their references to Russia's 
war in Ukraine, compared with last year. But they did agree that further 
sanctions on Russia could be imposed if the two countries don't reach a 
ceasefire.

   The communiqu said the G7 members would continue to monitor "nonmarket 
policies and practices" which contribute to imbalances in global trade. The 
statement did not mention China but nonmarket policies typically refer to that 
country's export subsidies and currency policies that the Trump administration 
charges gives it an advantage in international trade.

   Treasury Secretary Scott Bessent appears to have succeeded in steering the 
communiqu largely in the direction the Trump administration sought, 
particularly regarding China's trade practices.

   The high-profile gathering of officials from the United States, Canada, 
United Kingdom, Japan, Germany, France, and Italy also appeared to be more 
congenial than an earlier meeting of G7 foreign ministers in March. Yet that 
meeting, also in Canada, occurred as President Donald Trump was in the midst of 
threatening stiff tariffs on Canada and suggesting it could become the 51st 
state.

   Canada is president of this year's G7 and the sessions this week are 
intended to lay the groundwork for a meeting of the heads of state on June 
15-17 in Kananaskis, Canada. The White House said Thursday that Trump will 
attend that gathering.

   "Throughout our G7 presidency, the tone of the discussions has become 
progressively more constructive," Tiff Macklem, governor of the Bank of Canada, 
said at a news conference at the conclusion of the summit.

   Yet that unity appears to have been achieved by jettisoning many items that 
in the past had been agreed to by the G7 countries. In addition to leaving out 
any mention of trade, the communiqu dropped sections on combating climate 
change and cooperating on international tax policy, issues the Trump 
administration has dismissed.

   "There will always be tension around tariffs," said Francois-Philippe 
Champagne, Canada's finance minister. "But there are also places where you find 
common ground. ... This year our focus was to return to the G7 core mission, 
restoring global growth and stability."

   The shift comes as Trump has slapped widespread tariffs on imports, 
including a 10% global duty on all goods, even those from the other G7 allies. 
Trump has also imposed 25% tariffs on steel, aluminum, and cars, and on April 2 
imposed much steeper tariffs on about 60 nations, which he then paused until 
early July.

   Valdis Dombrovskis, European Union Trade Commissioner, said that trade was 
"obviously a difficult topic" during the negotiations. The EU, which 
participates in the G7 but doesn't serve as one of the rotating presidents, 
pushed for stronger language that would have highlighted the economic harms 
from tariffs.

   "The U.S. administration is having a somewhat different view of the 
situation," Dombrovskis told reporters. He added that details about U.S. 
tariffs weren't discussed because the G7 members are negotiating individually 
with the Trump administration about duties.

   On Ukraine, the communiqu condemned "Russia's continued brutal war against 
Ukraine," yet that language was milder than last year's, which referred to 
Russia's "illegal, unjustifiable, and unprovoked full-scale invasion." Trump 
officials in the past have pushed to avoid antagonizing Russia while seeking 
peace talks.

   Champagne, however, called the invasion "illegal" in Thursday's news 
conference.

   Bessent also successfully included an agreement in the statement that "no 
country or entity" that supported Russia's war efforts would be able to profit 
from Ukraine's reconstruction, a restriction that would bar Chinese companies 
from participating.

   Dombrovskis said the EU had proposed to lower the current price cap on 
Russian oil -- previously agreed to as part of early sanctions slapped on 
Russia in the wake of its 2022 invasion -- to $50, from $60, but the communiqu 
says little about specific measures.

   Still, the EU was largely satisfied with the G7's agreements on Ukraine, 
Dombrovskis said, including the willingness to impose more sanctions. The group 
also agreed to continue freezing Russia's financial assets until they can be 
used to help pay for Ukraine's reconstruction.

   Mark Sobel, a former top Treasury Department official and senior adviser to 
the Center for Strategic and International Studies, criticized the communiqu 
as "feeble."

   The statement "closes its eyes to the elephants in the room -- the word 
'tariffs' or a reference to destructive U.S. trade policies are nowhere to be 
found," Sobel said.

   "On Ukraine, the G7 will 'explore options' if a ceasefire isn't reached when 
the time for action is now," he added. "This risible communiqu cannot hide the 
fissures in the G7 and hardly bodes well for the larger fractures looming for 
the upcoming G7 leaders' summit."

   Still, John Kirton, a political scientist at the University of Toronto and 
director of the G7 Research Group, said it was a positive sign that a 
communiqu had even been issued. "That was in considerable doubt to the very 
end," he said.

   Yet both Sobel and Kirton noted there was no reference to U.S. budget 
deficits and their role in the "global imbalances" the ministers seek to 
combat. The federal budget deficit, by contributing to higher U.S. demand, 
worsens the U.S. trade deficit that the Trump administration seeks to reduce.

   The communiqu said that "economic policy uncertainty has declined from its 
peak," a view that Kirton said was "puzzling," given that the U.S. Congress is 
considering a tax and spending package that has unnerved financial markets this 
week, pushing up the interest rate on U.S. Treasury securities.

   "There's great uncertainty out there in financial markets," Kirton said. 
"The dollar is going down, and we don't know when that will end."

   Bessent held several bilateral meetings on the sidelines of the G7, 
including with Champagne and Japan's Finance Minister Katsunobu Kato.

   Bessent and Kato discussed trade and currencies, the Treasury Department 
said, with both sides agreeing that "exchange rates should be 
market-determined." The U.S. has often criticized Japan in the past for 
intervening in currency markets to lower the yen's value.

   Yet the two sides "did not discuss foreign exchange levels," Treasury said, 
a sign the U.S. isn't pressuring Japan about the yen's current value.