At the G7, the trade war will be everywhere but on the agenda

As world leaders gather in the Canadian Rockies over the coming days, discussion of the U.S. trade war that has shaken the global economy will be everywhere – except on the official agenda.

The G7 meeting, which runs from Sunday to Tuesday in Kananaskis, Alta., is happening against the backdrop of massive upheaval in international trade caused by U.S. President Donald Trump’s combative tariffs.

Experts don’t expect the group meetings, which form the core of every G7 program, to focus much on the trade disputes Mr. Trump has with every other leader around the table. Canadian officials have already indicated there likely won’t be a joint communiqué at the end of the meeting, perhaps to avoid exposing discord and antagonizing the U.S. President.

Instead, the real action will take place on the sidelines of the summit, where the leaders of Canada, Britain, France, Germany, Italy, Japan and the European Union will be able to press their cases one-on-one with Mr. Trump, and discuss new economic arrangements with one another as the world order shifts around them.

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“The U.S. has shown a clear preference for holding bilateral discussions, and it seems very hostile to attempts by other countries to band together or have some kind of collective agreement,” said Nicolas Lamp, an associate law professor and director of the trade policy institute at Queen’s University.

“They’re trying to play other countries off each other. And some kind of multilateral solution, even among the G7 countries, just doesn’t fit into that.”

The summit arrives at a crucial moment in the global trade conflict Mr. Trump touched off earlier this year.

The deadline for the three-month pause on the “reciprocal tariffs” the President announced in April is approaching fast. That means the European Union and Japan are staring down the barrel at 20-per-cent and 24-per-cent across-the-board U.S. tariffs if they can’t strike deals in the coming weeks. (Britain reached a handshake agreement with the U.S. in May that offered some sector-specific tariff concessions but left a baseline 10-per-cent tariff in place).

Canada avoided Mr. Trump’s reciprocal tariffs and the baseline 10-per-cent tariff. But it is still being squeezed by levies on steel, aluminum, automobiles and other goods that don’t meet the continental free-trade agreement’s rules of origin. And the U.S. has continued to ratchet up the pressure, doubling tariffs on steel and aluminum to 50 per cent last week.

Prime Minister Mark Carney has been in discussion with Mr. Trump over the past month about some kind of trade and security agreement, which would presumably lower some U.S. tariffs on Canadian goods. In recent weeks, he’s made a series of announcements – including a major increase in military spending – that appear aimed at greasing the wheels of a deal with the U.S.

Whether this culminates in a big Canada-U.S. announcement in Kananaskis remains to be seen. Experts aren’t holding their breath.

“There’s still strong interest in rebalancing trade relationships, and there’s a lot of countries that the U.S. government is working with to do that. So it’s an opportunity to engage in conversations about the progress of those talks and expectations,” said Everett Eissenstat, a former U.S. trade official who was Mr. Trump’s sherpa for the 2018 G7 meeting in Charlevoix, Que.

“But typically big announcements, even bilateral announcements, I wouldn’t expect to be made at the G7. Although it wouldn’t be unheard of,” said Mr. Eissenstat, who is now a partner at the law firm Squire Patton Boggs.

With all eyes on the sideline talks, the main G7 event is expected to be a watered-down affair. Canada, which gets to set the agenda as host, has outlined several priorities for the meeting, which include discussions about security, critical-mineral supply chains, artificial intelligence and private-sector investment in infrastructure.

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Trade and tariffs aren’t on the menu, although it’s hard to believe they won’t come up, said Senator Peter Boehm, who served as Canada’s G7 sherpa for the 2018 meeting in Charlevoix.

Canada’s main goal seems to be to avoid a repeat of Charlevoix, when Mr. Trump left early without signing the communiqué and lambasted his host, then-prime minister Justin Trudeau, as “very dishonest and weak” on the way out.

“In terms of a communiqué, I don’t think there’s going to be one,” Mr. Boehm said. “I don’t think it’s wise to try to negotiate one, having negotiated one the last time myself with my team. … Because if you’re not going to get consensus on some key points, then why go down to the lowest common denominator in terms of what you’re going to have.”

There could still be declarations on specific topics, such as support for Ukraine and improving supply chains for critical minerals. The latter has become increasingly important as China has sought to restrict the export of rare earths, which are essential inputs for many advanced technologies, as part of its trade conflict with the United States.

“One of the big differences between the first administration and this one, is there’s more of an understanding among world leaders that trying to convince the President that the multilateral system is good, that international integration is positive for the United States, [isn’t going to work],” said Mr. Eissenstat, the former U.S. trade official. “I think there’s a recognition that those conversations have been had and they need to be different types of conversations.”

Alongside the G7 leaders, Canada has invited Ukrainian President Volodymyr Zelensky, Indian Prime Minister Narendra Modi, South African President Cyril Ramaphosa, Brazilian President Luiz Inácio Lula da Silva and Mexican President Claudia Sheinbaum.

Ms. Sheinbaum’s presence is particularly important for Canada, given that Mexico and Canada are partners in the United-States-Mexico-Canada Agreement, the continental free-trade pact, and both countries will need to engage with the U.S. when the USMCA comes up for renewal. That review is currently scheduled for the middle of next year.

“The best outcome in my view of a trilateral meeting [between Mr. Carney, Mr. Trump and Ms. Sheinbaum] at the G7 is not that Trump is going to announce lower tariffs. He’s not going to do that,” said Christopher Hernandez-Roy, a senior fellow and deputy director of the Americas Program at the Center for Strategic and International Studies in Washington.

“But what may happen, and this would be progress, is that the three leaders commit to the USMCA renegotiations to begin by a certain date, and a date much earlier than the July mandated review of next year.”

That kind of announcement would be a major win, said Goldy Hyder, president and CEO of Business Council of Canada, which lobbied the Canadian government to invite Ms. Sheinbaum.

“It’s a rare opportunity where the three North American leaders can have a little sidebar, find a picnic table in the fresh air of Kananaskis, and maybe it will help them see clearly how important it is that the three countries work together to compete with the rest of the world,” Mr. Hyder said.

For most leaders, their key conversation at the summit will be with Mr. Trump. That said, other bilateral meetings will be important as well. It’s the first major summit for several newly elected leaders, including Shigeru Ishiba of Japan and Friedrich Merz of Germany – not to mention Mr. Carney – all who will be looking to make connections with their counterparts around the world.

There’s also the sense that new economic and security arrangements between the world’s wealthy democracies may be in the offing as the U.S. pulls back from its engagement with multilateral institutions and works to undermine the liberal trading order.

That could involve expanding membership in regional trade agreements, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or signing new bilateral deals, such as a new Canada-Britain free-trade agreement, said Clifford Sosnow, chair of the International Trade and Investment Group at the law firm Fasken.

“You’re starting to see a greater commitment to those kinds of bilateral and multilateral agreements, recognizing that the U.S. just may no longer be part of that deep multilateral arrangement that has existed since the Second World War, and around which we had all these bilateral agreements. Now all these bilateral agreements are going to start coming to the fore and becoming a priority,” Mr. Sosnow said.

But before the G7 leaders can get to reimagining the architecture of global economic governance, they first need to survive the next few days without a major blow-up.

“It’s kind of like a dysfunctional family getting together for Thanksgiving or Christmas,” Mr. Sosnow said. “Will people be nice?”