- Uncertainty around the Trump presidency makes trade a difficult topic.
- G-7 finance ministers are seen focusing on topics like currencies and taxes.
The world's most powerful economic officials will gather in Italy this week to discuss matters of international taxation, the safety of the financial system and funding the fight against terrorism. But the thorniest topic of all isn't on the agenda: trade.
America's protectionist turn under President Donald Trump has strained relationships with the countries that make up the Group of Seven, long considered staunch economic allies. Negotiations have grown so delicate that G-7 finance ministers and central bankers will not officially touch the topic during their meeting in the southern Italian port town of Bari. The three-day meeting begins Thursday night. Formal talks will instead be handled by Trump and his counterparts in the G-7 when they convene later this month in Sicily.
"I do think it's a red flag," said Heidi
The decision to shelve the topic comes despite the apparent vote of confidence for the benefits of globalization that came from the election in France last weekend. Political newcomer Emmanuel Macron captured the nation's presidency on a platform that unabashedly embraced the European Union, free
Now, officials on both sides of the debate are treading carefully. Experts say the finance ministers will likely strive to focus on areas of agreement. One early sign of consensus is on currency intervention. A Canadian official said the group expects to maintain language in its final communique emphasizing that exchange-rate volatility can have adverse effects on economic and financial stability. The agreement comes even as the United States kept Japan and Germany on a currency watch list last month and warned for the first time that it would consider adding nations with which America has a large trade deficit.
Some pressure points are still on the agenda, however. The United States has scuffled with European countries in recent years over how much tax they collect from American companies. Just this month, Italy settled with Google for $334 million over back taxes. Airbnb recently began collecting tourist taxes from customers in France after pressure from authorities. And Apple paid Italy about $350 million in back taxes a few years ago and remains locked in a court battle with the EU over a tax bill of more than $13 billion.
Since 2012, advanced economies have been working to coordinate their tax codes to combat companies that take advantage of loopholes in the international system. The United States is one of the only countries that taxes corporate income wherever it is earned. Treasury Secretary Steven Mnuchin has expressed support for moving to a territorial system that only taxes domestic income. The Trump administration has also floated massive structural changes, including broad deregulation and a trillion-dollar package of new government spending on infrastructure.
Exactly how much the White House is able to accomplish could help set the trajectory for growth not just in the United States, but the rest of the world.
"Until they have a good fix on what the United States is going to do ... it's tough for the other G-7 economies to get a sense of what they should do to make the overall package work for all," said John Kirton, co-founder of the G20 Research Group and a research associate at the University of Toronto.
Mnuchin may not be able to completely avoid questions about
"Does 'America First' mean that America in this administration is going to turn really inward?" said Tony Fratto, managing partner at Hamilton Place Strategies. "Or is it beginning to see that it's in America's interest to be leaders in these global cooperation meetings?"