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Trump moves to ease tensions over China, Iran as G7 summit wraps up

Jeff Mason and Richard Lough

* Agreement on helping fight Amazon fires appears at hand

* China and U.S. dial down trade tensions

* Trump opens door to diplomacy with Iran

* Deal hammered out to end row with France on digital tax

BIARRITZ, France, Aug 26 (Reuters) - U.S. President Donald Trump on Monday offered an olive branch to China after days of intense feuding over trade and opened the door to diplomacy on Iran, easing tension on the last day of a strained G7 summit.

The leaders of the world's major industrialised nations, meeting in the French coastal resort of Biarritz, look set to reach an agreement on how to help fight the Amazon forest fires and try to repair the devastation.

While they are not expected to leave with a more comprehensive set of agreements or even a joint communique, Trump and his Western allies appear to have agreed amicably to disagree on issues dividing them.

These ranged from Washington's escalating trade war with China, which many fear could tip the slowing world economy into recession; how to deal with the nuclear ambitions of both Iran and North Korea; and the question of whether Russian President Vladimir Putin should be readmitted to the group.

Trump, a turbulent presence at last year's G7 gathering, insisted during the Biarritz meeting that he was getting along well with other leaders of a group that also comprises Britain, Canada, France, Germany, Italy and Japan.

The trade war between the United States and China, the world's two largest economies, escalated on Friday as both sides levelled more tariffs on each other's exports, sending more shockwaves through financial markets.

Speaking on the sidelines of the G7 summit on Monday, Trump said he believed China wanted to make a trade deal after it contacted U.S. trade officials overnight to say it wanted to return to the negotiating table.

China's lead negotiator in the U.S. trade talks said earlier on Monday Beijing was willing to resolve its trade dispute with the United States through "calm negotiations" and resolutely opposed the escalation of the conflict.

Trump hailed Chinese President Xi Jinping as a great leader and said the prospect of talks was a very positive development.

"He understands, and it's going to be great for China, it's going to be great for the U.S., it's going to be great for the world," he said.

"LET THEM BE RICH"

Trump also backed away from confrontation over Iran on Monday, a day after French President Emmanuel Macron stunned other leaders by inviting Iran's foreign minister to Biarritz for talks on the stand-off between Washington and Tehran.

Trump told journalists that they had been wrong to report that he was blindsided by the five-hour visit of Mohammad Javad Zarif to the summit's sidelines, and said that while he thought it was too soon for a meeting he had no objections to it.

European leaders have struggled to calm a deepening confrontation between Iran and the United States since Trump pulled his country out of Iran's internationally brokered 2015 nuclear deal last year and reimposed sanctions on the Iranian economy.

Macron has led efforts to defuse tensions, fearing a collapse of the nuclear deal could set the Middle East ablaze.

Trump indicated an openness to discussions with Iran on a nuclear deal and said he was not looking for regime change.

"I'm looking at a really good Iran, really strong, we're not looking for regime change," he said. "And we're looking to make Iran rich again, let them be rich, let them do well."

Trump and Macron met over a long lunch on the first day of the summit and, as they gathered with other leaders on Monday for further talks, they greeted each other warmly and smiled.

DIGITAL TAX

Taking more heat out of the annual meeting, French and U.S. negotiators meeting behind the scenes reached a compromise agreement on France's digital tax, a levy that had prompted Trump to threaten a separate tax on French wine imports.

The row had threatened to open up a new front in the trade spat between Washington and the EU as economic relations between the two appeared to sour.

France's 3% levy applies to revenue from digital services earned by firms with more than 25 million euros in French revenue and 750 million euros ($830 million) worldwide.

U.S. officials complain it unfairly targets U.S. companies like Facebook, Google and Amazon. They are currently able to book profits in low-tax countries such as Ireland and Luxembourg, no matter where the revenue originates.

A source close to the negotiations said the deal envisaged that France would repay to companies the difference between a French tax and a planned mechanism being drawn up by the OECD.

The G7 leaders were due to discuss climate change in one of their final sessions on Monday and were expected to consider a deal on technical and financial help for the Amazon.

A record number of fires are ravaging the rainforest, many of them in Brazil, drawing international concern because of the Amazons importance to the global environment.

Macron shunted the blazes fires to the top of the summit agenda after declaring them a global emergency. Last week he accused Brazilian President Jair Bolsonaro's government of not doing enough to protect the area and of lying about its environmental commitments.

(Reporting by Richard Lough, John Irish, Crispian Balmer, Marine Pennetier, John Chalmers, Jeff Mason, William James, Andreas Rinke and Michel Rose Writing by John Chalmers; Editing by Alison Williams)