‘Family quarrel’: U.S. official shrugs off escalating trade dispute with Canada

Steel mill
Steel mill

Donald Trump’s top economic adviser dismissed differences over tariffs as a “family quarrel” Wednesday as reports of a testy phone call between the president and Prime Minister Justin Trudeau roiled Canada-U.S. relations ahead of this week’s G7 summit.

The fallout from Trump’s imposition of steel and aluminum tariffs on his G7 partners, as well as broader disagreements on trade and climate change, was also fuelling the G6-plus-one divide that has the U.S. increasingly offside with its allies.

Trudeau wanted the G7 to be a moment for Canada to shine, but the summit is rapidly turning into an exercise in pure survival: prevent Trump from taking a wrecking ball to the exclusive club of the world’s leading democracies, to say nothing of the country’s most critical trade nexus.

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U.S. senior economic adviser Larry Kudlow played down his country’s trade dispute with Canada, and said he hoped Trump and Trudeau could work through their differences during their face-to-face meeting at the summit, which opens Friday.

“I regard this as much like a family quarrel,” Kudlow told a news conference in Washington, adding that he’s confident the current tariff angst will soon blow over.

“I’m always the optimist, I believe it can be worked out, and I’m always hopeful on that point.”

Kudlow, the director of the U.S. National Economic Council, refused to discuss what CNN first reported was a tense phone call recently between Trump and Trudeau.

According to CNN, when Trudeau pressed Trump to explain how he could use national security as the justification for the tariffs on Canada, the president reportedly replied: “Didn’t you guys burn down the White House?”

Trump was making a reference to the War of 1812, but it was inaccurate: it was British troops that attacked the White House.

Officials in the Prime Minister’s Office would not provide details on the call, other than to say it took place on May 25 – the day Trudeau has said he initially proposed a face-to-face meeting with Trump to try to finalize a new North American Free Trade Agreement.

That plan fell through when the White House insisted that he agree to including a five-year sunset clause in the deal.

One insider would only say there was nothing “tense” about the May 25 call. “Frank, yes,” the official said. “Tense, definitely not.”

Trump has since mused about replacing NAFTA with bilateral trade deals with Canada and Mexico – an idea Trudeau shot down on Wednesday.

“We think that demonstrating the strength of NAFTA as a solid community as we take on the world is very much in all three of our advantages, and we’re going to continue to negotiate that way.”

Kudlow insisted Wednesday the NAFTA talks are still ongoing, but he wouldn’t say whether a deal could be reached this year.

It also wasn’t immediately clear whether Trump was making a joke about with the War of 1812.

But Trump is deadly serious about reforming a global trade system he believes is fundamentally broken, Kudlow said. Tariffs, he added, are simply one more tool in the president’s toolbox when it comes to repairing it.

“We may have tactical disagreements, but he has always said – and I agree – tariffs are a tool in that effort. People should realize how serious he is in that respect.”

Trudeau welcomed French President Emmanuel Macron to his Parliament Hill office ahead of their meeting Thursday, where they are expected to discuss how to handle Trump.

Kudlow said Trump would also have a bilateral meeting with Macron at the G7, a gathering that’s now widely expected to turn into a group effort in decrying the president’s trade tactics to his face and trying to convince him to reverse course.

Canada’s non-American G7 partners don’t envy Trudeau; some are downright sympathetic.

“This upcoming summit won’t be an easy one, and the leadership of the Canadian government is very much counted upon,” Kimihiro Ishikane, Japan’s ambassador to Canada, said in an interview.

When Trudeau won power, the bedrock of his foreign policy was to return Canada to its traditional multilateral leanings – support for institutions created after the Second World War such as the United Nations, NATO, the G7 and the international trading order.

But Trump is no fan of multilateralism – something Kudlow made crystal clear on Wednesday.

“It was a good system … and it lasted for a bunch of decades. But that system has been broken in the last 20 years-plus,” he said.

“International multilateral organizations are not going to determine American policy. I think the president has made that very clear.”

As one European G7 official put it, this is a “terrible time to have the presidency” of the G7.

Trudeau is seen as the best bet to build a bridge between Trump and the rest of the G7 because his government has been able to forge deep links with the U.S. administration and across the various levels of American politics and business, the official said.

For the summit to succeed, and for the G7 to carry on, Trudeau needs to “show off the glue” that binds what are still fundamentally like-minded countries.

That means strong, united statements rebuffing Russian electoral interference, or a commitment to improve the state of the world’s oceans, which is widely seen as a smart Canadian compromise to get Trump to address climate change without specifically referencing it.

Ishikane said Japan’s top priority is to see the projection of “unity” at the G7 this week.

“I think the resilience of liberal democracy or resilience of free market economy is in question.”

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