Trump’s tariffs will test unity among allies at G7 finance ministers’ summit

BANFF, Canada – Key financial officials from the wealthiest countries in the world are coming together at a mountain resort in Canada this week for what might be a tense meeting following President Donald Trump’s extensive tariffs. The annual gatherings of the Group of 7 finance ministers, known as the G7, have typically been friendly and in the past have resulted in joint commitments to tackle inflation and address the COVID pandemic. However, this year there may be less consensus due to Trump’s tariffs, which could hamper growth in many of the attending nations, including the host country Canada, which Trump has even suggested should become the 51st state of the U.S.

Eswar Prasad, an economist at Cornell University and former top official at the International Monetary Fund, commented, “I anticipate that discussions among G7 officials will be somewhat strained. This is a challenging period for the relationships among the G7 countries.” While the Trump administration has secured an initial trade agreement with one G7 member, the United Kingdom, discussions are ongoing with Japan and the European Union. Canada still faces 25% tariffs on many exports to the U.S., including automobiles, while France, Germany, and Italy, the other three G7 members, encounter a 10% baseline tariff on their exports as part of the EU.

The upcoming G7 meeting will be the first formal one attended by U.S. Treasury Secretary Scott Bessent and will also be joined by Federal Reserve Chair Jerome Powell and central bank governors from the other G7 nations. Francois-Philippe Champagne, Canada’s finance minister, stated, “Our colleagues are clear that a free, fair, and rules-based multilateral trading system is one where we all benefit.”

While many finance ministers gathered in Banff this week may aim for individual meetings with Bessent, it is unlikely that any trade agreements will be reached, according to an insider familiar with the meeting preparations. The finance officials are expected to work towards smoothing the path for potential agreements before the G7 heads of state meeting in June in nearby Kananaskis, Canada. Prasad remarked that Bessent might bring a more conciliatory tone to the discussions as he is viewed as a moderating influence on tariffs within the Trump administration.

Discussions at the meeting are expected to include the U.S. administration’s aim to address what it considers “global imbalances” in world trade, particularly focusing on China’s trade surplus. The status of the U.S. dollar may also be discussed in informal talks, especially after the dollar’s value unexpectedly dropped following Trump’s tariff announcements last month.

At last year’s G7 meeting in Italy, finance officials agreed on a joint statement emphasizing their commitment to a free, fair, and rules-based trading system. It remains uncertain whether a similar statement will be reached this year. Additionally, discussions on imposing new sanctions on Russian oil and possibly lowering the price cap on Russian oil as part of international sanctions may take place during the meetings.

The Trump administration, while advocating for stricter Russian oil sanctions, has not yet approved the new restrictions. Trump recently held talks with Russian President Vladimir Putin and Ukrainian leader Volodymyr Zelensky, signaling forthcoming ceasefire discussions between the two nations. Ukrainian Finance Minister Sergii Marchenko will also participate in the G7 meetings this week, despite Ukraine not being a member.

Daleep Singh, chief global economist at PGIM Fixed Income and a former deputy national security adviser in the Biden administration, highlighted that the issue of Russian oil sanctions will be a critical test of the remaining unity within the G7. Singh commented, “If you’re looking for something to engender a just and lasting peace, oil sanctions are the place to look.”