WHISTLER, British Columbia - The U.S. decision to impose tariffs on aluminium and steel imports from Canada, Mexico and the European Union will add a contentious note to a gathering of G7 finance ministers and central bankers, top policymakers said on Thursday as some warned that the tariffs could imperil global growth.
The escalating trade tensions between the United States and many key allies will dominate the meeting in Canada of financial leaders from the Group of Seven industrialized nations, with U.S. Treasury Secretary Steven Mnuchin the top target for bilateral complaints and lobbying from disgruntled allies.
The United States on Thursday said it was moving ahead to impose tariffs of 25 percent on steel imports and 10 percent on aluminium, starting at midnight (0400 GMT on Friday), ending months of uncertainty about potential exemptions and sending a chill through financial markets.
"There will be some challenging discussions I’m sure," Canadian Finance Minister Bill Morneau told a news conference as top policymakers from the United States, Britain, Germany, France, Italy, Japan and Canada gathered in the alpine village of Whistler, British Columbia.
"We are not saying there won’t be frictions," Morneau said. "We’re not saying we won’t have strong words. We’re not saying we won’t be able to send messages. We need to send messages saying working together is better than working apart.”
Mnuchin, who was not at the introductory discussion panels focused on development and sharing the benefits of global growth, is scheduled to meet individually with many of his global counterparts during the three-day meeting.
Bank of England Governor Mark Carney said the U.S. decision to target trade in goods, not services, is misplaced.
"This focus on goods trade, bilateral goods is not the right focus in a hyperconnected world where most of the economic activity, most people work, most small businesses, most women work in the service sector," Carney told a panel, though he said trade is not the direct responsibility of financial policymakers.
"If we were to liberalize services to the same degree as we have liberalized (trade in) goods, these balances would be cut in half for the United States and for the UK," Carney added.
International Monetary Fund Managing Director Christine Lagarde said if trade is "massively disrupted," the level of public trust in leaders will be severely damaged.
"First of all, those who will suffer most are the poorest, the less privileged people, those who actually rely on imported goods to have their living," she said, adding that longstanding supply chains also would be disrupted.
The U.S. actions on trade policy, which also include potential tariffs and investment restrictions on China and a national security probe that could lead to tariffs on auto imports, are expected to also dominate the G7 summit of world leaders in Quebec next week.