The US and Canada slipped closer to a diplomatic and trade crisis as US President Donald Trump called Canadian Prime Minister Justin Trudeau “very dishonest and weak.”
The spat drew in Germany and France, whose leaders sharply criticised Mr Trump’s decision to withdraw his support for a Group of Seven communique decided on Saturday, accusing him of destroying trust and acting inconsistently.
Mr Trudeau rejected a US demand for a sunset clause in NAFTA but says he is prepared to compromise on the issue, which is holding up talks to update the trade pact. But Mr Trump insists that Canada and Mexico agree to a sunset clause that would allow a member nation to withdraw after five years.
“There will not be a sunset clause ... we will not, cannot sign a trade deal that expires automatically every five years,” Mr Trudeau told a news conference.
Mr Trudeau says he told Trump the NAFTA talks had been made more complicated by a recent US decision to impose tariffs on steel and aluminium. Canada has promised retaliatory measures on July 1.
“Based on Justin’s false statements at his news conference, and the fact that Canada is charging massive tariffs to our US farmers, workers and companies, I have instructed our US reps not to endorse the communique as we look at tariffs on automobiles flooding the US market,” Mr Trump said on Twitter.
“Prime Minister Justin Trudeau of Canada acted so meek and mild during our G7 meetings only to give a news conference after I left saying that, ‘US Tariffs were kind of insulting’ and he ‘will not be pushed around.’ Very dishonest and weak. Our tariffs are in response to his of 270% on dairy!”
White House economic adviser Larry Kudlow also accused Mr Trudeau of betraying the US with “polarising” statements on trade policy.
“(Trudeau) really kind of stabbed us in the back,” he says.
US trade adviser Peter Navarro says: “There is a special place in hell for any leader that engages in bad faith diplomacy with President Donald Trump and then tries to stab him in the back on the way out the door and that’s what bad-faith Justin Trudeau did with that stunt press conference, that’s what weak dishonest Justin Trudeau did.”
Exports account for 31% of Canada’s GDP, according to the World Bank, about 76% of which go to the US. Meanwhile, some 40% of the oil the US imports comes from Canada but that number is declining.
Mr Trump has landed in Singapore to see whether his bet on North Korea will pay off.
“I am on my way to Singapore where we have a chance to achieve a truly wonderful result for North Korea and the world. It will certainly be an exciting day and I know that Kim Jong-un will work very hard to do something that has rarely been done before ...” Mr Trump said on Twitter yesterday.
The two leaders are yet to agree on how to define denuclearisation of the Korean peninsula – the stated goal of the meeting. The US wants a complete, verifiable and irreversible dismantling of the North Korean nuclear weapons programme. North Korea is possibly seeking a security guarantee – including a peace treaty formally ending the Korean War – and the removal of the American troops from South Korea.
Mr Trump says he expects to know “within the first minute” if Mr Kim is serious about giving up his nuclear weapons. The summit plan is for the two to be alone for that first minute, aside from translators. They will later be joined by top aides including secretary of state Mike Pompeo and national security adviser John Bolton.
Days before the summit, Mr Trump dismissed questions about his readiness, saying, “I don’t think I have to prepare very much. It’s about attitude, it’s about willingness to get things done.”
“I feel that Kim Jong Un wants to do something great for his people,” Trump said at a news conference in Charlevoix, Canada, where he attended a summit of leaders from the Group of Seven nations. “It’s a one-time shot and I think it’s going to work out very well.”
Emerging markets worry
The Wall Street Journal reports that a retreat in emerging-market assets is concerning analysts and could spread to the US and elsewhere, fuelling a cycle of “accelerating risk aversion.”
A selloff in Brazilian stocks and its currency last week fed into a wider retreat from Mexico to South Africa and rattled Italy’s weakened bond market. Many currencies are near multiyear lows, despite a boost from strong commodity prices and solid global growth, while investor allocations to emerging-market-focused bond funds are at their lowest level of the year, according to the Institute of International Finance.
More than $US10 billion has flowed out of mutual and exchange-traded funds that invest in emerging markets debt and equity in the past six weeks, according to Bank of America Merrill Lynch.
More turbulence could be in store this week as the European Central Bank and the Federal Reserve hold their monetary policy meetings. Many expect the Fed to raise interest rates, which would increase pressure on emerging markets and test the ability of some countries to repay dollar-denominated debt.
Compounding this worry, new statistics suggest China’s factory inflation accelerated faster than expected in May as the price of commodities such as crude oil and metals increased.
Its producer price index rose 4.1% from a year earlier, compared with a projected 3.9% increase in a Bloomberg survey of economists and a 3.4% gain in April. The consumer price index climbed 1.8% in May, the statistics bureau said Saturday, matching economists’ forecast and the previous month’s increase.
Swiss vote ‘no’ on reform
A plan to transform Switzerland’s financial landscape by exempting commercial banks from electronically creating money when they lend was rejected by Swiss voters on Sunday.
More than three-quarters of voters rejected the so-called “Sovereign Money” initiative. All of the country’s self-governing cantons also voted against in the poll, which needed a majority from Switzerland’s 26 cantons as well as a simple majority of voters to succeed.
Concerns about the potential risks to the Swiss economy by introducing a “vollgeld” or “real money” system appear to have convinced voters to reject the proposals. The sovereign money initiative would have ended the centuries-old system of fractional reserve banking by allowing only the SNB to create money and requiring checking accounts to be fully backed by assets that are a direct claim on the monetary authority.
The Swiss government, which had opposed the plan because of the uncertainties it would unleash, says it is pleased with the result.
Plebiscites and referendums are a key feature of Switzerland’s political system, with votes on a wide variety of topics taking place several times a year.
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