Here's What To Expect From This Weekend's "Nightmare" G-7 Summit

Once upon a time, the G-7 summits were showcases for boilerplate platitudes about international cooperation that garnered a baseline level of media cooperation.

That was before the Trump era.

Last year, President Trump sowed discord by feuding with Canadian Prime Minister Justin Trudeau, before repeatedly refusing to sign off on the group's traditional communique. This year, as wildfires raging in the Amazon have inspired an international virtue signaling protest movement demanding that the leaders of some of the world's largest economies do something to contain fires that take place in the Amazon every year, and with the European economy teetering on the edge of recession - oh, and let's not forget Trump's escalating feud with President Xi - the annual summit once again promises to be a weekend-long drama.

The Trump administration’s steel and aluminum tariffs on G-7 allies sowed discord at last year's summit. And already, finance ministers from the non-US countries have issued a criticism of US trade policy in advance of this year's summit, provoked by Trump's threats to slap tariffs on European goods ranging from wine and cheese to cars.

In a precursor of what's likely to come, French police are already moving aggressively to break up a camp of protesters who had gathered in Biarritz to demand the G-7 act to help contain the wildfires in the Amazon.

Washington's decision to pull out of the Paris Climate Accord and the Iran deal will likely factor into the summit, as will Boris Johnson's ongoing efforts to persuade his European colleagues into revising the UK's withdrawal agreement or face a no deal Brexit nightmare. And in an echo of the 1980s and the days of the Plaza Accord, the US dollar is once again strong enough - in fact the trade weighted dollar has never been stronger - to destabilize emerging economies that borrow in dollars (let's not forget BoE Governor Mark Carney's revelatory suggestion from Friday's Jackson Hole conference that the world adopt a non-fiat, Libra-like reserve currency).

Already this week, French President Emmanuel Macron has insisted that France won't allow any revisions to the climate accord, while insisting in a tweet that the developed world act to put out the fires in the Amazon, despite Brazilian President Jair Bolsonaro's insistence that foreign powers not interfere with his country's domestic affairs.

As FT reports, France and other EU nations have threatened not to ratify a major trade deal unless Brazil does more to fight fires in the Amazon, with Macron accusing Bolsonaro of lying about his environmental policies.

In a preview from WSJ, the group of wealthy nations is now divided on "nearly every issue they are set to discuss" during this weekend's summit.

"We’re facing a historic challenge to the world order," Macron, who is hosting the summit in the French seaside resort city of Biarritz, told a group of reporters.

Luckily, we already know how this week's diplomatic fiasco will end: Macron said he would ditch the final communique, since with all the acrimony that has built up within the group arriving at an actual deal would be impossible. And one analyst who spoke with Politico said the gathering would likely become a 'nightmare' for Trump and everyone else involved.

"G-7 summits have turned into a bit of a nightmare for all concerned and chances are this one could be especially terrible," said Richard Gowan, an expert on multilateralism at the International Crisis Group.

During this year's summit, Trump will participate in the five main sessions, focusing on a range of topics from gender inequality to climate change, in addition to several bilateral sessions. One of those will be a sit-down with British Prime Minister Boris Johnson, marking the first face-to-face meeting of the two men since Johnson became PM. Trump will also meet with Japanese PM Shinzo Abe.

Offering the possibility of some relief for markets, Trump might succeed in finalizing, or at least making some progress, on bilateral trade deals with Japan and the UK.

But a string of frustrated tweets threatening more tariffs against Europe is, at this point, equally as likely.