As the G7 summit convenes in the scenic Canadian Rocky Mountains, the primary agenda may shift away from trade politics due to the escalating tensions between Israel and Iran. However, German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen are determined to keep the spotlight on important trade discussions.
Trade talks amidst escalating conflict
On the first day of the summit, trade will be a topic of discussion in one of the four scheduled sessions, as reported by Koen Verhelst, covering the event from Kananaskis. Merz emphasized the urgency of resolving ongoing conflicts, stating, “This time, it will be about a clear perspective for a resolution in the customs dispute.” The talks will also address economic security, supply chains for critical raw materials, and collaboration in emerging technologies.
Von der Leyen shared insights from her recent conversation with former President Donald Trump, describing it as a productive exchange regarding trade negotiations. Although it seems Merz will not have a direct meeting with Trump during the summit, there are still three open time slots for potential high-level discussions.
Samina Sultan, an economist at IW Köln, highlighted the strained relationship between Merz and Trump, noting, “The lack of rapport is detrimental to resolving the trade conflict.” Sultan predicts that a preliminary agreement may emerge by early July, but cautions that achieving a comprehensive trade deal with the U.S. within a month is unlikely and that the base tariff of 10 percent may remain in place.
Impact of global events on oil prices
Meanwhile, the recent escalation in the Middle East has led to a significant rise in oil prices, with WTI increasing by 11.8 percent and Brent by 10.7 percent, surpassing 70 U.S. dollars per barrel. Sultan remarked that, “Typically, oil and gas prices spike temporarily following conflicts, but they often decline as tensions ease.” She added, “However, amidst global uncertainty, any additional conflict poses a risk to economic stability.”
The spiraling violence has already affected oil production. Reports indicate that Israeli airstrikes targeted oil and gas facilities, leading to disruptions in gas production. In response, Iran has launched attacks on Israeli oil company installations, raising concerns regarding supply chain disruptions for German importers of Israeli goods, as noted by Dirk Jandura, president of the Federal Association of Wholesale, Foreign Trade and Services.
Amid these developments, discussions surrounding trade agreements and tariffs are more crucial than ever, as leaders seek to navigate the complexities of international relations and economic pressures. The G7 summit, therefore, emerges as a pivotal moment for global trade dynamics, especially in light of recent geopolitical upheavals.