G-7 leaders need to offer Trump a ‘golden bridge’ of retreat to avert a trade war, chief economist says

Canadian Prime Minister Justin Trudeau, German Chancellor Angela Merkel, U.S. President Donald Trump, Italian Prime Minister Paolo Gentiloni and French President Emmanuel Macron prepare to depart after posing for the group photo at the G7 Taormina summit on the island of Sicily on May 26, 2017 in Taormina, Italy.

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Canadian Prime Minister Justin Trudeau, German Chancellor Angela Merkel, U.S. President Donald Trump, Italian Prime Minister Paolo Gentiloni and French President Emmanuel Macron prepare to depart after posing for the group photo at the G7 Taormina summit on the island of Sicily on May 26, 2017 in Taormina, Italy.

Cooler heads will prevail despite the steady ramp-up of rhetoric on trade tariffs, the founder of New York-based consultancy High Frequency Economics believes.

Finance ministers of the world’s wealthiest nations will meet at the G-7 summit Friday in Quebec, and it is likely to be rife with awkwardness. In addition to the U.S., the G-7, or Group of 7, consists of Canada, France, Germany, Italy, Japan and the U.K. — all countries that have been hit by the Donald Trump administration’s sweeping tariffs on steel and aluminum exports.

And they are not happy about it. Since last week, the European Union (EU), Canada and Mexico have announced retaliatory tariffs on American goods, continuing along a trajectory many economists fear will lead to an all-out trade war.

But speaking to CNBC on Thursday, Carl Weinberg, the consultancy’s chief economist, threw water on those fears.

“Our view is that wiser heads are going to prevail, the adults in the room are going to prevail, and that the Trump approach to trade is perhaps unsophisticated and doesn’t fully encompass all the issues that are on the table,” Weinberg said. He described the current tiff as Trump’s strategy of trying to negotiate a hard deal and then backing down.

“We think at the end of the day, it’s not going to succeed, the partners are not going to budge and give us what we want… he’s going to end up backing down. What we need to find is a ‘golden bridge’ of retreat,” Weinberg said, alluding to the term coined by the sixth-century BC Chinese general Sun Tsu describing a method of offering your opponent a safe means of admitting defeat.

In this way, he suggested, Trump could perhaps depart with what he could call the “best deal ever,” although it’s not the one he initially demanded.

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