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A trade war between the United States and Europe is coming and the fallout could tip Germany into recession, according to analysts at German lender Commerzbank.

EU leaders have now agreed to negotiate fresh trade arrangements with Washington but have restricted the talks to industrial goods only. That scope of debate is likely to irk President Donald Trump who is under pressure from Congress to win access to EU agriculture markets.

In February, Trump said he would impose tariffs on cars imported from the European Union if U.S. talks with the bloc can’t produce a new deal. The EU has since threatened to tax 20 billion euros ($22 billion) worth of U.S. goods.

Both sides have cautiously hung on to existing agreements, promising to take no action until talks are concluded.

In a research report Friday, analysts at Commerzbank said the chances of a trade deal that satisfied both European leaders and U.S. lawmakers looked slim. It noted that France, holding a powerful voice in the corridors of Brussels, had already erected a serious barrier.

“President (Emmanuel) Macron has already voted against opening negotiations with the U.S. because the U.S. is no longer participating in the 2015 Paris Climate Agreement,” noted Commerzbank.

The bank said on the other side of the ledger, U.S. Congress has made it clear that it will not rubberstamp any agreement that excludes agriculture — a tricky proposition given many EU nations fiercely protect prices paid to their farmers.

“It is therefore likely that Donald Trump will announce the imposition of duties — probably at rates of 25% — on imports of autos and auto parts from the EU,” said Commerzbank.

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Trump is meeting with world leaders at G7 as he escalates US-China trade war

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U.S. President Donald Trump and First Lady Melania arrive in Biarritz for the G7 summit, France August 24, 2019. REUTERS/Regis Duvignau

Regis Duvignau | Reuters

President Donald Trump arrived in France on Saturday for the annual meeting of the Group of 7 powers, one day after he called his Federal Reserve chief an enemy of the United States and urged American companies to end business with China in the midst of an escalating trade war.

The summit comes amid fears over a global economic slowdown, and U.S. tensions with allies over trade, Iran and Russia.

Trump said Friday he will raise existing duties on $250 billion in Chinese products to 30% from 25% on Oct. 1. Additionally, tariffs on another $300 billion in Chinese goods, which start to take effect on Sept. 1, will now be 15% instead of 10%.

In addition to the China trade war tensions, the president has maintained tough rhetoric against the European Union. The White House is set to decide in November whether they will impose duties on the autos industry in Europe.

Earlier this year, Trump vowed to set tariffs on imported vehicles and parts from the EU and Japan, but delayed that duty for 180 days in May. The president signed a deal with the EU earlier this month to boost U.S. beef exports.

Trump again threatened to tax European cars Tuesday.

“Dealing with the European Union is very difficult; they drive a high bargain,” Trump said. “We have all the cards in this country because all we have to do is tax their cars and they’d give us anything we wanted because they send millions of Mercedes over. They send millions of BMWs over.”

Experts say that trade conflict with Europe could be much more damaging than the current tit-for-tat conflict with China.

British Prime Minister Boris Johnson told reporters upon his arrival in France that he plans to tell Trump at the summit to pull back from the trade war with China. Johnson said his priorities for the summit “are clearly the state of global trade.”

“I am very worried about the way it’s going, the growth of protectionism, of tariffs that we’re seeing,” Johnson told reporters on the tarmac.

Trump’s first meeting on Saturday was a private lunch with French President Emmanuel Macron.

Macron, who will host the summit, said they were discussing world crises, including Libya, Iran and Russia, as well as trade policy and climate change.

Trump said he anticipated the lunch with Macron would go well. 

“We actually have a lot in common, Emmanuel and I. We’ve been friends for a long time. And every once in a while, we go at it just a little bit — not very much. But we get along very well,” he said. 

When asked if he would place tariffs on French wines in retaliation for France’s digital services tax, which he previously threatened to do, Trump was noncommittal, but responded that he loves French wine.

Donald Tusk, president of the European Council, said on Saturday that the EU would “respond in kind” if the U.S. imposes tariffs on France over the digital tax plan.

The G-7, which represents the world’s major industrial economies, includes the U.S., Germany, France, Japan, Canada, Italy, and the U.K.

At the summit, world leaders are expected to discuss several foreign policy matters, including Iran and tensions between India and Pakistan, as well as record wildfires in the Amazon rainforest that have spurred global outrage.

Formal talks begin Sunday morning. Many experts expect the summit to end without a joint communique because of clashes on trade.

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China warns US to stop wrong trade actions or face consequences

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China said on Saturday it strongly opposes Washington’s decision to levy additional tariffs on $550 billion worth of Chinese goods and warned the United States of consequences if it does not end its “wrong actions”.

The comments made by China’s Ministry of Commerce came after the U.S. President Donald Trump announced on Friday that Washington will impose an additional 5% duty the Chinese goods, hours after Beijing announced its latest retaliatory tariffs on about $75 billion worth of U.S. goods, in the latest tit-for-tat moves in their bilateral trade dispute.

“Such unilateral and bullying trade protectionism and maximum pressure violates the consensus reached by head of China and United States, violates the principle of mutual respect and mutual benefit, and seriously damages the multilateral trade system and the normal international trade order,” China’s commerce ministry said in a statement on Saturday.

“China strongly urges the United States not to misjudge the situation or underestimate determination of the Chinese people,” it added.

Trump’s latest tariff move, announced on Twitter, said the United States would raise its existing tariffs on $250 billion worth of Chinese imports to 30% from the current 25% beginning on Oct. 1, the 70th anniversary of the founding of the communist People’s Republic of China.

At the same time, Trump announced an increase in planned tariffs on the remaining $300 billion worth of Chinese goods to 15% from 10%. The United States will begin imposing those tariffs on some products starting Sept. 1, but tariffs on about half of those goods have been delayed until Dec. 15.

Trump was responding to Beijing’s decision on Friday night that it was planning to impose retaliatory tariff on $75 billion worth of U.S. imports ranging from soybean to ethanol. China will also reinstitute tariffs of 25% on cars and 5% on auto parts suspended last December.

The White House economic adviser said earlier in the week the Trump administration was planning in-person talks between U.S. and Chinese officials in September. It is unclear if the bilateral meeting would still take place.

The year-long trade war between the world’s two largest economies has roiled financial markets and shaken the global economy.

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Protesters march near Biarritz demanding action from G-7 leaders

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French activist Jean-Baptiste Redde, aka Voltuan (R) holds a placard reading ‘stop climate crime’ next to a demonstrator dressed as a traditional Basque shepherd, during a march in Hendaye, south-west France on August 24, 2019, to protest against the annual G7 Summit attended by the leaders of the world’s seven richest democracies, Britain, Canada, France, Germany, Italy, Japan and the United States.

GEORGES GOBET | AFP | Getty Images

Thousands of anti-globalisation and environmental activists joined yellow vest protesters and Basque separatists on Saturday near the French coastal resort of Biarritz to demand action from G7 and other world leaders set to meet there.

Protesters converged on the nearby town of Hendaye on the French border with Spain to protest against economic and climate policies pursued by the world’s leading industrial nations and to promote alternatives.

“The top capitalist leaders are here and we have to show them that the fight continues,” said Alain Missana, 48, an electrician wearing a yellow vest — symbol of the anti-government demonstrations that have been held in France for months.

“It’s more money for the rich and nothing for the poor. We see the Amazonian forests burning and the arctic melting. The leaders will hear us,” he said.

Fires are devastating large swathes of the forest which is considered a vital bulwark against climate change.

Protesters waved banners for causes ranging from gay rights to Palestine, but their messages were aimed firmly at the leaders of the United States, Germany, France, Britain, Canada, Japan and Italy who are set to begin three days of talks on Saturday.

“No to the G7. For another world,” one banner read. “Heads of state the Amazon is burning. Act now,” said another.

The protesters marched under bright-blue summer skies from Hendaye to the town of Irun, Spain, some 30 km (18 miles) south of the G7 venue Biarritz.

More than 13,000 police officers, backed by soldiers, are guarding the Biarritz summit site and police had feared that anarchist groups might have tried to derail Saturday’s protest, which has been billed as a peaceful, family event.

Four police officers were lightly wounded on Friday after protesters fired a homemade mortar near the anti-G7 counter summit in Hendaye. Police arrested 17 people for hiding their faces.

There was no immediate sign of any radical groups on Saturday and the police presence was light.

Protesters came from all parts of France and beyond including from across the border, where Basque separatists were also keen to show their solidarity.

“The counter-G7 demonstration is in this Basque region and we want people to see we are part of it,” said Alfredo Akuna, a 46-year-old engineer from San Sebastián who wore traditional Basque clothing.

“We’re involved in many movements including anti-capitalism and anti-fascism so it’s important to be here to show that.”

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