The "cauldron" of Hormuz casts a shadow over the G7 agenda, as Europe cleverly avoids US tariffs.

Despite the tensions from the Middle East dominating the negotiations, the ministers decided not to include the latest threat of increased US tariffs on automobiles in formal discussions to avoid escalating internal tensions within the bloc.

Strategic lull on US-EU tariffs

The conference, held over two days, May 5th and 6th, under the chairmanship of France, marked the second meeting of G7 trade ministers during Paris's presidency. The meeting took place at a time when the global economy was facing a "supply shock" due to the closure of the Strait of Hormuz, a vital waterway carrying one-fifth of the world's oil. According to the French Secretary of State for Trade, Nicolas Forissar, the repercussions of the conflict in the Middle East were expected to completely dominate the informal meeting on May 5th.

Notably, this G7 agenda carefully avoided directly discussing US President Donald Trump's threat last weekend to increase tariffs on cars and trucks imported from the European Union (EU). This sensitive issue will be addressed in bilateral meetings on the sidelines. Specifically, US Trade Representative Jamieson Greer is expected to have separate meetings with EU Trade Commissioner Maros Sefcovic and French Economy Minister Roland Lescure.

Last summer, the US and the EU reached an agreement to cap US tariffs on European cars and parts at 15%, lower than the 25% that Trump imposed on many other partners. At the end of March, EU lawmakers approved the agreement with conditions and are awaiting ratification by member states. Responding to the risk of the US changing its mind and increasing tariffs, Mr. Forissar's office affirmed that Europe has chosen not to overreact. Member states will discuss the issue internally when the time comes and are determined not to bring it within the G7 framework in order to protect the current agreement.

4 key areas shaping global trade

On the second day of the meeting (May 6th), trade ministers from seven major powers – the UK, Canada, France, Germany, Italy, Japan, and the US – will focus on addressing four strategic priorities proposed by host country France.

The first priority is to find a collective and effective response to the industrial overcapacity that is undermining global free trade.

Economic security and essential mineral resources are being prioritized. Major powers are striving to secure and diversify their mineral supplies, which are indispensable materials for the production of strategic products such as computer chips, electric vehicle batteries, and supermagnets. France is calling for the establishment of a closely integrated system linking producing, processing, and consuming nations based on a commitment to adhering to common standards.

The third focus is on reforming the World Trade Organization (WTO). Following the failure of the March negotiating round and the paralysis of the WTO's "arbitration" role due to obstruction from the US, the G7 aims to rebuild the organization to be more responsive to the challenges of our time.

Finally, ministers will discuss measures to tighten control over cross-border e-commerce parcels. The fact that millions of small parcels are evading customs duties is creating an unfair competitive environment for domestic retailers. To close this loophole, the US suspended tax exemptions for parcels under $800 last year, while the EU is also preparing to apply fixed customs duties to packages under €150 this summer.