The G-7 Must Prepare Now for Trump

Planning is underway for the G-7 summit that Italian Prime Minister Giorgia Meloni will host from June 13 to 15. As the 50th summit of the G-7, the club of the world’s leading democracies, there will be an impulse to celebrate.

Understandably so. The G-7—which includes Canada, France, Germany, Italy, Japan, the United Kingdom, the United States, and, since 1981, the EU—today represents 54 percent of world GDP and over 55 percent of global defense spending. For decades, G-7 members have gained additional weight on the world stage by coordinating their national economic power in pursuit of shared foreign-policy priorities, such as protecting democratic societies and open markets.

But the importance of the coming summit exceeds its status as a landmark anniversary. The G-7’s future—and the future of global democratic cohesion in general—is now at stake.

Recent disparaging remarks about NATO by presumptive Republican presidential nominee Donald Trump have led many to question the credibility of America’s commitment to its allies. Part of Trump’s frustration with NATO comes from other NATO members’ historically low defense spending compared to the United States. Why should Americans spend more on Europe’s defense than Europeans are willing to?

However, the G-7 might prove even more vulnerable to the vagaries of a second Trump term. For Trump, coordinating U.S. foreign policy with others is a pointless constraint on U.S. freedom of action—unless, that is, it provides a tangible net economic return to America.

Herein lies the problem. The United States currently runs a trade deficit in goods with all of its G-7 partners except the United Kingdom. In 2023, these deficits amounted to $337 billion, more than the U.S. deficit with China ($279 billion). Trade deficits in goods are a foreign-policy red flag to Trump. That is why he treated Angela Merkel’s Germany as a greater rival than Vladimir Putin’s Russia and torpedoed the 2018 summit communiqué after G-7 leaders tried to push back against U.S. protectionism.

G-7 leaders could cross their fingers and hope there is a second term for incumbent U.S. President Joe Biden. But this is currently, at best, a 50-50 proposition. Instead, they should use the next three months to put in place a policy agenda that could withstand the buffeting of a second Trump presidency while also serving as a platform for a second Biden term.

The G-7’s achievements in Biden’s first term have been impressive. Since Putin’s full-scale invasion of Ukraine in February 2022, the G-7 has implemented an unprecedented package of sanctions against Russia, ranging from freezing the roughly $300 billion of its central bank’s reserves held in their currencies to banning the provision of insurance to tankers carrying Russian oil if it’s sold above a cap of $60 per barrel. It can do this because over 93 percent of global reserves are held in G-7 currencies, and over 90 percent of the world’s oceangoing tonnage is covered by protection and indemnity insurance issued by companies based in the G-7.

Reflecting their common concerns over China’s rise and Beijing’s close alignment with Moscow, the G-7 has also engaged consistently over the past three years with close allies South Korea and Australia, in an effort to start “friendshoring” supply chains for the semiconductors and renewable energy inputs that will be central to their future economic growth.

All this important work could come to an end if a new Trump administration returned to punishing its closest allies for being free riders. But fixing G-7 members’ trade imbalances with the United States is impossible in the near term. That’s why the upcoming G-7 summit must prioritize preparing for the possible restoration of a hostile Trump presidency.

First, G-7 members need to send a clear signal to Moscow that their support for protecting the sovereignty of Ukraine has no time limit. The murderous conflict there is now shadowed by an intense contest to show which side can outlast the other politically and economically. With new U.S. support currently blocked in Congress, European countries plus the EU have already taken an important step to demonstrate their resolve, by committing a further 77 euros billion in future multiyear financial and military assistance to Kyiv, on top of the approximately 75 billion euros they have already allocated since the start of the war.

The summit should also decide how all G-7 members will start drawing on the profits earned from the frozen Russian reserves. The obstacle to date is that the bulk of these reserves are held by EU banks, and some governments and the European Central Bank are concerned that even the modest step of disbursing the earned interest (4.4 billion euros last year) lacks a firm legal foundation and could also undermine the euro’s credibility as a global reserve currency. Overcoming these reservations would underscore the G-7’s resolve; and a Trump presidency might think twice before reneging on an arrangement that would repay some of the U.S. costs of supporting Ukraine.

Second, G-7 members should invite South Korea and Australia formally into the group. If there is a second Biden term, their membership will strengthen the G-7’s collective resilience in high technology and renewable energy. If there is a second Trump presidency, these two democratic allies will be less isolated in the face of his mercantilist threats.

Third, G-7 members should allocate a first tranche of funding for the plan that the Biden administration, EU leaders, Saudi Arabia, the United Arab Emirates, and India announced last year to build a rail, energy, and data corridor from India through the Gulf and Israel to Europe. This belated but important project to compete with China’s Belt and Road Initiative will connect India’s and the Gulf states’ youthful, burgeoning economies with Europe’s wealthy but aging markets.

The war in Gaza has called the plan into question, but its benefits to Israel create an important additional incentive for a post-Netanyahu government to build a durable peace with the Palestinians. At the same time, it would support the Trump presidency’s main foreign-policy achievement: the 2020 Abraham Accords that normalized Israel’s relations with several Arab states.

The G-7 is an invaluable geo-economic coordinating body for what is shaping up to be a protracted new Cold War with China and Russia. Whether to cement the gains of the Biden presidency or lessen the global risks of a Trump presidency, the G-7’s 50th anniversary summit must live up to its billing.