Several heads of government disappear off for a taxpayer-financed weekend mini-break in Canada today. The G5, G7, G8, and now G6 plus 1 have never really accomplished very much after the first burst of enthusiasm with the Plaza and Louvre accords of the 1980s. This meeting will be no different.
Because the G6 plus 1 is about spin not substance, the risks for markets come from the visual from this meeting. The US is looking isolated. This is not the isolationism and protectionism of the 1930s. In the 1930s everyone put up trade barriers against everyone else. This time the US is putting up trade barriers against everyone else, and everyone else is carrying on just as before.
China's trade data came out overnight. The trade surplus fell as commodity imports became more expensive. The trade surplus with the US rose – because US policy is designed to increase the US trade deficit. We expect over a third of US tax cuts will be spent on imports.
German trade data is due. Japan's import bill rose, again with rising commodity costs. Japanese first-quarter GDP disappointed on weaker consumer demand. Japanese consumers do not seem to believe their real incomes are rising.