G7 to discuss global trade risks after US tariffs on China

G7 ministerial meetings, in Tokyo

By Gavin Jones and Giuseppe Fonte

ROME (Reuters) -The Group of Seven (G7) major democracies meeting in Italy next week will discuss the risk of fragmentation in global trade after "very tough" tariffs imposed by the United States against China, Italian Economy Minister Giancarlo Giorgetti said.

U.S. President Joe Biden unveiled this week a bundle of steep tariff increases on an array of Chinese imports including electric vehicle (EV) batteries, computer chips and medical products, risking an election-year standoff with Beijing in a bid to woo voters who give his economic policies low marks.

The meeting on May 24-25 among the G7 finance ministers in the northern Italian town of Stresa will reflect on the "fragmentation of global trade, with the latest moves by the American government which has shown its cards with very tough measures against China", Giorgetti said.

He was being interviewed for a conference in Milan on Tuesday organised by Italian newspaper La Verita.

"The world as we have known it is finishing," Giorgetti said, adding that "a trade war is underway which reflects geopolitical tensions" and Europe still needs to carve out its own role in the evolving scenario.

Another item on the agenda for the meeting will be how to use frozen Russian assets seized after Moscow's invasion of Ukraine, the Italian minister said.

The G7 froze around $300 billion worth of financial assets soon after Moscow's attack in February, 2022. Since then, the European Union and other G7 countries have debated how and whether to use the funds to help Ukraine.

U.S. proposals to use them to directly fund Ukraine in the war would have "quite serious legal implications" which still need clarifying, said Giorgetti, who will host the Stresa meeting as Italy holds the rotating presidency of the G7.

The United States has proposed seizing the assets in their entirety, but Europe has balked, citing risks to the euro and massive legal repercussions.

More recently, Washington has pushed for using the assets as collateral to provide loans for Ukraine.

The European Commission has proposed as an alternative transferring to Ukraine profits generated by Russian central bank assets frozen in Europe, amounting to 2.5 billion to 3 billion euros ($2.7-3.2 billion) per year.

Giorgetti said on Monday the G7 would likely back the European approach to the issue.

($1 = 0.9247 euros)

(Reporting by Gavin Jones and Giuseppe Fonte, editing by Alvise Armellini and Ed Osmond)