U.S. Treasury Secretary Steven Mnuchin defended the Trump administration's plans to save and create jobs for American workers during his meetings with G7 finance ministers at their annual meeting in Bari, Italy.
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He also reiterated the promise for tax reform in the United States, telling G7 ministers it remains a goal by the end of the year.
Mnuchin's tax message came amid tough talk on trade, even though it was not on the official agenda. “We don’t want to be protectionist but we reserve our rights to be protectionist to the extent we believe trade is not free and fair,” he said.
Adding, “We want to have balanced trade. We believe in free trade, but we do have large imbalances and we have had very productive discussions with our counter parts."
The Secretary pointed to the recently announced trade agreement with China as a step in the right direction, as the Trump administration pushes trade deals and negotiations with several key trading partners for more balanced growth.
Secretary Mnuchin said G7 finance ministers are open to America’s new trade policies: “They feel a level of comfort and understanding of Trump administration policies,” he told reporters after the G7 meeting concluded. “Our objective is to grow exports and to create more opportunities for American workers.”
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As for global tax policies and tax reform specifics, the G7 worries, “…a trend towards less redistributive tax and transfer systems in many advanced countries…may have been behind rising inequality.”
When asked if G7 ministers were concerned about the potential for U.S. tax reform to cause the income gap to widen, Secretary Mnuchin said, “Reductions in the highest tax rates will be offset by reductions in deductions. Seventy-percent of the tax burden companies’ pay is passed on to workers. I am focused on a middle income tax cut.” He also noted the conversations around tax were productive.
The U.S. is considering a shift to a territorial tax system to replace the current residency based tax code.
U.S. companies currently pay tax on income earned outside the country, as well as within, and U.S. based multi-national corporations say that puts them at a disadvantage with foreign competitors. A territorial system would only tax income earned within the United States, whereas income earned outside would be subject to the taxes in that country.
Additionally, the G7 issued its annual communiqué with warnings about the global economy, and growing income inequality, in countries with advanced economies like the United States.
"The global economy is facing a prolonged period of modest growth and high or rising inequalities in many countries, notably within countries with middle and lower income classes being particularly affected," the statement said.
Other topics at the meeting included ways to strengthen cyber security, which proved especially poignant, as a massive ransomware cyberattack disabled computer systems in several countries across the world Friday, just as the G7 ministers began a discussion on the subject.
The G7 affirmed its commitment to fund a cyber security task force to counter threats to the global financial system.
Counter terrorism measures and maintaining sanctions on countries like Iran and North Korea were also among the topics reaffirmed by the ministers.
This meeting helps lay the foundation for the G7 meeting of global leaders that will take place later this month in which President Trump will attend.