The world’s rocky trade relations are playing out in the Rockies this week. G7 finance ministers and central bankers gathered in the mountains of western Canada yesterday to start a three-day summit.

Hanging over the proceedings is the countdown to July 8, when Washington is poised to slam its allies with “reciprocal” tariffs.

Rocky (Mountain) Diplomacy

Global trade is expected to dominate discussions in Banff, Alberta, which, at 4,500 feet above sea level, is Canada’s highest incorporated town. But the scenic views are not likely to inspire harmony: A US Treasury official told Reuters that, while negotiators have “made very substantial progress” with some G7 partners, there’s unlikely to be word of any new trade deals.

Under President Trump’s plan, goods from most countries are currently subject to a 10% universal tax, while a 25% levy has been placed on steel, aluminum, and auto imports. On July 8, a moratorium on the additional “reciprocal” tariffs expires, threatening to slam imports with a range of levies: 20% for EU shipments and 24% for Japanese goods, for example. Under that threat, the EU downgraded its growth forecast for the eurozone from 1.3% this year to 0.9%. Officials from other G7 members — the forum also consists of Britain, Canada, France, Germany, Italy, and Japan — have exhibited or hinted at varying degrees of urgency:

• The UK, pressing for agreements post-Brexit, agreed to a non-binding framework with the US earlier this month that touched on parts of their trading relationship. At this week’s meeting, Treasury Secretary Scott Bessent plans to talk with Japanese officials, who represent one of 18 “important” partners Bessent says he’s focused on, but further trade discussions will be held in Washington, Reuters reported.
• Canadian Prime Minister Mark Carney — whose country has the unique advantage of remaining mostly tariff-free, thanks to the USMCA agreement — has suggested in recent months that he will not rush a deal with Trump. On the other hand, German Finance Minister Lars Klingbeil called for a resolution to the trade standoff as quickly as possible before leaving Berlin.

“It’s about making clear to the US side that this tariff policy is really endangering the global economy,” Monika Schnitzer, an economist at Munich’s Ludwig Maximilian University, told public broadcaster ARD of the message US officials will hear.

Area of Agreement: US officials briefed multiple outlets that Bessent plans to press his counterparts to address China’s nonmarket practices, a term for government intervention that distorts markets, such as the country dumping cheap goods on the world, leading to so-called “overcapacity.” For example, the Organization for Economic Cooperation and Development estimates Chinese steel subsidies are more than 10 times higher than those in OECD countries, which can allow producers that would otherwise fail to instead operate at a loss. In 2023, China produced 54% of the world’s crude steel. Other G7 officials and US politicians from both parties largely agree with Bessent’s concerns.

Google’s AI assistant, Gemini, has beaten “Pokémon Blue,” the 1996 GameBoy game. That’s the announcement CEO Sundar Pichai kicked off Google’s annual I/O conference with yesterday. (Playing retro Pokémon games is becoming a bragging point for AI companies — Anthropic shared its AI model Claude’s progress playing “Pokémon Red” in February.)

Gemini’s super-effective gameplay was the first of many AI announcements at the conference. Google’s AI onslaught comes as Big Tech races to catch up with up-and-comers (ahem, OpenAI) threatening tech leaders’ long-held dominance.

Search Starts Multi-Tasking

Google wants to become the go-to AI platform as competitors encroach on its main biz: finding answers to questions like how to make Dubai chocolate strawberries. For years, Google held around a 90% share of the search market, but its dominance has slipped since ChatGPT came on the scene. A Bernstein analyst this month estimated it could already be as low as 65%, while Wells Fargo analysts said it could fall to 50% in five years.

AI startups aren’t just cutting into Google’s search dominance with simple queries. They’ve also expanded the industry to AI-automated tasks — like writing essays or coming up with recipes based on a picture of what’s in the fridge.

Big Tech’s trying to keep up:

• At its I/O conference, Google said that Gemini can generate replies across Google apps like Gmail and help users hunt for the right apartment. Gemini also got a new sibling: a coding agent named Jules.
• Microsoft, the company behind No. 2 search engine Bing, announced more than 50 AI tools for building “the agentic web,” aka AI systems that automate tasks, during its annual Build conference yesterday.

Not Feeling Lucky: While Google faces true competition for the first time from AI-focused competitors, it’s simultaneously being taken down by regulators for being a monopoly (ironic timing). US judges have ruled in two separate cases that it has an illegal monopoly both in the ad-tech world and on the search market. OpenAI introduced ChatGPT at a time when critics were already complaining about Google’s search product becoming less useful. Now, the tech leader is forced to innovate fast as it awaits rulings on how its monopolies might be broken up.

Like ’90s teens snatching up any and every CD bearing the too-cool-for-school “parental advisory” sticker, it seems a Pentagon blacklisting only makes a company more attractive to investors.

Chinese electric battery maker CATL — flagged by the US Department of Defense in January for alleged ties to the Chinese military — pulled off the best market debut performance of the year on Tuesday, with shares jumping more than 16% in its Hong Kong IPO. As always, it’s the forbidden fruit that’s the most desirable.

CATL Call

To be fair, the Pentagon blacklisting didn’t mean much to begin with — carrying no sanctions or other formal restrictions and designed simply to discourage firms from doing business with the company. CATL vehemently denied connections to the People’s Liberation Army, and US firms seemed happy to take their word for it. Tesla and Ford remain top customers of the battery supplier, and both JPMorgan and Bank of America served as joint sponsors of the listing despite pleas from a US congressional committee to sever ties.

Investors don’t seem to care about the warning label either. In fact, as they look to put their money anywhere other than a US equities market that suddenly looks bloated and unstable, the red flag may have looked more like something of a green light:

• “We are in this kind of unique scenario, where you have a well-known company issuing new shares, also at a time when you have a macro factor where investors want to diversify away from the US dollar-related assets,” Jason Lui, BNP Paribas’ head of Asia-Pacific equity and derivative strategy, told the Financial Times.
• CATL, to be sure, has the fundamentals to back up its stock performance: The company has a market share of around 38%, according to SNE Research, roughly double the next closest competitor, and last year generated $7 billion of profit on $50 billion in sales. The company has already said it intends to use some of the funds raised from the IPO to dramatically expand its production and sales outside of China; earlier this year, it wowed with a new battery it says can fully recharge in just a few minutes.

H-Sharing is Caring: CATL, which has traded on the Shenzhen stock exchange since 2018, is helping fuel a $22 billion surge in listings in Hong Kong this year. Chinese firms have increasingly tapped both exchanges, though they typically price their Hong Kong “H-shares” at a roughly 25% discount to their Shenzhen “A-shares” to entice more buyers. CATL, however, listed its H-shares at a much slimmer discount than usual. Trading at HK$306.20 at the closing bell on Tuesday, the H-shares reached a price 1.2% higher than CATL’s A-shares. “For the H-shares to be trading above the A-shares just shows how exceptional the demand is for this company, particularly from global investors,” Bernstein senior research analyst Neil Beveridge told CNBC.