By David Ljunggren and Jan Strupczewski
LA MALBAIE, Quebec (Reuters) - Top U.S. allies scrambled on Friday to keep a Group of Seven nations summit from veering off track as President Donald Trump vowed to deal with "unfair trade practices" by Canada and the European Union.
Washington's partners in the G7 have been reeling since the Trump administration last week imposed tariffs on steel and aluminum imports from Canada, the EU and Mexico, prompting retaliation and raising the specter of a global trade war.
Canada, the host of the two-day summit in La Malbaie, Quebec, and the nation that has borne much of the brunt of Trump's trade fusillades in recent days, is holding out hope that progress can be made on less controversial issues.
Asked whether Canadian Prime Minister Justin Trudeau's team was engaged in frantic damage control, a Canadian government official said it was always clear there would be disagreements at the summit over trade and relations with Russia.
Trump set the tone before leaving Washington on Friday.
"We're going to deal with the unfair trade practices. If you look at what Canada, and Mexico, the European Union - all of them - have been doing to us for many, many decades. We have to change it. And they understand it's going to happen," Trump said.
He also said that Russia should be attending the summit, an idea that was unlikely to gain much traction at the G7 gathering, which groups Canada, the United States, Japan, Britain, Italy, France and Germany. The EU is also attending.
Russia was suspended from what was then called the G8 in 2014 because of its annexation of Crimea from Ukraine. Trump said Russia should be readmitted, but even Moscow seemed to reject that suggestion.
"Russia is focused on other formats, apart from the G7," Kremlin spokesman Dmitry Peskov said in a statement reported by the government-controlled Sputnik news agency.
Trump's presidency has been clouded by a federal investigation into alleged Russian meddling in the 2016 presidential election, and possible collusion by his campaign. Both Moscow and Trump have denied the allegations.
A source within the French presidency said Trump's proposal did not seem "coherent," and that it would be discussed in Quebec. A spokesman for Canada's Trudeau said Ottawa's position against allowing Russia back into the G7 had not changed.
New Italian Prime Minister Giuseppe Conte struck a contrarian note, saying Russia should be readmitted.
NERVOUS MARKETS
Trump, who aides said has scant interest in multilateralism, is set to have bilateral meetings with French President Emmanuel Macron and Canada's Trudeau at the summit. The White House said he would leave four hours earlier than originally planned to fly to Singapore to meet with North Korean leader Kim Jong Un.
The Canadian government official said there could be meaningful progress on less controversial issues at the summit such as economic growth, the environment and gender equality. "We have no reason to believe there will be problems on those issues," the official said on condition of anonymity.
The U.S. leader will miss talks about climate change and clean energy, and will have left Canada by the time the other leaders begin closing news conferences likely to be laden with criticism of Washington's policies.
While the G7 chiefs have largely praised Trump for his efforts to stabilize the Korean peninsula, they are unhappy he pulled out of an international agreement designed to limit Iran's nuclear ambitions.
Officials have conceded the mood at the summit will likely be exceptionally tense.
Although Trump says his tariffs are necessary to protect U.S. industry and workers, Canada and the EU have denounced them as illegal. Canada has proposed levies on a range of U.S. goods next month and the EU has pledged its own retaliatory measures.
That has financial markets worried about tit-for-tit escalation that could tarnish an overall rosy global economic outlook.
U.S. stock indexes initially dipped on Friday, partly due to investor nervousness over the G7 summit, but later turned positive.
"When it comes to trade - the positions are very clear. The President of the United States thinks that the U.S. has been treated in an unfair way by Europe and by others, and the others think that this is not the case," European Commission President Jean-Claude Juncker told a press conference in La Malbaie.
"We will explain this through facts and figures, that this is not the right view one should have on this topic," Juncker said.
Canada is also frustrated by what it sees as unacceptable U.S. demands in talks to modernize the North American Free Trade Agreement, a deal that Trump has frequently criticized and threatened to terminate. Mexico is also a member of NAFTA.
(Additional reporting by Susan Heavey and Doina Chiacu in Washington and Jean-Baptiste Vey, Giselda Vagnoni, William James, Jan Strupczewski, Andrea Hopkins and David Ljunggren in La Malbaie, Quebec; Writing by Paul Simao; Editing by Hugh Lawson, Jeffrey Benkoe and Susan Thomas)
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