* Summit coincides with escalating U.S.-China trade war
* Disputes on trade, climate may eclipse Macron's agenda
* EU's Tusk warns of lack of global unity
* UK PM has to balance ties with US and EU as Brexit looms
* Activists urge tough G7 stance on Amazon wildfires (Adds Trump and Macron comments, China's comments on trade, Merkel)
By Marine Pennetier and John Chalmers
BIARRITZ, France, Aug 24 (Reuters) - U.S. President Donald Trump arrived in France on Saturday for what promises to be a fraught meeting of major industrialised nations, with friction over trade, climate change and Iran likely to snarl the talks.
The three-day Group of Seven meeting in the Atlantic seaside resort of Biarritz takes place amid sharp differences over a clutch of global issues that risk further dividing a group of countries already struggling to speak with one voice.
Summit host French President Emmanuel Macron wants the heads of Britain, Canada, Germany, Italy, Japan and the United States to focus on the defence of democracy, gender equality, education and the environment and has invited Asian, African and Latin American leaders to join them for a global push on these issues.
However, in a bleak assessment of relations between once-close allies, European Council President Donald Tusk said it was getting "increasingly" hard to find common ground.
"This is another G7 summit which will be a difficult test of unity and solidarity of the free world and its leaders," he told reporters ahead of the Biarritz gathering. "This may be the last moment to restore our political community."
A grim array of disputes and problems await the leaders, with a trade war between China and the United States worsening, European governments struggling to defuse tensions between Washington and Tehran, and global condemnation growing over illegal fires that are ravaging the Amazon.
Trump brought last year's G7 summit to an acrimonious end, walking out of the gathering in Canada early and rejecting the final communique. On Saturday he sounded more upbeat.
"So far, so good," he said during a lunch with Macron on a sun-soaked terrace, hailing his friendship with the French leader. "Every once in a while we go at it a little bit, not very much. We get along very well, we have a very good relationship. I think I can say a special relationship."
Macron listed foreign policy issues the two would address, including Libya, Syria and North Korea, adding that they shared the same objective of preventing Iran from obtaining nuclear weapons.
However, the initial smiles could not disguise their opposing approaches to many problems, including the knotty question of protectionism and tax.
JOHNSON'S WORLD DEBUT
Hours before leaving for Biarritz, Trump reacted angrily to China's move to impose retaliatory tariffs on more U.S. goods, even saying on Friday he was ordering U.S. companies to look at ways to close their operations in China.
Trump also took aim at France's new tax on big tech companies, threatening to tax French wine "like they've never seen before". Tusk warned that the European Union would respond in kind if Washington took aim at the digital tax.
China's President Xi Jinping is not among the Asian leaders invited to Biarritz. China said on Saturday it strongly opposed Washington's decision to levy additional tariffs on $550 billion worth of Chinese goods and warned the United States of consequences if it did not end its "wrong actions".
Adding to the unpredictable dynamic between the G7 leaders are the new realities facing Brexit-bound Britain: dwindling influence in Europe and growing dependency on the United States.
New Prime Minister Boris Johnson will want to strike a balance between not alienating Britain's European allies and not irritating Trump and possibly jeopardising future trade ties. Johnson and Trump will hold bilateral talks on Sunday morning.
Even so, diplomats played down the likelihood of Trump and Johnson joining hands against the rest, citing Britain's close foreign policy alignment with Europe on issues from Iran and trade to climate change.
"There won't be a G5+2," one senior G7 diplomat said.
Johnson, who has promised to take Britain out of the EU on Oct. 31, said ahead of the summit that Britain would not retreat from its responsibilities on the world stage after Brexit, nor sacrifice its belief in the global order.
The remarks were a riposte to those who say leaving the European Union will diminish Britain's influence on the global stage and force a pivot towards Trump's unorthodox and often confrontational approach to diplomacy.
'MONEY FOR THE RICH'
Anti-G7 demonstrators held a colourful march in Hendaye on the nearby French-Spanish border but were kept away from Biarritz by more than 13,000 police officers, backed by soldiers.
"It's more money for the rich and nothing for the poor. We see the Amazonian forests burning and the Arctic melting," said Alain Missana, an electrician wearing a yellow vest -- symbol of anti-government protests that have rattled France for months.
EU leaders piled pressure on Friday on Brazilian President Jair Bolsonaro over fires raging in the Amazon rainforest.
Macron said Bolsonaro had lied in playing down concerns about climate change at a G20 summit in Japan in June, and threatened to veto a trade pact between the European Union and the Mercosur bloc of South American countries.
A French diplomatic source said advisers to the G7 leaders were working on concrete initiatives to respond to the fires.
"We are shaken by the terrible fires in the Amazon. We will discuss how to offer support and help and make an appeal that everything has to be done to stop the rainforest from burning," German Chancellor Angela Merkel said before flying to Biarritz.
(Reporting by Richard Lough, Jeff Mason, Marine Pennetier, John Chalmers, Crispian Balmer, John Irish in Biarritz, Bryan Pietsch in Washington, Gabriela Baczynska in Brussels and Chris Steitz in Frankfurt Writing by Crispian Balmer and Richard Lough Editing by Gareth Jones, Angus MacSwan and Frances Kerry)
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