Washington Insider -- Wednesday

White House Report Faults Tariffs

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Anxiety Rising In US Farm Circles On China Trade

The U.S. has signaled it will make its intentions known by Friday on duties on some $50 billion in Chinese goods over intellectual property issues.

U.S. ag interests like the American Soybean Association (ASA) are planning a full-court press to try and convince the administration to not take actions that would negatively impact U.S. soybean and other ag trade as China has threatened to respond with retaliatory trade actions against U.S. products like soybeans and other ag goods.

It's not clear whether the U.S.-North Korea summit was enough to have the U.S. willing to hold off on imposing sanctions against China. But there are also still likely other steps in the process before U.S. sanctions go into place.

The U.S. has to publish a formal determination on the duties in the Federal Register, with up to 30 days after that point for the duties to come into effect. Plus, indications are the Trump administration is studying taking up to another 180 days before putting the duties in place.


Commerce slaps provisional duties on olives from Spain

Imports of ripe olives from Spain will be subject to provisional dumping duties ranging from 16.88% to 25.50%, the Commerce Department announced late Tuesday.

Commerce also hit the olive imports with provisional subsidy duties ranging from 7.52% to 27.02%. The International Trade Commission (ITC), which investigates injury to the U.S. industry, will have the final say on whether the duties will be locked in.

The ITC decision is expected on July 24, Commerce said.

Imports of ripe olives from Spain were valued at an estimated $67.6 million in 2017, Commerce said in a fact sheet.


Washington Insider: White House Report Faults Tariffs

While there are numerous mysterious goings on in the government these days, a White House economic analysis of President Trump’s trade agenda looks to be one of the most unexpected. It is a very high level study that concludes that the administration’s proposed will hurt economic growth in the United States.

The New York Times says that the findings are from the White House Council of Economic Advisers and have been circulated only internally but not publicly released, as is often the case with the council’s work – making the exact economic projections unknown. But the determination comes as top White House officials continue to insist publicly that Trump’s trade approach will be “massively good for the U.S. economy.”

The chairman of the Council of Economic Advisers (CEA), Kevin Hassett, an economist who came to the administration from the American Enterprise Institute, a conservative think tank, dodged questions at a White House briefing recently.

Asked whether the administration’s economists had modeled the impact that a trade war with China would have on the United States economy, Hassett said Trump was a great negotiator who would persuade other countries to open their markets to American products.

“If you model a future where everybody else reduces their trade barriers to ours, then that’s massively good for the global economy and massively good for the U.S. economy,” Hassett said.

But the immediate effect of the administration’s trade agenda has been the opposite, as other nations retaliate against the United States with their own tariffs, the Times said.

The administration has hit Canada, Mexico, Japan and the European Union with steel and aluminum tariffs and threatened tariffs on a range of Chinese goods. In return, many of those countries have either imposed or threatened reciprocal tariffs on everything from steel to pork to orange juice, a move that economists say will depress economic growth.

Chris Rogers, research director for Panjiva, part of S&P Global Market Intelligence, said Mexico’s recently enacted tariffs would hit the American agricultural sector hardest.

Republican lawmakers and many economists have been warning that the administration’s trade approach will undercut economic growth and partially offset any boost from the $1.5 trillion tax cut that Congress passed and Trump signed last year.

Last week, Representative Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, criticized the administration for throwing “a huge wet blanket of uncertainty on an economy that otherwise they were responsible for making red hot.”

Pursuing a trade approach that actually dampens economic growth would be a significant self-inflicted wound for the Trump administration, which has made achieving sustainable 3% economic growth a top priority. Trump has said his tax cut plan, along with his effort to roll back regulations, will provide “rocket fuel” to the economy.

Wall Street research firms have warned that those tariffs, and the retaliatory tariffs that trading partners have threatened in response, will slow growth in the United States. Researchers at Goldman Sachs said this month that the latest round of tariff escalations could reduce economic growth by as much as 0.15 percentage points this year.

Asked about the CEA analysis, a White House spokeswoman, Lindsay Walters, said in an email on Wednesday that “we don’t comment on internal, deliberative documents.”

In her email, Walters pointed to a report issued on Wednesday by the Organization for Economic Cooperation and Development, which includes an economic model predicting positive outcomes if nations around the world reduce tariff levels.

So far, that has not happened. At an event unveiling the organization’s report in Washington, its secretary general, Angel Gurria, warned against tariff escalation. “We regret the proliferation of tariffs announced in the last couple of days,” Gurria said. “We believe they are a threat to the global recovery.”

Other Trump administration officials have also expressed confidence that the White House’s trade policies will not undermine the president’s broader economic agenda.

The internal findings from the CEA appear to echo the widely shared view by most economists that tariffs hurt economic growth. For example, in a March survey of an expert panel of academic economists assembled by the University of Chicago’s Booth School of Business, no economist agreed with the statement, “Imposing new US tariffs on steel and aluminum will improve Americans’ welfare.”

This week, the World Bank said in its Global Economic Prospects Report that if tariff threats led to trade wars, the consequences could be “devastating.” It pointed to intensifying protectionism around the world as a risk to economic growth.

Veterans of previous councils said that sometimes the CEA initiates its own analyses, and sometimes other senior White House officials request an analysis for policy development purposes. But much of the research is held closely for internal consumption.

However, it appears that concern over the administration trade policy efforts is growing, especially following the disagreements seen during the recent G7 meeting. So far, Congress seems unwilling to directly confront the administration over its high risk trade policies. Certainly, producers should watch this debate closely, especially as both USDA and the Congress consider their role in shaping trade policies to protect essential export markets for ag products, Washington Insider believes.

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