Washington Insider -- Friday

Trade Fight Proceeds

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

Sen. Roberts: No Plan Presented To Him Yet On Trump Tariff Aid

Senate Agriculture Chairman Pat Roberts, R-Kan., some staff-to-staff contacts have occurred on how USDA might eventually help farmers impacted by President Trump's tariff actions on key importers of U.S. farm products, but no comprehensive plan has been presented to him yet.

“This is getting out of hand,” he told reporters. “We are now seeing a lot of companies and industries that people might not think would be affected and once you start a trade war, it is like shattered glass, you do not know where it is going to end up.”

Roberts noted there has been talk of making anywhere between $15 billion and $30 billion available for aid to farmers hurt by the tariffs. “I do not know how they would do that. I do not know what the criteria would be that they would use,” he said.

House Panel to Assess Impacts Of Tariffs On Farmers, Consumers

House Republicans have scheduled a hearing next Wednesday afternoon to examine how farmers, consumers and businesses have been impacted by President Donald Trump's decision to impose tariffs on goods from China and other trading partners.

"Farmers, growers, and ranchers in my home state of Washington and around the country are significantly hurt because products that they are forced to import to stay competitive — such as agriculture equipment, chemicals, steel and aluminum — are now prohibitively expensive," House Ways & Means Trade Subcommittee Chairman Dave Reichert, R-Wash., said. "Adding insult to injury, these same farmers, growers, and ranchers are experiencing severe retaliation through prohibitive tariffs and other measures by their major customers, including China, Canada, Mexico and the EU."

The session, Reichert said, "will provide an important opportunity to discuss both the direct and indirect negative effects of the US Section 232 and 301 tariffs on America’s farmers, as well as the retaliation they are now experiencing. It will also be an opportunity to discuss the effects on the rural communities that depend on a vibrant agriculture sector."

Democrats earlier had called for a hearing by the full House Ways & Means Committee on the China trade situation.


Washington Insider: Trade Fight Proceeds

The trade war moved rapidly this week as the president raised the ante on Tuesday identifying an added $200 billion in Chinese products that he intends to hit with tariffs.

The Washington Post said that the move “makes good on the president’s threat to respond to China’s retaliation for the initial US tariffs on $34 billion in Chinese goods, which went into effect the previous Friday, and would eventually place nearly half of all Chinese imports under tariffs.”

Administration officials said the tariff fight is aimed at forcing China to stop stealing American intellectual property and to abandon policies that effectively force U.S. companies to surrender their trade secrets in return for access to the Chinese market. “These practices are an existential threat to America’s most critical comparative advantage and the future of our economy,” said Robert E. Lighthizer, the president’s chief trade negotiator.

Trump’s latest new tariffs will not be imposed until the end of a two-month public comment period, the Post said.

Still, early reaction to the president’s action was unfavorable. For example, “Tonight’s announcement appears reckless and is not a targeted approach,” said Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee.

Beijing has vowed to respond in kind to any U.S. trade action. But China only bought about $135 billion in U.S. goods last year, meaning it will run out of American products to tax before it matches Trump’s latest move, the Post said.

Chinese officials are expected to retaliate in other ways, hitting US firms in China with unplanned inspections, delays in approving financial transactions and other administrative headaches.

The president has repeatedly described his resort to tariffs — which are paid by American importers — as a lever to extract negotiating concessions from U.S. trading partners. A few rounds of talks with Chinese leaders this year made little progress, however, and no plans for additional meetings have been made public.

The Trump administration said it cracked down on China for a variety of trade practices involving intellectual property and technology that cost U.S. companies an estimated $50 billion annually.

China’s retaliation to those measures was “without any international legal basis or justification,” Lighthizer claimed Tuesday.

Tuesday’s announcement included a 205-page public notice and list of the individual products that could be hit by the new 10-percent tariffs.

Lighthizer’s office plans four days of public hearings on the trade actions starting Aug. 20.

However, “Trump’s escalation of trade hostilities makes it increasingly difficult to envision an exit path from an all-out trade war. This new round of proposed tariffs takes the fight onto yet another level from which it is going to be difficult for either side to make a graceful retreat,” said Eswar Prasad, former head of the International Monetary Fund’s China division.

Beijing, meanwhile, has unveiled measures to help Chinese companies absorb the U.S. trade blows, pledging to funnel money collected from its own import levies to firms and workers tangled in the escalating trade war.

Chinese officials also encouraged businesses to reduce their reliance on U.S. goods, urging them to shift orders for products such as soybeans and automobiles to suppliers in China or countries other than the United States.

The ministry released no further details about how it would spread the financial relief or whether the aid would cover the total cost of losses, but analysts said the move suggests China could significantly increase its support for industries that stand to be bled by the commercial battle.

There is another unusual aspect to the current trade fight—a very high level of mistrust regarding the issues involved. Not only are many business groups opposing the new policy, but the facts involved are frequently challenged. For example, the New York Times charged this week that “in accusing other countries of cheating the United States, the president misleads the public about a complicated subject.”

The Times didn’t pull punches. It said the President’s “ceaseless complaints about trade — with neighbors like Canada and Mexico, allies in Europe or mercantilist China — is that the United States is getting a raw deal. Much of what the president has said is malarkey.”

In fact, the Times said “the world is not ripping off the United States.” It then goes on to criticize many of the statistics the White House used recently. And, it especially hates the “trade deficit.”

This statistic very frequently describes trade in physical goods but ignores trade in services — a broad category of the U.S. economy that includes movies, software, tourism, legal advice and the college tuition paid by foreign students to American universities, a trade segment in which the US had a large surplus last year. The Times calls reliance on only trade in goods an “inanity” and argues that most economists say larger economic forces are involved including the government’s fiscal deficit.

So, we will see. Throughout the 2016 campaign, both parties criticized trade in broad, non-specific terms. Now, the economy faces prospects of seeing important markets undercut repeatedly with only small prospects of future benefits and a growing group of businesses are now pushing hard for a realistic, detailed examination of costs and benefits — including the costs of long - term rebuilding important markets that were the results of years of investment and cooperation and are now threatened, a daunting prospect, Washington Insider believes.

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