Washington Insider -- Wednesday

By DTN's Washington Insider

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

Grassley Says His Views on Trump Trade Efforts Have Shifted

Trade policy actions by President Donald Trump have started to bear fruit and that has prompted Sen. Chuck Grassley, R-Iowa, to shift his views on the administration's trade actions. "Quite frankly, we thought they did not know what they were doing," Grassley told reporters. "Now it looks like things are coming together."

The U.S.-Mexico-Canada Agreement (USMCA) and updated South Korea trade deal are two of the factors contributing to Grassley's shift. "Until the USMCA, there was a doubt about whether the president could really pull it off. Now that he was succeeded, I think it reinforces the fact that [farmers] are going to stick with the president," Grassley told reporters in his weekly call.

At a stop in Spirit Lake, Iowa, on Monday, Grassley said the USMCA deal could be a key for pork. "Corn and soybeans — nothing special for us in regard to Canada, but the fact that we got an agreement with Canada means we can move along our agreement with Mexico. Mexico's the number one buyer of our corn and also a big buyer of our pork," Grassley said.

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Sen. Portman Calls for Removal Of Steel, Aluminum Duties Against Mexico And Canada

Now that the U.S.-Mexico-Canada Agreement (USMCA) has been worked out, the US needs to remove tariffs on aluminum and steel imports from Canada and Mexico as leaving them in place could jeopardize support for the deal with lawmakers, according to Sen. Rob Portman, R-Ohio.

"The notion is, OK, we have reached this agreement, painstaking as it was ... and now we are being asked to vote on it, but wondering whether we are going to have a second shoe drop," Portman said after remarks at the Heritage Foundation. "I think it would be better if we were just about to resolve those issues along with the revised NAFTA and know that what we are voting on is going to have the kind of predictability and stability we want."

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Washington Insider: Companies Log Tariff Complaints

Increasingly, U.S. companies are registering complaints about the administration’s tariff war. For example, Bloomberg is reporting this week that Ford’s CEO sees a “$1 billion hit to profit linked to levies.”

He also argues that “president Trump’s tariffs have made steel more expensive in the U.S. than any other market,” escalating the company’s criticism of the president’s trade war.

“U.S. steel costs are more than anywhere else in the world,” Joe Hinrichs, Ford’s president of global operations, said Monday. He added that Ford is talking to the administration about the tariffs: “We tell them that we need to have competitive costs in our market in order to compete around the world.”

Domestic hot-rolled coil – the benchmark price for American-made steel – has gained 28% in 2018 as the Trump administration implemented tariffs on imports. The levies helped push prices to about $920 a metric ton earlier this year, the highest in a decade. U.S. steel currently costs about $260 more per short ton than steel in China, which accounts for more than half of global demand.

President Trump often portrays his levies as key to getting other countries to accept to his trade demands. When celebrating a trade deal with Canada and Mexico to replace NAFTA earlier this month, he referred to those who have complained about tariffs as “babies.” The president also accused motorcycle manufacturer Harley-Davidson Inc. of using them as an excuse to move jobs overseas.

As a result, it has been a rocky road for relations between Ford and Trump, Bloomberg says. He repeatedly attacked the company on the campaign trail in 2016 for announcing its intention to move small-car production to Mexico. The automaker earned the president-elect’s praise for nixing that plan weeks before his inauguration.

Trump has since answered a call by Ford and other carmakers for the U.S. to re-examine fuel economy standards set by the Obama administration. The company received this relief with some trepidation, clarifying that it wasn’t asking for a rollback to rules and didn’t want the federal government to battle states led by California over their tougher standards.

President Xi Jinping has gone tit-for-tat with Trump, matching his 40% tariff on imported vehicles – a decision that has led Ford to reduce American exports to China, particularly of Lincoln models that it’s trying to sell in the world’s biggest auto market.

While Ford only sells a small number of vehicles into China, it’s been struggling mightily in the market. Sales there have declined in 14 of the last 15 months and plunged 43% in September, as trade tensions combine with a stale lineup and dearth of sport utility vehicles to drag on demand.

Also, Bloomberg says that the “cost of doing business” increasingly includes expensive lobbying as business groups including the U.S. Chamber of Commerce ramped up their spending on lobbying during the third quarter,” intended to contain the damage from President Donald Trump’s trade war.

The report says the new tariffs on imports of steel, aluminum and Chinese goods, along with his effort to reshape NAFTA have been an increasingly important driver behind efforts to influence American trade policy.

There were more than 390 reports during the third quarter that included “tariff” as a specific lobbying issue, more than double the almost 140 reports citing tariffs in the same period last year, records show.

Hundreds of these listed NAFTA, the Section 232 metal tariffs meant to bolster U.S. producers and Section 301 duties on Chinese imports. The filings came two weeks before Congressional elections and just as lawmakers begin to decide on whether to approve a revised NAFTA accord with Mexico and Canada.

The chamber, the largest U.S. business lobby, spent $17.6 million on lobbying during the third quarter, a 34 percent increase from the same quarter last year.

The National Association of Manufacturers, which also has pushed the Trump administration to include both Canada and Mexico in a renegotiated NAFTA and to negotiate a bilateral trade deal with China, reported that its lobbying spending for the third quarter more than doubled from the same period last year to $2.85 million.

Trump has argued that his metal tariffs have buoyed U.S. producers and that any short-term economic pain from the duties on Chinese imports and retaliation will be offset by a better long-term deal.

But hundreds of companies and associations have filed public comments and testified in opposition to Trump’s tariffs on Chinese imports – most without success – and many are now seeking exclusions for specific products. Thousands of requests for exclusions on metal import duties also have been filed.

So, we will see. The administration still seems tightly dug in on its “get tough” trade stance and argues that it has strong support for that position. Whether or not that holds through the fall elections remains a key question—and producers should watch closely as these policy issues are tested at the polls, Washington Insider believes.

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