Washington Insider -- Monday

Trade Policy and Farmer Angst

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

Trump Asks USTR to Consider another $100 Billion in China Trade Tariffs

President Donald Trump late-Thursday announced he is directing U.S. Trade Representative Robert Lighthizer to consider another $100 billion in tariffs on imports of Chinese goods.

"Rather than remedy its misconduct, China has chosen to harm our farmers and manufacturers. In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under Section 301 and, if so, to identify the products upon which to impose such tariffs," Trump said.

Trump also said he "also instructed the Secretary of Agriculture, with the support of other members of my Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests."

Despite the order to consider more tariffs, Trump also called for talks between the two sides. "Notwithstanding these actions, the United States is still prepared to have discussions in further support of our commitment to achieving free, fair, and reciprocal trade and to protect the technology and intellectual property of American companies and American people," Trump said. "Trade barriers must be taken down to enhance economic growth in America and around the world. I am committed to enabling American companies and workers to compete on a level playing field around the world, and I will never allow unfair trade practices to undermine American interests."

House Ways & Means to Examine US Tariffs

The House Ways & Means Committee will hold a hearing April 12 on the trade tariffs ordered by the Trump administration, examining the impact on various sectors of the U.S. economy.

"Our private sector witnesses will discuss the impact of recently announced U.S. tariff increases on their businesses, including product and country coverage of the tariffs, the process to comment on and apply for exclusions from the tariffs and the effects of possible retaliation on U.S. exporters," Ways & Means Committee Chairman Kevin Brady, R-Texas, said in a statement announcing the April 12 hearing.

Washington Insider: Trade Policy and Farmer Angst

Well, rural politics and the ag sector made the front page on lots of media over the weekend, but the tone was unwelcome. For example, Senator Pat Roberts of Kansas, one of the deepest-dyed Republican stalwarts and chair of the Senate Agriculture committee, made more than a few headlines for ripping the administration's trade dispute with China saying “farmers and ranchers should not be collateral damage.”

The Hill reported that Roberts emphasized, “These are real people, real families. You don’t use them as a playing card, I think that’s the most upsetting thing that has happened.”

Roberts is expressing some of the political shock that is emerging as the administration pushes its trade dispute with Beijing after the White House on Tuesday detailed a $50 billion tariff package on China, with 25% tariffs being leveled on imports of Chinese electronics, shoes, furniture and other goods.

To no one’s surprise, Beijing retaliated, proposing 25% tariffs on imports of U.S. soybeans, corn, airplanes and automobiles in a package that totals about $50 billion worth of goods.

Commodity futures markets plummeted in response to the tariffs.

“It’s very disconcerting,” Roberts told the Kansas City Star. And he’s not the only Republican to express concern and criticism over the tariffs, The Hill said.

Sen. Chuck Grassley, R-Iowa, said on Wednesday that agriculture industry workers should not have to bear the brunt of China's retaliation against U.S. tariffs.

“The United States should take action to defend its interests when any foreign nation isn’t playing by the rules or refuses to police itself. But farmers and ranchers shouldn’t be expected to bear the brunt of retaliation for the entire country," Grassley said.

Agriculture Secretary Sonny Perdue said President Trump reassured him that farmers would not be hurt by an ongoing trade dispute with China.

"If these tariffs actually come into play, it's going to be concerning to our farmers. But I talked to the president as recently as last night. And he said, 'Sonny, you can assure your farmers out there that we're not going to allow them to be the casualties if this trade dispute escalates. We're going to take care of our American farmers. You can tell them that directly,'" the secretary said.

A number of Republican lawmakers were not so sure. The New York Times said the President’s moves have “injected damaging uncertainty into the economy as Republicans are already struggling to maintain their hold on the House and the Senate in a difficult election year.”

It concluded that “control of the Senate could come down to Republican efforts to unseat Democrats in North Dakota, Indiana, Missouri and Montana,” all states staring down the barrels of a trade war’s guns.

In the meantime, Trump shows no sign of backing off, the Times says.

Also, the administration is talking up its direction to USDA to help farmers cope with the damage from tariffs—but very few details have been forthcoming about how such a program would work or how much it might cost.

Farmers have been among the most organized groups in lobbying the administration about its trade policy. But as trade tensions with China have escalated, some say their complaints appear to be falling on deaf ears. Many of them are now complaining to Congress, NYT said.

This includes a number of Republicans. For example, Iowa’s senators — Joni Ernst and Charles Grassley, both Republicans — have called on Trump to reconsider. In a statement, Ernst cited the “real danger that increased tariffs on U.S. exports will harm Iowa producers and undermine the rural economy,” and she said she had spoken directly with the president about it.

And there’s another factor in this trade policy debate and efforts to protect producers. President Carter’s embargo of commodity shipments to Russia in 1980 was only on ag products and the protections he provided were regarded as too weak. This time, ag is involved again, but it is not alone. Carmakers and Boeing would be hit hard by China’s tariffs. Many American companies purchase products from Chinese factories, while others rely on the country’s vast consumer market to sell their goods. Protecting all sectors involved could be very costly, but not protecting some exporters while stepping in to protect ag producers likely would be politically risky.

In addition, the White House strategy to press China to reform its economic behavior seems entirely opaque, the Times said. It cited new White House economic advisor Larry Kudlow who said that the administration was holding back-channel talks with the Chinese, but that he would not characterize them as negotiations. He added that the United States was considering providing China with a list of the changes the United States would like to see, but that it had not yet done so.

So, we will see. The 1980 embargo appeared to have little impact on Russia but left a long trail of political wreckage across the Midwest—in fact, many argue that all trade embargoes to achieve social goals have damaged the United States the most. And market indicators already are signaling powerful domestic economic threats. This is a critical issue producers should watch closely as the debate proceeds, Washington Insider believes.

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