Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.EPA Set To Outline New WOTUS Rule
EPA is set to unveil its version of the Waters of the US (WOTUS) rule, seeking to replace the version put forth by the Obama administration that drew scorn from U.S. agriculture.
The new WOTUS rule is aimed at ending uncertainty over federal jurisdiction over waters and contacts advise the effort will be "clear and easy" to understand, giving landowners an understanding of whether a project on their property would need a federal permit or not.
However, the current WOTUS rule is partially tied up in courts, with the 2015 version in place in 22 states, the District of Columbia, and the U.S. territories. The prior regulation is in effect in the remaining 28 states.
EPA's plan will establish "national consistency" and seek to rebalance things between the federal government and states in managing land and water resources.
$1.5 Billion Award for Corn Growers
A federal judge has approved a settlement of $1.51 billion for than 650,000 corn growers in the U.S. who charged they were financially harmed when China halted importing U.S. corn for nearly a year near the end of 2013.
Syngenta was sued for selling a strain of corn seed called Viptera to U.S. farmers starting in 2011, before it was approved by China for corn imports.
This resulted in U.S. corn farmers being effectively locked out of the China market until the corn strain won approval in 2014.
U.S. District Judge John Lungstrum of Kansas agreed with the recommendation of a special master appointed in the case to award one-third of the total amount, or about $503.3 million, in attorney fees. The judge will hold a hearing Dec. 17 to determine how to allocate the fees among the dozens of plaintiff law firms involved in the case. Lungstrum called the settlement amount “very impressive,” noting it is one of the largest known settlements in any kind of case.
Washington Insider: Growing Fear of Rising Economic Pressures
The Hill is reporting this week that amid rising trade tensions with China and others, a “fading economic outlook and questions about rising interest rates” are beginning to pose new challenges to the president as he prepares for his reelection campaign.
Sputtering negotiations between Washington and Beijing over tariffs and other trade barriers rattled financial markets this past week, frightening traders who were already bracing for a possible recession in 2019, The Hill said.
While Friday’s respectable employment report from the Labor Department showed encouraging signs of wage growth from November, it also bolstered the case for a December interest rate hike by the Federal Reserve — and sent Wall Street reeling. The Dow Jones Industrial Average lost 558 points by the end of trading Friday, a 2.2% drop, while the S&P 500 and Nasdaq composite fell 2.3% and 3%, respectively.
This is despite consistently low unemployment, currently at a 49-year low of 3.7%.
Grant Thornton chief economist Diane Swonk is forecasting that a recession will start in the first half of 2020, six months earlier than she had initially predicted. If she’s right, Trump will face the herculean task of securing reelection while the economy is contracting.
“Election years don’t stop recessions from occurring,” Swonk wrote in a research note this past week. “That said, recessions are notoriously hard to time. No one knows for sure which straw will break the camel’s back, only that they are piling up.”
Analysts are keeping close watch on a slew of economic risks now “with Trump's trade policies topping the list.” The president has threatened to withdraw the US from the North American Free Trade Agreement if Congress doesn’t approve a revised trade deal with Canada and Mexico and he has sent mixed signals about a potential agreement with China.
For example, the president sent stocks soaring a week ago Monday when he declared “a big leap forward” with Chinese President Xi Jinping after the two met recently at the Group of 20 summit. He said his administration and China have agreed to work out a deal within the next 90 days to increase Beijing’s purchase of American agricultural goods and suspend some tariffs.
The exact terms of the negotiations remain unclear — and are creating market uncertainty that led to concern and then action in the form of a sell-off.
Initial optimism about the deal faded the next day when the President declaring himself “a Tariff Man” on Twitter and warned of steep consequences for China if Xi failed to meet his demands. Canada’s arrest of a top Chinese tech executive on behalf of the US also inflamed Washington's relationship with Beijing.
“Investors have a list of worries, from slower corporate earnings growth to higher interest rates, but the potential of an escalating trade war is at the top of the list,” Mark Zandi, chief economist at Moody’s Analytics, told The Hill. “The President appears to believe his negotiating tactics will win the day but instead they are undermining confidence and delaying the end to the war.”
Some U.S. businesses say they are being kneecapped by administration tariffs on imported steel, aluminum and Chinese goods, along with foreign retaliation on U.S. agricultural exports. The U.S. trade deficit reached $55.5 billion in October, the highest level in a decade, while American businesses paid $6.2 billion in tariffs, according to a pro-trade group's analysis of federal data.
The economic crunch from the ongoing trade battles is expected to weigh on the Fed in the next few days when the bank’s policymaking committee meets to discuss whether to hike interest rates. The Fed is expected to raise rates in December — but could potentially signal an imminent pause as it considers the path of the economy, The Hill argues.
The Fed has been gradually hiking rates since 2015 as the economy recovered and joblessness plummeted. However, the President has blasted the Fed and its chairman, Jerome Powell, for those rate increases, breaking with most of his party to accuse the central bank of harming the economy. Rising interest rates also suppress stock market performance, making it harder for Trump to tout the economy.
The U.S. added 155,000 jobs in November, below economists’ expectations. Steady declines in housing sales, exports and business investment also raised alarms about the long-term prospects.
But the employment report also showed wages rising at a 3.1% annualized level, an encouraging increase after years of modest gains.
Traders saw that data as support for a Fed rate hike, and the Dow closed with a loss as U.S. stocks have dipped back into negative territory for the year and suffered their worst week of losses since March.
Recent economic reports likely are keeping the Fed on track to raise rates later this month, “but they also support a likely downgrade in the number of rate hikes the committee projects for 2019 from three to just two,” said Curt Long, chief economist for the National Association of Federally-Insured Credit Unions. “The November jobs report was sturdy but uninspiring.”
The administration’s trade policies are increasingly coming under fire as economic volatility has increased, but both sides continue to be deeply dug in. The emerging trade policy fight is one producers should watch closely as it emerges, Washington Insider believes.
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