Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.US-Japan Trade Talks Conclude But Early Conclusion In Doubt
Japan will not be able to concede on ag trade issues before the July Japanese elections, Japanese Prime Minister Shinzo Abe told President Donald Trump Friday, according to the Financial Times.
U.S. Ambassador to Japan William Haggerty told the paper that Trump was "very clear in reminding the prime minister ... that his goal is to achieve a more reciprocal relationship with Japan."
Trump urged Abe to reduce tariffs on U.S. farm goods, again signaling he could levy tariffs on the approximately 1.7 million cars that Japan sends annually to the United States as negotiating leverage. Trump said that Japan “puts very massive tariffs on our agriculture.” But he added, “We do not tariff their cars so I think that (is) something we will work out.” Abe pointed out that Japan accounts for tens of billions of dollars of investment in the U.S., along with tens of thousands of jobs created by that investment.
Trump said he would like to possibly sign a deal during his planned trip to Japan in late May for the enthronement of Japan’s incoming emperor, Naruhito. The Group of 20 summit meeting is scheduled for the Japanese city of Osaka in June, while the Group of 7 meeting is set for France in August and the East Asia Summit in Thailand.
Japan's chief trade negotiator Toshimitsu Motegi said that a trade deal with the U.S. could require U.S. congressional approval, a sign that Japan could be looking at seeking major concessions from the U.S. in exchange for opening their agricultural markets.
More Time for MFP Certification
May 1 was the date that farmers originally had to submit their 2018 production evidence to the Farm Service Agency in order to receive Market Facilitation Payments (MFP) under the tariff aid plan put in place by the Trump administration.
But USDA Secretary Sonny Perdue this weekend announced farmers will have until May 17 to get that info to FSA offices.
Weather factored into the decision to extend the deadline, as USDA noted that extended the deadline because heavy rainfall and snowfall have delayed harvests in many parts of the country, preventing producers from certifying acres.
To date, more than $8.3 billion has been paid to nearly 600,000 applicants. MFP provides payments to producers of corn, cotton, sorghum, soybeans, wheat, dairy, hogs, fresh sweet cherries and shelled almonds.
However, he reiterated what he has said before on this topic – the MFP/trade aid effort was only for 2018 crops and will not be resurrected for 2019 production.
Washington Insider: Negative Effects of Tariffs Widespread
To nobody’s surprise, agricultural and manufacturing firms have been among those hardest hit by the new tariffs levied in the year-long trade war, according to a new survey of business economists, The Hill says this week.
The National Association for Business Economics reported that about one year after President Trump’s steel and aluminum tariffs took effect in March 2018 businesses felt impacts that varied greatly depending on the type of firm.
Three-quarters of respondents in the goods-producing sector including agriculture, mining, construction and manufacturing reported that recent “tariffs have had a negative impact on their firms.”
That compares to 40% of respondents in the transportation, utilities, information and communications sector who said the tariffs had a negative impact; 11% of respondents in the finance, insurance and real-estate sector; and 25% of respondents in the services sector.
Overall, some 28% of respondents reported that recent tariffs have had a negative impact on their businesses, while 1% said they had a positive impact. A plurality of respondents, 43%, said they had no impact on their firms while another 13% said that the tariffs have been "neutral" for them.
A little over one in five respondents said that tariffs have boosted costs for their companies in the past year with 13% reporting a negative impact on sales. In the goods-producing sector, 67% reported higher costs, 50% reported higher selling prices and 42% reported a negative impact on sales.
Fifty-four percent of respondents in the goods-producing sector reported sourcing changes or supply chain shifts, 31% reported delayed investments and 23% reported delayed inventory because of actual or potential trade-policy changes. Among all respondents, two-thirds reported no changes to hiring and investment as a result of actual or potential trade activity.
The survey results come as Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer travel to China to begin trade talks today. The Chinese government will send a delegation to Washington for more discussions about trade starting on May 8, the White House said.
The U.S. and China both put tariffs on each other's products last year, but President Trump agreed in December not to raise tariffs further while the countries work to reach a deal.
The administration has made trade one of its top economic issues. The president touted the economy on Friday, after the Commerce Department reported economic growth in the first quarter of this year of 3.2%.
NABE also asked its members about the Federal Reserve’s pause in raising interest rates. President Trump has forcefully pushed back against the increases, arguing they are stifling economic growth.
Half of respondents said they expect the rate increase pause to be favorable for business conditions at their firms, while 7% said they expect it to be unfavorable and 39% said it will have no change.
While analyses show that U.S. tariffs on Chinese goods are chipping away at the goods-trade deficit with China, The Hill noted “other questions to answer when it comes to whether the tariffs are having their desired effect.
For example, Axios questioned whether the tariffs are “helping American businesses,” and that observers should remember that U.S. “companies that import pay the tariffs.” When the full slate of tariffs went into effect in October, tariff collections topped $5 billion, the highest amount ever recorded. The amount of tariffs paid by these American companies has doubled since May, including an increase of more than 30% from August to October.
Companies as varied as truck manufacturer Cummins, equipment maker Caterpillar, chipmaker Nvidia and washing machine manufacturer Whirlpool have all separately issued lower 2019 guidance citing the tariffs as a direct cause.
An analysis of 7,000 individual products subject to new tariffs shows that there has been a measurable slowdown in purchases from both the U.S. and China. However, both Chinese and American firms are largely finding substitutes or eating the price increases instead of passing them on to consumers, Axios said.
While economic metrics for China have fallen during the tariff war, along with the country's stock market, the pullback has been largely in line with expectations for the country's move from an export- to service-driven economy.
Who is benefiting? India, Brazil, Cambodia and other countries who can offer substitute products and locations. India's exports to China from June-November 2018 increased by 32% and rose 12% to the U.S.
Brazil, the world's second largest soybean producer, more than doubled its shipments to China, the largest soybean importer in October, while China imported just 66,955 metric tons of American soybeans that month, compared to 1.33 million metric tons a year earlier.
While it is hard to ignore the extremely uneven business impacts from the trade wars for “frontline” and other subsectors of the economy, the Trump administration’s political base seems to be largely holding fast even as political fights intensify. These budget and economic policy battles should be watched closely as they become increasingly controversial and last even longer over the coming months, Washington Insider believes.
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