Washington Insider -- Friday

U.S.-China Trade Talks the Main Focus

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

US-China Trade Talks the Main Focus

The Trump Administration early Friday imposed higher tariffs on Chinese goods.

Markets will be keying in on any word from talks in Washington between U.S. and Chinese officials. Expectations are the most important meeting may well have been a dinner session between U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He.

The situation with the U.S.-China talks swung between pessimism and modest optimism Thursday as the U.S. published the notice in the Federal Register that it was increasing tariffs on $200 billion in Chinese goods.

In a statement on Friday, China’s Ministry of Commerce said that the government “deeply regrets that it will have to take necessary countermeasures.” It didn’t specify what those countermeasures might be.

President Donald Trump prompted the modest optimism when he declared in comments at the White House that he received a "beautiful" letter from Chinese President Xi Jinping. Trump also commented that a deal could still possibly be reached yet this week.

Given the negative response to his aggressive tweets on Sunday and comments earlier in the week on China backtracking on their trade commitments, markets were only moderately supported by the comments.

But the expectation is that if the U.S. and China do not reach an agreement or at least agree to withhold taking additional trade actions, the trade situation will extend for another few weeks.

US Ag Imports Hit New Record in March

The value of U.S. agricultural exports rose to $12.05 billion in March, up $1.2 billion from February, but imports hit a record $11.94 billion as they rose nearly $2 billion from the February mark.

That left just a $111 million trade surplus, the smallest since the U.S. registered an ag trade deficit of $46 million in May 2017.

The export total was the third highest of Fiscal Year (FY) 2019 and marked five out of six months so far in FY 2019 that imports have been valued at $10 billion or more.

The value of U.S. ag exports so far in FY 2019 totals $66.95 billion, down sharply from $74.86 billion at this point in FY 2018, while imports are at $65.15 billion, up from $63.92 billion one year ago.

That sets the stage for U.S. agriculture to fall short of the FY 2019 forecast of $141.5 billion and to beat the forecast for imports of $128 billion.

Washington Insider: Alarm Over Looming Budget, Shutdown Battles

It’s never too early to worry as The Hill is reporting this week that alarm bells are starting to go off on Capitol Hill over a looming fight to fund the government and prevent a shutdown later this year.

Although Congress has until the end of September to pass legislation preventing another funding lapse, “lawmakers are sending up warning signs to their colleagues and the White House that they are heading toward a fall train wreck, with deadlines for raising the debt ceiling and preventing across-the-board budget cuts and the second shutdown of the year all in the same month.”

Senate Appropriations Committee Chairman Richard Shelby, R-Ala., said Wednesday that he highlighted the deadlines and the consequences for failing to get a budget deal, during a GOP lunch this week with Vice President Pence and in a phone call with acting White House chief of staff Mick Mulvaney.

The growing concern about the chances of getting agreements to raise the budget caps and fund the government comes as Congress and the administration have struggled for months to strike a smaller deal on a stalled package of disaster recovery aid.

Sen. John Thune of South Dakota, the No. 2 Senate Republican, said the struggle to reach a deal on disaster aid was “not a good bellwether” for the rest of the fiscal year.

Senators appeared optimistic late last week that they would be able to reach a deal on the recovery legislation after Shelby and Sen. Patrick Leahy, D-Vt., swapped offers. But they ran into a “hiccup” over the weekend, and senators signaled this week that the administration’s $4.5 billion request for emergency funding for the border was complicating the talks. With legislation slowing to a crawl in the Senate, the White House has a limited number of must-pass bills it could try to attach the border funding to.

“Well, we have to see what exactly he wants,” Minority Leader Charles Schumer, D-N.Y., told reporters during a weekly press conference. “But you know, again, he complicated up the disaster bill once. Maybe now he’s doing it twice. That’s what it seems to be.”

The disaster aid bill stalemated more than a month ago after the President criticized Puerto Rico’s handling of recovery money during a closed-door Republican lunch. He tweeted this week that “Puerto Rico should be very happy and the Dems should stop blocking much needed Disaster Relief!”

Shelby acknowledged Wednesday, more than a month into the standoff, that he doesn’t know what the White House wants in the legislation in order for the President to sign it. Asked if he thought Mulvaney was playing a “constructive” role in the disaster relief negotiations, Shelby responded by saying: “Constructive role? He’s certainly playing a role.”

Still, the disaster bill “pales in comparison to the months-long process for preventing an October shutdown — budget deals in Congress followed by passing 12 appropriations bills,” The Hill said.

In the meantime, House Democrats are pushing ahead with their own spending plan, setting up a clash with GOP senators and the White House as the fall deadlines draw closer. House Democrats are aiming to pass all 12 of their appropriations bills next month, potentially giving them an opening for leverage in the upcoming funding negotiations.

Thune said Wednesday that he expects several Senate Republicans will want to get a two-year budget deal but hadn’t gotten a clear signal from the White House whether the administration would accept such an agreement.

When asked if the current stalemate raises concerns about trying to fund the government, Sen. Dick Durbin, D-Ill., responded that Senator Shelby hasn’t been given clear direction on where we’re going. “He wants to go to work and I want to join him. Without a number, we’re at a loss,” he said,” referring to the need for topline defense and nondefense figures.

Republicans prided themselves on their appropriations work last year, when they passed all 12 bills in the committee by the end of June. But even that high-water mark ended in multiple short-term spending bills and a 35-day partial government shutdown, the longest in U.S. history.

Shelby said he warned Mulvaney and his colleagues that if they can’t resolve disaster aid it would be a “bleak winter” as they try to fund the government.

“I told the caucus and I told Mulvaney, too ... the disaster bill is very important,” Shelby said. “But it pales in comparison to what the next thing is — the big regular appropriations. If we can’t work this out, we’re going to have a bleak winter.” He added to reporters, “You guys will be here a long time. So, don’t plan any vacations.”

Clearly the political stakes working through budget challenges are extremely high, as they are in many debates just now. Increasingly, this year’s budget battles should be watched closely as they emerge, Washington Insider believes.

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