Washington Insider -- Friday

Costing New Tariff Impacts

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

RFA: Minnesota Data Backs Up Year-Round E15 Decision

Demand for E15 fuel year-round is being shown by data released in Minnesota, but the Renewable Fuels Association (RFA) said that the figures underscore the need for EPA to scale back the broad use of the small refiner exemptions under the Renewable Fuel Standard (RFS).

The Minnesota data did not show a “plummet” in E15 sales volumes in June, RFA noted, the first month of the summer driving season when E15 sales were prevented before the EPA action to makes sales of the fuel okay year-round. Sales of E15 jumped from 3.66 million gallons in June 2018 to 6.30 million gallons in June 2019, according to the data. There was also an 18-percent rise in the number of fueling stations in Minnesota that sold E15, RFA noted.

“The data from Minnesota confirm that the market is already reacting positively to the elimination of the unnecessary and ridiculous summertime restriction on E15,” said RFA President and CEO Geoff Cooper.

But, the data also show that EPA’s “unrestrained” use of SREs is having an impact. “In recent months, E15 sales volumes per station have been slightly below year-ago levels due to weakened RFS requirements and lower prices for the RFS compliance credits known as RINs,” RFA noted.

UK Keen to Work On US Trade Deal

British Foreign Secretary Dominic Raab, a close ally of Prime Minister Boris Johnson, met with President Donald Trump on Wednesday, while Trade Secretary Liz Truss met with U.S. Trade Representative Bob Lighthizer earlier in the week.

After meeting Trump, Raab said the UK government is committed to leaving the European Union (EU) by October 31, and aims to complete a bilateral agreement with the U.S. “as soon as possible after.” Truss called a trade pact a “golden opportunity.”

Meanwhile, Secretary of State Mike Pompeo expressed confidence that the UK and EU would “sort this out.” He said the U.S. supports the UK “and will be on the doorstep, pen in hand, ready to sign a new free-trade agreement at the earliest possible time.”

Washington Insider: Costing New Tariff Impacts

Media focus on U.S. trade policy is intensifying and that U.S. technology companies “would pay an additional $1 billion a month or more in tariffs if the President follows through on his threat to impose duties on additional Chinese imports, according to Bloomberg.

It cited a report by a campaign “trade group” opposed to the duties that said tariffs paid on products subject to all Trump’s duties were $3.4 billion in June, up from $2.8 billion in May.

The data, compiled from the U.S. Census Bureau, give a first glimpse at the impact of the proposed expected tariff increase on $200 billion in Chinese goods to 25% from 10%, Consumer Technology Association said.

The CTA took pains to observe that tariffs on imports are taxes paid largely by consumers and that the U.S. tech industry was assessed $1.7 billion in tariffs in June. It also pointed out that the additional levies set to take effect on Sept. 1 would impact about $13 billion in technology imports from China that month, including mobile phones, laptops, televisions and smartwatches.

“Tariffs are taxes” the group repeatedly emphasized and that “increasing costs for companies puts consumers in the middle of the President’s trade war,” Gary Shapiro, the group’s chief executive officer said.

Bloomberg also commented that in this battle, the current leaders are making “big bets that could backfire.”

“Americans are already paying record-high tariffs, with the biggest hit to consumers is still to come on Sept. 1,” Tariffs Hurt the Heartland spokesman Jonathan Gold said.

Trade associations and coalitions opposed to the tariffs are repeating their calls for the U.S. and China to return to the negotiating table and complete a trade deal. The CTA also called on Congress to pass legislation limiting the president’s authority to impose duties, which it said would reassert the role of lawmakers in trade policy.

In addition, Bloomberg said it sees new evidence that farmer discontent over President Donald Trump’s escalating trade war with China was growing along with skepticism of the administration’s assertion that “China pays the U.S. tariffs.” Producer pushback was notable on Wednesday “as his agriculture secretary was confronted at a fair in rural Minnesota,” Bloomberg said.

Gary Wertish, president of the Minnesota Farmers Union, drew applause as he leveled criticism of the administration’s trade policy at a forum with Agriculture Secretary Sonny Perdue in front of “thousands of farmers” gathered in a metal barn for a panel discussion.

Wertish criticized Trump’s “go-it-alone approach” and the trade dispute’s “devastating damage not only to rural communities.” He expressed fears Trump’s $28 billion in trade aid will undermine public support for federal farm subsidies, saying the assistance is already being pilloried “as a welfare program, as bailouts.”

Others joined in, Bloomberg said. Brian Thalmann, president of the Minnesota Corn Growers Association, complained about Trump statements that farmers are doing “great” again. “We are not starting to do great again,” he said. “We are starting to go down very quickly.”

Joel Schreurs of the American Soybean Association warned American producers are in danger of long-term losses in market share in China, the world’s largest importer of soybeans.

Perdue sought to soothe the crowd by defending the president’s policies. He offered assurances that American farmers would gain their market share back in China but said any resolution to the conflict had to be based on “reciprocal trade. If your solution is to forget about what China has done and sell and trade with them anyway with cheating, then I just fundamentally disagree with you,” Perdue said.

Perdue told reporters afterward that the ball is in China’s court on the trade dispute and no additional trade assistance is currently planned for farmers beyond what the administration has already announced.

Bloomberg concluded that farmers and other rural groups that have been strong administration supporters are showing signs of more openly criticizing recent trade policies and that the “trade aid” is not seen as adequate – and that overall the heavy reliance on tariffs may not be achieving the desired results. U.S. farm income dropped 16% last year to $63 billion, about half the level it was as recently as 2013, the report said.

The President’s overwhelming support in rural America was crucial to his narrow 2016 election victory, Bloomberg said, and likely will continue to be critical to his re-election bid next year. In June, 54% of rural voters approved of Trump’s job performance compared with a national approval rating of 42%, according to a Gallup survey of 701 self-identified rural voters.

So, we will see. Clearly, the recent collapse of negotiations with China has been a severe disappointment to producers. What its political impacts will turn out to be remains to be seen – but it appears likely that USDA officials who will be dispatched to calm farm groups at the many local and state fairs may face increasing producer ire as trade issues continue to be hotly debated, Washington Insider believes.

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