Washington Insider -- Wednesday

Trade Policy Shifts

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

Trump Asked Japan to Buy US Farm Products: Kyodo

President Donald Trump has asked Japanese Prime Minister Shinzo Abe to buy a “huge amount” of U.S. farm products, according to a report from the Kyodo news agency.

The report cited Japanese and U.S. government sources for the information.

Soybeans and wheat were included in the request, Kyodo said, with the Japanese government said to be mulling its response.

The report indicated one possibility was to buy the products as food security for African countries and would be worth several hundred million dollars, including transportation costs.

Meanwhile, Trump took aim at Japan in wide-ranging comments while in Pennsylvania Tuesday, declaring while the U.S. imports “millions” of cars from Japan, all they buy from the U.S. was wheat.

Endangered Species Act Protections Eased

The Trump administration is making changes to how wildlife regulations are implemented, answering complaints from developers who complained the law has become too onerous.

Environmentalists dispute that, noting the changes will endanger critical wildlife habitats.

The new rules, expected to go into effect in October, would also make it more difficult for regulators to factor in the effects of climate change.

The Endangered Species Act was signed by President Richard Nixon in 1973.

Washington Insider: Trade Policy Shifts

Amid deepening gloom about future economic growth, the administration delayed imposition of the next round of a number of tariffs on Tuesday to limit impacts on holiday shopping, the urban press widely reported yesterday.

The Washington Post said that the White House announced a delay in the imposition of tariffs on Chinese imports of cellphones, laptop computers, video game consoles, and certain types of footwear and clothing until Dec. 15, significantly later than the Sept. 1 deadline previously threatened.

The announcement, which came from the Office of the U.S. Trade Representative, ensures that Apple products and other major consumer goods would be shielded from the import tax until at least December, potentially keeping costs on these products down during the holiday season.

The announcement moved markets sharply higher, the Post said, noting that the Dow Jones climbed close to 500 points, or nearly 2%, on the news. The stock prices of Apple, Best Buy, Mattel and Macy’s were among those that rallied.

The president told reporters that he delayed the additional tariffs “just in case they would have a negative impact on U.S. shoppers” — his most explicit admission so far that the tariffs likely would have raised costs for American consumers and businesses and had a negative impact on the economy.

Previously the president had said, “We’re not ready to make a deal with China.” Now, USTR said the 10% tariff would still go into effect in September on some items, including many food products, gloves, coats and suits. But it said tariffs on other items would be waived completely “based on health, safety, national security and other factors.”

Trump called the delay “meant as an overture to Chinese officials.”

“I’m not sure if it was the tariffs or the call, but the call was very productive,” Trump said, referring to a conversation this week between top Chinese and U.S. negotiators.

Still, he warned that China needs to buy more from the United States, “As usual, China said they were going to be buying ‘big’ from our great American Farmers. So far, they have not done what they said. Maybe this will be different!”

Chinese officials deny that they ever agreed to purchase the farm products Trump had promised, and this soon became clear to the U.S. agriculture industry.

Many businesses had worried openly that higher tariffs on consumer goods ahead of the Christmas shopping season could severely damage the economy at a time when some are already warning that the risk of a recession next year has increased.

The Post said that the tariff delay is likely to keep retail shopping strong this year, citing “many economists,” but also noted that it “does nothing to alleviate the confusion and uncertainty over what Trump will do next in the trade battle.”

The Post called the announcement “the latest in a herky-jerky trade war between the White House and China as the president has tried to pressure Chinese leaders to change their trade practices.” Chinese officials have negotiated but refused to agree to the terms Trump demands, leading to a prolonged standoff.

Trump has frequently threatened dramatic penalties only to back away. His threat of imposing a 10 percent tariff on an additional $300 billion in Chinese imports starting next month spooked investors and many lawmakers, and it led to a steady slide in the stock market in the past two weeks.

“These tariffs were Trump’s idea. Now his team is trying to clean this up,” said Steve Pavlick, a former Trump Treasury Department official who heads policy at Renaissance Macro Research. “I don’t think it’s a coincidence that you see this right before Christmas. They are trying to minimize the impact.”

But Trump’s demands in recent weeks signaled to many that the political peril the prolonged trade war has raised has grown.

Trump had originally threatened to impose these new tariffs on $300 billion in consumer goods by early July, but at a June meeting with Chinese President Xi Jinping, he agreed to hold off. At the meeting, held during the Group of 20 summit in Osaka, Japan, Trump said the Chinese had agreed to dramatically increase purchases of U.S. agricultural goods.

Several weeks ago, U.S. Trade Representative Robert E. Lighthizer and Treasury Secretary Steven Mnuchin flew to Shanghai to meet with Chinese leaders about restarting trade negotiations. Those discussions went poorly, the Post said—and when the president heard back from Mnuchin and Lighthizer about how poorly the trip had gone, he announced that he would move ahead with the 10 percent tariff on $300 billion in Chinese goods in September.

USTR’s announcement on Tuesday was the first sign that the administration might back down from that demand.

Still, the mid-December tariff deadline still could raise concerns among major retailers and importers about higher costs during a crucial window for revenue.

In spite of the positive market responses to Tuesday’s announcement, a number of economists worry that it won’t resolve the trade war sufficiently before the election.

So, we will see. So far, it seems that the administration will ease off its “get tough” policies somewhat. Whether that means a new push for an agreement remains to be seen, however. Whatever the recent tariff policies have become, they certainly should be watched closely by producers as this economic battle proceeds, Washington Insider believes.

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