Washington Insider -- Friday

New Tariffs for European Exports

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

US-China Trade Talks Ahead

Trade talks between the U.S. and China are expected to resume next week in Washington as the thirteenth round of negotiations unfolds. It is unclear whether either side is willing to make the concessions necessary for a deal, observers note.

Chinese officials and some media reports are still spinning a possible interim agreement that President Donald Trump has made clear he does not support as he favors a comprehensive, enforceable agreement.

However, an interim or small-scale deal centered around China buying more U.S. agriculture products and the U.S. postponing planned tariff increases set for October 15 and December 15 is seen as still being possible if the two sides show some flexibility, according to some reports.

Unknown is whether the U.S. will demand more in return for postponing the tariff increases.


Expectations Rising For Biofuel Announcement

The Trump administration’s EPA may use partial waivers under the Small Refinery Exemptions (SREs) as part of a biofuel package, according to Reuters.

The news service previously reported that EPA ignored advice from the Department of Energy that some of those applying for SREs should get only partial waivers.

While most reports indicate the deal will be announced next week, sources have indicated that the package could be announced by President Donald Trump as early as today.

The announcement is close to what has been speculated about the package in recent weeks. Keys will be how it is accepted or rejected by both biofuel proponents and the oil industry.

An expected boost in ethanol use would begin to impact starting with the 2020-21 corn marketing year.

Washington Insider: New Tariffs for European Exports

The Trump administration said Wednesday that it would impose tariffs on European aircraft, French wine and cheese, Spanish olive oil and other goods starting Oct. 18, the New York Times reported this week.

The tariffs are part of a WTO decision over a long-running complaint over subsidies given to the European plane maker Airbus and are intended to allow the United States to recoup some of the losses the American plane maker Boeing sustained because of Europe’s trade practices. The WTO said the U.S. could to impose tariffs on $7.5 billion in trade from Europe annually, and the new duties can be applied “until the two sides reach a negotiated settlement, or the organization decides that Europe is in compliance with its rules.”

The tariffs are seen as likely to raise prices for American customers who import products from Europe and to affect airlines, manufacturers and consumers at the grocery store, the Times said. It said the list of products affected “reads like a gourmet shopping list, with the administration planning to place a 25 percent tax on imports of Parmesan cheese, mussels, coffee, single malt whiskeys and other agricultural goods from Europe.”

The WTO decision ends a roughly 15-year dispute over the financial assistance Europe provides to its major plane maker. It followed a ruling last May that Europe had illegally subsidized several Airbus models and is the largest authorized retaliation in the organization’s history.

The U.S. Trade Representative (USTR) said it plans to levy a 10 percent tariff on European aircraft and a 25% tariff on agricultural goods, industrial products and other imports “in an effort to pressure the European government to abandon its subsidies.” USTR Robert Lighthizer said. “We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”

European officials pushed back hard on the U.S. announcement and said while they are eager to negotiate a solution they also are prepared to respond with levies on American goods. The WTO is considering a parallel case that the EU brought against the U.S. for subsidizing Boeing and the EU has its own list of $20 billion in American products that it could tax in response.

However, Cecilia Malmstrom, the European commissioner for trade, said that the European Union had been trying to head off the possibility of American retaliation through negotiations, but had failed so far. The U.S. had been receptive to further discussions but not to the idea of delaying its tariffs, she said.

The USTR argued that the Europeans had not put forward a sufficient solution and that the nature and size of the subsidies provided by the EU dwarfed anything that the United States provided to domestic companies.

An escalating trade spat with Europe would open another front in the global trade war that the administration has undertaken in an effort to change trade terms that it claims have long disadvantaged the U.S. The president already has imposed tariffs on more than $360 billion of products from China in addition to levies on washing machines, solar panels and steel and aluminum from Japan and Europe.

Those actions have raised the average American tariff rate on imported goods to levels not seen in decades — the U.S. now has the highest tariff levels of any of the Group of Seven industrialized nations.

In a report published Tuesday, the WTO slashed its forecast for global trade growth for this and next year as trade tensions between the U.S. and the EU have already been running high. The governments announced in mid-2018 that they would work toward a trade agreement but negotiations quickly stalled over a dispute about agriculture which the U.S. insists should be included in the talks. President Trump has been fiercely critical of Europe’s trade policies and is considering hitting the eurozone with additional tariffs this fall on cars exported to America, the Times said.

Chad P. Bown, a senior fellow at the Peterson Institute, said the planned exchange of tariffs highlighted the failure of the U.S. and Europe to work together to write more comprehensive rules about global trade, particularly subsidies. That could have major implications for China, which the U.S. and other countries have criticized for unfairly subsidizing its companies and undercutting other companies around the world.

Even though the new tariffs would be in line with global rules they still would weigh on the economy and American companies.

Airbus said that the company spent $50 billion purchasing products in the United States in the last three years — more than it spent in France, Germany or Britain. And if the U.S. does impose tariffs on aircraft or aircraft parts, the company said, it would “create insecurity and disruption not only to the aerospace industry, but also to the broader global economy.” They “would have a negative impact on not only the U.S. airlines but also U.S. jobs, suppliers and air travelers,” Guillaume Faury, the company’s chief executive said.

So, we will see. The new U.S.-EU tensions come amid growing concerns about the economy and about the next steps expected by the Fed and others. Certainly, these developments should be watched closely by producers and others as they are revealed in the coming weeks, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com