Washington Insider -- Friday

Questioning the Get Tough Trade Policy

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

Pelosi Comments Still Positive On Prospects For USMCA

While most have focused on Democratic leaders walking out of a meeting with President Donald Trump where both sides have traded accusations about someone suffering a “meltdown,” House Speaker Nancy Pelosi, D-Calif., made additional statements that indicate she is still working toward House approval of the U.S.-Mexico-Canada Agreement (USMCA).

"We will do what we need to do for the good of the American people, and that has nothing to do with him," Pelosi said, with “him” being Trump. "There may be some collateral benefit to him when we successfully achieve some things for the American people. But there's no reason not to do it because there's collateral benefit to him."

U.S. Trade Representative Robert Lighthizer was scheduled to meet with House Democratic working group on USMCA Thursday, and some indicate there could be multiple meetings in the next week on the matter.

Members of the group and Speaker Pelosi continue to insist that progress is being made.

Disaster Aid Funding Soon: Perdue

USDA Secretary Sonny Perdue said this week that U.S. farmers should see disaster aid funding soon.

“Farmers who are eligible for individual disaster aid that signed up last month, the money should start flowing in this week.”

Perdue said earlier this week in Georgia, adding USDA is working with the states on block grants to cover damage to non-traditional items like timber and animal facilities.

However, farm and commodity groups have notified lawmakers that the $3.050 billion in funding for Wildfire and Hurricane Indemnity Program Plus (WHIP+) will not likely come close to needs, a development that was widely expected given the amount of funding and potential claims expected to be made.

Washington Insider: Questioning the Get Tough Trade Policy

There have long been concerns in some quarters about the basis for the Trump administration’s “get-tough” policy with China, and other. This week, a number of industry and media sources are persistently questioning what the longer-term impacts on the domestic and global economies may be.

For example, the New York Times said on Thursday that the current “agreement in principle,” with China has yet to be finalized — and likely would not roll back the hundreds of billions of dollars in tariffs that China and America have placed on each others’ products. In addition, it noted that the president is also considering escalating the trade fight to other fronts, as it prepares to tax $7.5 billion worth of wine, cheese, aircraft and other European goods. And, the administration says it will decide next month whether to impose tariffs on imported cars from European and other countries.

On Wednesday, President Trump discussed the possibility of additional tariffs on the European Union if the bloc is unwilling to reduce the EU-U.S. trade imbalance — but said “for right now, we’re going to try and do it without that,” although he continues to argue that “the United States is not being treated fairly.”

The Times also commented especially on the president’s “unpredictable” approach, and said that new, limited deals with South Korea and Japan and the proposed “new” NAFTA will come at a cost. The recent and proposed “tit for tat” tariffs have raised prices for businesses, uprooted global supply chains and created crippling uncertainty for companies, delaying investment and hiring. The pain has spread beyond the United States and China and is exacerbating a global economic slowdown, particularly in Europe. “Economists warn the damage is likely to outlast any interim trade deal with China,” the Times said.

The article mentioned several fairly gloomy, new forecasts, including a World Bank expectation that next year’s growth would be below previous estimates of 2.6%. It acknowledged that trade uncertainty remains a drag on the global economy along with the possibility of a “hard” Brexit resulting from Britain’s plan to leave the European Union.

There could be reason for optimism in 2020, it said, “if there can be a reduction in uncertainty and more clarity on the outlook on trade and that includes U.S.-China trade but that also includes “the global trade environment itself.”

Not all of the negative economic effects are a result of the trade war, the report said. But it asserts that policymakers say Mr. Trump’s trade policies “could help tip the global economy into recession.”

The Federal Reserve has begun cutting interest rates to try and insulate the American economy against the effects of President Trump’s trade war, but its officials have warned that their power is limited and that economic damage is likely to persist, particularly if uncertainty continues and tariffs remain in effect.

The president and his trade advisers continue to insist that China is paying the cost of the tariffs, not American businesses or consumers. But a new paper by researchers at Harvard University, the University of Chicago and the Federal Reserve Bank of Boston suggests that businesses and consumers in the United States are feeling an impact from the trade fight and that the pain could escalate and that additional costs could be passed on to American consumers in the months to come.

President Trump agreed to forgo a tariff increase planned for Oct. 15. But another round of tariffs is still on the table for December, the Times said, in addition to those already existing on $360 billion worth of Chinese goods. And, while the president “has floated the idea of signing an agreement with his counterpart, Xi Jinping, at a summit of global leaders in mid-November,” the deal has yet to be finalized and analysts say there are plenty of ways the fragile agreement could crumble, as happened in May.

Secretary Mnuchin told NYT on Wednesday that he has no plans to travel to China for more negotiations, and that there has been no decision as to whether the existing tariffs or those scheduled to take effect in December would be reversed if a deal is reached.

In addition, he said issues such as intellectual property protections, forced technology transfers and how to enforce an agreement are still being worked out.

The lack of a final deal, let alone a comprehensive agreement that ends the tariff war, is enough to stymie global growth for the foreseeable future, economists and other analysts say.

“The U.S. is attempting to pluck low-hanging fruit first, rather than hold out for a more complete trade deal,” Julian Evans-Pritchard, an economist at Capital Economics, wrote in a note to clients. “But reaching an agreement on the more contentious structural issues remains an uphill battle and it still seems more likely than not that trade tensions will escalate again before long.”

So, we will see. Clearly, new questions and concerns about the administration’s focus on tariffs can be expected to intensify, especially if the economy continues to slow. This is a high stakes fight producers should watch closely as it proceeds, Washington Insider believes.

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