Washington Insider -- Thursday

Hints at Delays for Scheduled Tariff Boosts

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

More Time To Sign Up For Trade Aid, Dairy Program

USDA says the brutal weather conditions this year that have continued recently are enough to have the agency extend signup for the 2019 Market Facilitation Program (MFP 2) and the Dairy Margin Coverage (DMC) program. MPF 2 signup was to have ended December 6 and DMC enrollment for 2020 was to end December 13.

USDA says enrollment will now be open through December 20.

Just over one quarter of licensed dairy operations, 7,204 farms, have enrolled in DMC for the 2020 calendar year as of Dec. 9. By comparison, 82% of licensed operations, 23,164 in all, signed up for the program for 2019.

Under the first two of three possible tranches of MFP 2 payments, FSA has paid $10.470 billion in MFP payments to farmers. The top five states were Iowa, Illinois, Minnesota, Texas and Kansas.

Full US Approval Of USMCA Seen In Early 2020

Signing of the updates to the U.S.-Mexico-Canada Agreement (USMCA) Tuesday by officials from the three countries was hailed by both Democrats and Republicans in Washington.

The House vote on the pact is expected to come next week, with some suggesting December 19 after the House finishes its action on the articles of impeachment.

Senate approval, however, is not expected until early 2020. Senate Majority Leader Mitch McConnell, R-Ky., said Tuesday that a Senate vote “will have to come up in all likelihood right after the (impeachment) trial is finished in the Senate.”

Washington Insider: Hints at Delays for Scheduled Tariff Boosts

Well, there’s lots going on in U.S. trade policy these days but the implications are still tough to interpret. For example, House Speaker Nancy Pelosi, D-Calif., said she would support the new NAFTA deal in in the House – less than an hour after she announced the articles of impeachment against President Donald Trump.

Though a dense fog of uncertainty remains, the Times says it sees signs that the U.S. may delay scheduled increases in duties on Chinese imports – but that the decision “rests with the president who could go either way,” the report said.

So, new tariffs on over $100 billion of Chinese goods are due to take effect on Sunday. While many American officials are eager to avoid the tariffs, key observers insist that no decision has been made and the President is continuing to meet with advisers this week.

The United States and China announced in mid-October that they had reached a so-called Phase 1 trade agreement that would allow Chinese purchases of American agricultural goods to resume while the United States would cancel additional tariffs scheduled for Oct. 15. American officials said that future tariff increases could also be avoided if the pact were signed.

Since then, negotiators have continued to grapple over the deal’s terms. The two sides remain divided over how many of the tariffs will be canceled in return for China’s trade concessions, and over the terms that will govern Chinese purchases of tens of billions of dollars worth of American agricultural products.

The administration’s next scheduled tariff increase is set for 12:01 a.m. on Dec. 15 and would place a 10% tariff on $156 billion of products, including toys, smartphones and other electronics, weighing on consumers and potentially turning into a political liability for a president headed into a re-election campaign.

Business groups are worried about the new levies. “We’re still in a high-stakes poker game,” Myron Brilliant, the executive vice president at the U.S. Chamber of Commerce, said.

“Having another round of tariffs would be a poison pill in the context of the current U.S.-China negotiations and in the context of the global economy,” Brilliant added. “We hope both sides understand the urgency of getting an agreement finalized as soon as possible.”

If President Trump delays those tariffs to allow more time for negotiations, it would be the fifth time this year that he has delayed or canceled tariffs—and could prompt criticism that China is taking advantage of the negotiating process.

In addition, the significant progress this week on moving the revised North American trade deal toward a vote in Congress appears to have slowed progress toward a resolution by diverting the administration’s attention away from China, the Times said.

The Times report concludes that “as the deadline nears, the December tariffs’ fate has grown particularly cloudy.” And, China apparently tried to appeal to the administration’s desire to see more farm purchases by offering a waiver on tariffs it had placed on U.S. soybeans as Chinese companies made large bulk purchases of American goods.

In addition, USDA Secretary Sonny Perdue said this week during a trip to Indiana that he did not expect the new tariffs would be imposed.

Also, critics continue to argue that the Phase 1 deal would do little to address America’s longer-term concerns about China’s economic practices.

Reports from China this week indicate that the Chinese government had discernibly hardened its negotiating positions since President Trump and Vice Premier Liu He reached their agreement in October. That deal has attracted criticism from the more nationalistic wing of the Chinese government, especially since it lacks any U.S. pledge to roll back some of the tariffs already imposed.

Since early November, Chinese negotiators have demanded that a Phase 1 deal include some tariff relief in order to make the deal “equal” – otherwise it will be one-sided, said Professor Tu Xinquan, the executive dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. The trade ministry founded the university and retains close links to it.

But China clearly has been wary of offering further concessions to offset a tariff rollback. That has stymied negotiators at least temporarily.

Now, U.S. officials are telling the press that they are still waiting for China to signal its willingness to make “necessary concessions” to seal a deal. Clete Willems, a partner at Akin Gump who left the White House this year, said China appeared to be taking actions, like the soybean purchases, to persuade the administration to delay the tariffs as both sides work toward a deal.

The president has a decision to make,” Mr. Willems said, “and realistically he could still go both ways.”

So, we will see. Political tensions are so high just now that it is increasingly difficult to anticipate any economic decision, especially in the area of trade. As a result, the trade talks should be watched very closely by producers, especially as the scheduled deadlines approach, Washington Insider believes.

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