Washington Insider -- Thursday

Trade War Spreads

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

Top trade officials from NAFTA countries to meet this week

The top trade officials from the three NAFTA countries will meet this week, with U.S. Trade Representative Robert Lighthizer, Canadian Foreign Minister Chrystia Freeland and Mexican Economy Secretary Ildefonso Guajardo to gather in Washington. This comes amid Mexico's top NAFTA negotiator saying the talks have now entered a period of intensive negotiation.

"NAFTA modernization process is entering a phase of intensive ministerial engagement," Kenneth Smith Ramos said via Twitter, noting that his country "will continue to work constructively, and it will be the substance of the negotiation that drives any potential conclusion." There was expected to be another negotiating session yet this month in Washington, but there is speculation now that may not take place, especially with indications the U.S. wants to see an agreement in principle by April 13.


USDA Announces Reopening Of Enrollment For Margin Protection Program

Producers will be able to enroll in the updated Margin Protection Program for Dairy (MPP-Dairy) from April 9 to June 1, according to USDA. The updated program is expected to attract more interest for 2018 enrollment.

Those producers who already elected to participate for 2018 will have to re-enroll in the updated program during the period announced by USDA.


Washington Insider: Trade War Spreads

Bloomberg is reporting that “Trump wanted a trade war. Here’s what one looks like.”

Bloomberg notes that in early March, the President declared trade wars “good, and easy to win,” but that such talk is now alarming many U.S. business leaders, who largely support existing trade deals. It also has roiled securities markets, which fear lower profits and slower economic growth if the U.S. turns protectionist and other countries retaliate. In fact, retaliations are already underway.

For example, China hit $3 billion of U.S. wine, fruit, pork, steel pipe and other exports with tariffs last week. That list included many products on the list from U.S. states that favored Trump in the 2016 presidential election. Then, after the U.S. announced details of its tariffs on $50 billion of Chinese imports, China said it would retaliate against U.S. products “equivalent in scale and degree to the U.S. measures.”

More recently, yesterday, China announced proposed tariffs against U.S. soybeans, chemicals and aircraft.

Other countries haven’t retaliated for the steel and aluminum tariffs, which took effect March 23, largely because the President temporarily exempted many of them, Bloomberg says. Still, the EU is unhappy and warned it will respond with its own 25% tariffs on $3.5 billion of American goods. Like China, the EU says it will focus particularly on products from states that are part of Trump’s political base. These include U.S. brands of motorcycles, blue jeans and bourbon whiskey. In turn, Trump warned that he would impose a 25% penalty on European car imports if the EU carried out its threat.

Still, the administration is struggling to persuade critics that tough trade measures can alter China’s behavior without tipping the world into a trade war and ultimately harming American workers and consumers, the New York Times said. In addition to the tariffs, the White House is preparing to restrict Chinese investment in American technology and innovation, and to start a case against China at the World Trade Organization.

“The administration is rightly focused on restoring equity and fairness in our trade relationship with China,” said Myron Brilliant, an executive vice president and the head of international affairs at the U.S. Chamber of Commerce. “However, imposing taxes on products used daily by American consumers and job creators is not the way to achieve those ends.”

The Times also notes that farming communities, one of the country’s largest exporters and a solid base for Trump, are among the most vulnerable. Chinese tariffs of 25% will particularly hurt American pork farmers, who sent more than $1 billion worth of products to China last year. In addition, new duties will be charged to other U.S. agricultural products including wheat, corn, cotton, sorghum, tobacco and beef. They’re among 106 products ranging from aircraft to chemicals targeted by Beijing in retaliation for proposed American duties on its high-tech goods.

China is the world’s biggest importer of soybeans and that huge market had been set to grow after purchases climbed to a record as China’s large-scale livestock farming expanded amid a shortage of protein-rich feeds. U.S. Ambassador Terry Branstad last month warned Beijing against retaliatory measures aimed at imports of the oilseed and said any efforts to curb the trade would harm ordinary Chinese citizens more than American growers.

The date on which China’s tariffs will be implemented depends on the outcome of negotiations with the U.S., Vice Finance Minister Zhu Guangyao told reporters after a briefing in Beijing on Wednesday.

So, we will see. There are many ways policy fights like this can play out, and sometimes they fail to be as worrisome as they appear. Still, the U.S. ag sector is very apprehensive about what might happen to NAFTA—and the new Chinese tensions add significantly to the sector’s concerns, Washington Insider believes.


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