China Commerce Ministry 'Shocked' by Latest Trump Tariff Announcement

Posted on 07/11/2018 6:22 AM

Trump takes on NATO allies | Change for release of USDA reports


No further negotiations between U.S. and China have been scheduled, but a Trump administration official noted that the U.S. remains open to finding a solution. On Tuesday, the Trump trade team announced details on $200 billion of tariffs for Chinese imports. Calling the actions "completely unacceptable," China's Commerce Ministry said it was "shocked" by the latest U.S. trade action and would complain to the WTO. It also vowed to retaliate with a "combination of quantitative and qualitative measures."
     Trump is being Trump ahead of NATO's annual summit in Brussels today. He already put allies in a defensive mood by openly questioning the value of the generations-old alliance and linking his grievances on defense spending to America’s trade deficit with Europe. The president also complained that German imports of Russian oil and natural gas make Angela Merkel’s nation “a captive of Russia.” Trump’s criticism of NATO drew a rebuke from Donald Tusk, the president of the European Council. “Appreciate your allies,” Tusk said. “After all, you don’t have that many.”
     A level-playing field for issuing USDA reports is at hand, with major changes announced by USDA that will take effect Aug. 1. Observers now are asking whether departments issuing major economic reports will do the same to avoid having some firms and traders garnering an unfair advantage.
     Will U.S. surpass Saudi Arabia as world's largest crude producers? "In 2019, EIA forecasts that the United States will average nearly 12 million barrels of crude oil production per day," said Linda Capuano, Administrator of the EIA. "If the forecast holds, that would make the U.S. the world’s leading producer of crude."

 

U.S. assesses 10% tariffs on $200 billion more in Chinese imports. The White House on Tuesday said it would assess 10% tariffs on a further $200 billion in Chinese goods, but they won't take effect for at least two months, giving time for public comment; hearings on the products are scheduled for Aug. 20-23. A final decision on the tariffs will be made after Aug. 20. The new U.S. tariffs appear focused on Chinese manufacturing, covering electronics, textiles and auto parts, as well as minerals used in gadgets and batteries. Link for details.

China fired back at President Donald Trump’s latest tariff action, saying it won’t back down in the trade war that was started unilaterally by the U.S. China “never yields to threat or blackmail,” Vice Minister of Commerce Wang Shouwen said in written comments to Bloomberg today. “The U.S. side ignored the progress, adopted unilateral and protectionist measures, and started the trade war.”

Wang also accused Trump administration officials of not negotiating in good faith with the Chinese government and unilaterally escalating the dispute. “China made great efforts and demonstrated utmost sincerity to stabilize trade relations with the U.S.,” Wang said. “Regrettably, the U.S. side did not honor its words, chopping and changing all the time.”

The U.S. behavior represents a typical ‘trade bully,’ posing a grave threat to the global value chain,” Wang said. “It will hamper global economic recovery, hurting many businesses and ordinary people around the world. It will harm the interest of companies, employees and consumers in both China and the U.S.”

Meanwhile, Sen. Jeff Flake (R-Ariz.) said there will be a Senate vote today on a nonbinding measure aimed at limiting Trump’s power to impose tariffs. The bill would instruct conferees on an energy and water “minibus” spending bill to include a provision providing a role for Congress in imposing Section 232 tariffs.

China media reports talk up China's ability to replace U.S. soybeans. China can boost its soybean imports from countries outside of the U.S., particularly from South America, COFCO President Yu Xubo told the People's Daily newspaper. China can also buy more rapeseed, sunflower seeds, and bring in more soybean meal, rapeseed meal, sunflower meal and fishmeal to fill any supply gaps, Yu said, noting that boosting meat imports is another option.

"In the long term, South America, and the Black Sea area still have great potential in their arable land, and can play a bigger role in the global soybean supply system," Yu observed. Plus, he noted that COFCO can help meet that domestic demand as it is a leading grain trader in those regions.

Meanwhile, the People's Daily also reported that the China Grain Reserves Corporation (Singogran) has reportedly not bought any U.S. soybeans since April. Sinograin imported around 60% of its soybeans from South America in 2017, with 26.2% from Brazil and 43.2% from Argentina, the report said, with 30.6% from the U.S. "In the past two years, Sinograin has proactively adjusted the source of its imports to lower the potential risk caused by over-concentration, and it has formed stable, mature, and multi-channel international supplies," an unnamed Sinograin official said. The official said that Sinograin prefers major soybean producers that maintain sound trade relations with China, have stable policies, and offer lower taxes on imports, the report said.

USDA announces major change in report lockup procedures. USDA on Tuesday said it is making a major change in the release of reports issued by the National Ag Statistics Service (NASS) and the World Agricultural Outlook Board (WAOB) in that the media will no longer be given the data 90 minutes ahead of the release to be able to compile stories and file them immediately upon release.

The change will take effect Aug. 1, 2018, but the July 12 Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports will released as they have been — accredited media operations will still be given the information ahead of time with an embargo on the release until after the official report release. In the case of Crop Production and WASDE, the release time is 11 a.m. (CT), with reports given access to the information within lockup at around 9:30 a.m. (CT).

USDA said public inquiries prompted USDA to examine the situation and "determined that technological advancements have afforded recipients of customized media reports a market advantage not enjoyed by members of the general public."

USDA revealed it "sought analytical assistance from the Commodity Futures Trading Commission to help inform a policy update to the lockup procedures."

Media outlets affected by the decision are six news services: Associated Press, Dow Jones/Wall Street Journal, Thompson Reuters, Market News Int’l/Deutsche Boerse, Bloomberg News and DTN/Progressive Farmer.

Reason for the change. "It takes USDA data roughly 2 seconds to be transmitted and posted for the public to read," USDA said in a release. "Meanwhile, press organizations have access to high-speed fiber optic lines out of the USDA lockup and advertise paid services to clients that offer ‘ultra-low latency’ data transmission speed. They have approximately 90 minutes to distill the reports down to their clients’ needs." USDA said there is "evidence to suggest that there is significant trading activity worth millions of dollars that occurs in the one to two second period immediately following" the report releases, saying that "could not be based on the public reading of USDA data. The inference is that private agents are paying the news agencies for faster data transmission to get a jump on the market," USDA said.

Another change: Not only is USDA now requiring media to participate in lockup the same way as the public, USDA also said the media outlets will not be able to "utilize high-speed transmission cables from within USDA’s lockup facility."

Perspective: It will now be interesting to see how long or whether the U.S. government takes similar action relative to the release of economic reports released by several departments. The same reasoning USDA provided for changing release of its reports could well be applied to important economic reports.

Mexico's incoming leader to talk NAFTA 2.0 with top Trump officials. Mexican President-elect Andrés Manuel López Obrador will meet three more top White House officials Friday: Treasury Secretary Steven Mnuchin, Homeland Security Secretary Kirstjen Nielsen and White House senior adviser Jared Kushner. Those are in addition to Secretary of State Mike Pompeo, who was already set to meet López Obrador and his team in Mexico City to discuss the bilateral relationship.

López Obrador will be accompanied by some of his cabinet picks, such as Marcelo Ebrard for foreign minister, Graciela Márquez Colín for economy minister and Jesús Seade for chief NAFTA negotiator.

The officials are expected to discuss the NAFTA renegotiation, economic development projects and migration. López Obrador reiterated on Tuesday that he will continue to respect the negotiating positions from current Mexican President Enrique Peña Nieto’s administration. “We consider that [NAFTA] should be maintained. In this time, we’re going to be observers. We recognize the work from the negotiating team, and we’re going to be with them as observers to support and achieve a good deal,” López Obrador said in a press conference outside his campaign office.

Lighthizer to detail plan for pursuing African FTA. U.S. Trade Representative Robert Lighthizer will discuss achieving a trade agreement at the annual African Growth and Opportunity Act Forum (AGOA). “Trade Representative Lighthizer will outline both the administration’s continued support for AGOA, as well as the desire to pursue in tandem a new and exciting initiative,” Assistant U.S. Trade Representative for Africa Constance Hamilton said on Tuesday at a private-sector event. “We know that long-term one-way preferences [under AGOA] can only do so much to drive U.S. trade and investment. U.S. businesses and investors want clear rules of the road, a sound business environment and certainty.”

The AGOA program provides duty-free access for 47 sub-Saharan African countries to export most of their goods to the United States. The program was created in 2000 to spur trade with Africa and help create jobs on the continent. Three years ago, Congress extended the program through 2025 but also directed USTR to explore options for negotiating free trade agreements that would move beyond the one-way trade benefits now provided by the United States.

Hamilton said the Trump administration was still far away from formally beginning free trade negotiations with any African country. “What we’re saying is we’re ready to start exploratory talks to find out exactly what it is we can do, understanding that an agreement that we have with an African country might be different” than existing free trade agreements, she said. “We don’t have an FTA with an African partner. Why not? We have them all over the world. ... Why is it scary to say reciprocity,” Hamilton added. “This is something [Lighthizer is] very, very dedicated to seeing happen during his term as USTR so I hope that when we get together ... for the AGOA forum that ministers come with an open mind and think about what this could mean for the future of our relationship.”

Other items of note:

  • EPA on Tuesday published a proposed rule on the Renewable Fuel Standard (RFS), setting volume requirements for 2019 and establishing biomass-based diesel volume for 2020. A hearing is scheduled for July 18 and comments are due Aug. 17. Link for details.

  • President Donald Trump reiterated his call for allies to increase their defense spending at the outset of this week's NATO summit, while sharply criticizing Germany for supporting a major gas deal with Russia. Trump at the U.S. chief of mission residence in Belgium ahead of the NATO summit, said "Germany is a captive of Russia" and "totally controlled by Russia” because of energy purchases. Trump told NATO Secretary-General Jens Stoltenberg that Germany was wrong to support a new $11-billion Baltic Sea pipeline to import Russian gas while being slow to meet targets for contributing to NATO defense geared toward protecting Europe from Russia.

  • Barrasso want floor time for WRDA before next recess. Senate Environment and Public Works Chairman John Barrasso (R-Wyo.) said his goal is to get the chamber to vote on bipartisan water infrastructure legislation "hopefully in this work period." His panel unanimously approved S 2800, America's Water Infrastructure Act, in May, while the House passed its narrower version of the Water Resources Development Act (WRDA), HR 8, last month. The Senate is expected to go on recess for at least the week of Aug. 6, but Majority Leader Mitch McConnell (R-Ky.) has said he plans to cut short the rest of the traditional August recess.

  • USDA expands housing for temporary farmworkers. USDA on Tuesday issued guidance on how it plans to handle expanded eligibility for housing assistance it provides to temporary farmworkers. The 2018 omnibus spending bill mandated that workers admitted to the U.S. on a temporary basis — such as through H-2A visas — be eligible to live in housing financed by the department under its Farm Labor Housing program, which provides subsidies to help house farmworkers across the country. Employers of H-2A workers are required to provide housing, and H-2A workers were not previously allowed to be covered by the program. Applications are due Aug. 27.

  • GAO report calls for look at resources for CFIUS. A new report from the Government Accountability Office (GAO) calls on the Defense Department to reassess the resources it needs to participate in CFIUS, given its growing workload in policing transactions for national security concerns. GAO said the Defense Department (DoD) co-led work on 99 transactions in calendar year 2017 — a 57% increase from 2012. Over the same period, its annual authorized positions grew from 12 to 17. GAO said DoD should assess its CFIUS resource requirements and put a priority on personnel and funding resources. Link to report.

  • American Airlines has become the latest big company to say it's axing plastic straws and stir sticks amid a broader push to abandon one-time use plastics. Its airport lounges will instead feature biodegradable straws and wooden stir sticks, while bamboo replacements will be substituted aboard its planes. American estimates the move will eliminate more than 71,000 pounds of plastic annually.

Markets. The Dow on Tuesday closed up 143.07 points, 0.58%, at 24,919.66. The Nasdaq edged up 3.00 points, 0.04%, at 7,759.20. The S&P 500 ended up 9.67 points, 0.35%, at 2,793.84.

CME raises corn, soybean futures margins; will boost premium charge for corn, soybean contracts. The CME said that the maintenance margins for corn futures would rise to $800 per contract, up 11.1% from the current $720 per contract, and will raise the soybean futures maintenance margin to $2,050 per contract, up 10.8% from the current $1,850 per contract for July 2018, effective after the close of business July 11. The exchange also said that the premium charge for corn, mid-sized corn, soybean and mid-size soybean futures will also rise, effective with the fourth quarter of 2019. The premium charge will rise to 26.5/100s of one cent per bushel per day, up from the current 16.5/100s of one cent per bushel per day. The change will take effect at the expiration of the November 2019 soybean contract and the December 2019 corn contract.

U.S. may surpass Saudi Arabia as world's leading producer of crude. The U.S. government's Energy Information Administration (EIA) forecasts that in 2019, the U.S. will average nearly 12 million barrels of crude oil production per day. If the forecast holds, that would make the U.S. the world’s leading producer of crude, passing Saudi Arabia.

API reports drop in crude supplies. U.S. crude stockpiles fell 6.8 million barrels the week ended July 6, according to those familiar with data released by the American Petroleum Institute (API). U.S. government data due for release later this morning is looked to show a stockpile decline of around 5 million barrels.


 

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