Details Coming on U.S. Tariffs on China, But Will Trump Implement Them?

Posted on 06/13/2018 5:42 AM

Senate farm bill | Canada official visits | House immigration deal | RFS reform


Key decision ahead on U.S. tariffs on China. President Donald Trump will make the decision on whether or not coming details on $50 billion in tariffs on China will actually be implemented.
     Canadian Foreign Affairs Minister Chyrstia Freeland's is visiting today with Senate Foreign Relations Chairman Bob Corker (R-Tenn.), with other members noting interest in attending.
     Senate Ag Committee markup of the farm bill is at hand, and the key is whether or not any major amendments will alter the underlying bill. As of this morning, the Congressional Budget Office (CBO) had not yet officially released its score of the underlying measure, an unusual situation as the panel members decide to vote on the bill. Some biofuel-related amendments are possible, but they could be nixed as part of the debate.
     The defeated House farm bill will likely get another vote as GOP leaders late Tuesday reached an immigration compromise.
     Sen. Grassley (R-Iowa) will be aggressive on EPA's use of waivers for the RFS, but he continues to provide no details on what he plans ahead. Meanwhile, some interesting nuggets have surfaced regarding possible changes for the RFS, including a possible national octane standard.
     WOTUS rule to OMB later this week. That is what EPA Administrator Scott Pruitt said in Kansas this week.

 

 

Navarro: U.S. planning tariffs on smaller number of Chinese products on $50 billion list, but Trump to make final decision. President Donald Trump is considering imposing 25% tariffs on a “subset” of Chinese imports that the administration included in its original list of around $50 billion in targeted products, White House trade adviser Peter Navarro said Tuesday, adding that it would be a decision for President Trump to make. Navarro, speaking at an event in Washington hosted by the Wall Street Journal, said the U.S.' goal was to defend its own interests rather than compel China to make changes.

The comments signal the Trump administration will move forward with tariffs but that it could impose penalties on a smaller group of products included on the original list of about 1,300 tariff lines.

Background. The U.S. is planning to impose 25% tariffs on the products as part of its ongoing investigation into China’s policies that it says pressure U.S. companies to hand over technology and intellectual property to Chinese firms.

The Trump administration is expected to release its final list of targeted products by Friday, previously saying the tariffs could be imposed “shortly thereafter.”

Should the U.S. tariffs be imposed, China has warned that it will not follow through on tentative plans to buy more U.S. farm and energy products. And any Chinese retaliation will include imports of U.S. soybeans.

Bottom line: The key is not details on the U.S. threatened tariffs, it is whether or not they will be implemented. President Trump may want to keep that a murky topic. After President Trump’s summit with North Korean leader Kim Jong Un on Tuesday, which China helped to bring about — Trump said Beijing has not done an adequate job of closing its border to trade with North Korea in recent months, and Trump seemed to blame that for rising U.S.-China trade tensions. “Which is a shame. But I have to do it. I have no choice. For our country, I have to do it,” Trump said at a press conference in Singapore, possibly referring to imposing new tariffs.

Keen interest in meeting with Canada trade official. Senate Foreign Relations Chairman Bob Corker (R-Tenn.) said Canadian Foreign Affairs Minister Chyrstia Freeland's visit with him today is an informational meeting and not unusual. But Corker said he expects more committee members than usual to participate because of the U.S.-Canada rift after the G7 meeting and Ottawa’s opposition to metals tariffs the Trump administration imposed on Canada.

Meanwhile, USDA Secretary Sonny Perdue is to meet Friday in Canada with his Canadian counterpart, Lawrence MacAulay. The two agriculture secretaries will hold a media availability after "their bilateral meeting on opportunities to discuss further cooperation between Canada and the United States in agriculture,'' according to a USDA press release.

Senate Ag panel farm bill markup today. More than 200 amendments have been filed with the committee, but it is unclear how many will be considered. Ag Chairman Pat Roberts (R-Kan.) said he hoped to reduce the number down by incorporating some into a traditional manager’s package. Senate Majority Leader Mitch McConnell (R-Ky.), a Senate Agriculture member, wants the full Senate to vote on the farm bill soon after the markup and before the chamber’s Fourth of July recess.

In an unusual development, the Congressional Budget Office (CBO) has yet to officially release the budget scores for the proposed farm bill, leading to some speculation that there could be an attempt to mask the impact of some of the proposed changes and/or the fate of some programs.

Expected amendments include Sen. Chuck Grassley's usual attempt to alter pay caps and who gets farm program payouts. The Senate bill makes no changes to current definitions of who qualifies as “actively engaged” in a farm operation and eligible for farm program payments up to $125,000 a year. Grassley plans to ask the committee to approve payment limitation language that would establish who can qualify for farm payments. The draft Senate farm bill sets the maximum adjusted gross income that a farm or farm operation can have and still receive subsidy payments at $700,000, down from the current $900,000.

Safety net programs. Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio) are pushing major changes for the Ag Risk Coverage (ARC) program at the expense of the Price Loss Coverage (PLC) safety net program. Thune also wants a higher cap for the Conservation Reserve Program (CRP) than the slight boost in the Senate's underlying bill. The draft Senate farm bill expands the CRP, which pays farmers who take environmentally sensitive land out of farm production for multiple years, to be able to enroll 25 million acres a year, up from the current 24 million acres. Thune has said he’d like to see a higher number, potentially as much as 30 million acres. Link for details.

Sen. John Hoeven (R-N.D.) plans to offer an amendment that raises the caps on direct and taxpayer-backed guarantee loans provided through the Farm Service Agency. The maximum amount for loan guarantees would increase from $1.39 million to $2.5 million a year while the maximum for direct loans would increase from $300,000 to $600,000. If adopted, the changes would apply to farm operating loans and farm ownership loans.

Several amendments dealing with the crop insurance program are expected.

Biofuel-related amendments may be attempted, but it is uncertain if they will be allowed. Sen. Amy Klobuchar (D-Minn.) wants a provision to require the secretary of Agriculture to study the impact on farm income of EPA granting hardship waivers to oil refiners, as well as require EPA and the Department of Energy to use the study as they decide which refiners should get exemptions in the future. Sen. Deb Fischer (R-Neb.) filed an amendment to allow year-round sale of fuel containing 15% ethanol to a bill that failed to get through the Environment and Public Works Committee last year.

House GOP reach deal on immigration; upping odds farm bill may get another vote. House Republicans next week will hold votes on legislation to protect young immigrants brought to the U.S. as minors and living in the U.S. without authorization, after GOP leaders staved off an uprising from centrist Republicans.

The development will likely mean another vote on the Republican farm bill that was defeated last month when some conservatives demanded the House first act on immigration policy. Timeline for another farm bill vote is murky because the immigration deal buys GOP lawmakers at least another month for negotiations.

The House will vote on two competing immigration bills next week "that will avert the discharge petition and resolve the border security and immigration issues," AshLee Strong, a spokeswoman for Speaker Paul Ryan (R-Wis.) said Tuesday night. Under the new agreement, Republican leaders would set up votes on both a conservative measure offered previously by Reps. Bob Goodlatte (R-Va.) and Michael McCaul (R-Texas), and a compromise bill that was the subject of recent negotiations. The options being considered as part of a compromise include the creation of a new visa program that would reward immigrants for meeting certain benchmarks to allow them to become citizens, though lawmakers were vague about what those would be. Strong said more information would come after the House GOP Conference meets this morning. Ryan would also get to bring up a bill of his choosing, which could be the vehicle for any GOP deal reached during the continuing negotiations.

The Goodlatte bill would reform the H-2A agricultural guest worker program, transferring it to USDA from the Department of Labor.

Ag labor commitment. Rep. Dan Newhouse (R-Wash.) said Republican leaders promised him that the House will consider separate legislation this summer to address agricultural labor needs. “Our farmers and ranchers must have access to a legal and reliable workforce in order to provide the world with a safe and abundant supply of food,” said Newhouse. With those commitments, Newhouse did not sign a discharge petition that would have forced a vote on legalizing the so-called Dreamers. Also, the staff of Rep. Dennis Ross (R-Fla.) said he wouldn’t sign the discharge petition Tuesday after GOP leaders gave him a commitment that legislation overhauling the guest-worker program would come to the House floor before the chamber’s August recess. Ross had been considering signing the petition.

In the Senate, Majority Leader Mitch McConnell (R-Ky.) has played down the chances of his chamber voting on immigration again this year after four different proposals failed in the Senate in February.

Other items of note:

  • VP Mike Pence briefed Senate Republicans on the president's talks with North Korea's Kim Jong Un at Tuesday's conference lunch. “I hope it takes the form of a treaty,” Senate Majority Leader Mitch McConnell (R-Ky.) said about what he envisions regarding congressional oversight of the U.S.-North Korea joint statement. He believes the issue should come before Congress. Sen. Lindsey Graham (R-S.C.) said he did not have an issue with halting joint military exercises between the U.S. and South Korea while discussions with North Korea continue. But he said Trump would face opposition to any move to withdraw American forces from South Korea. Pence said that while the U.S. is ending semiannual "war games" (joint military exercises) with South Korea, regular readiness training will continue. Pence was not contradicting Trump's announcement, but he clarified that the decision to end military exercises, seen as a significant concession to North Korea, won't mean the administration is ending all exercises with Seoul.

  • I hope we don’t end up in a full scale trade war ... I hope this will all be avoided,” McConnell said about the G7 summit.

  • Grassley says he will be “aggressive” on RFS waivers. Sen. Chuck Grassley (R-Iowa) will continue to be on the offensive when it comes to EPA’s actions to exempt small refiners from the Renewable Fuel Standard (RFS). “What we have to do — and I’ve instructed staff, and have support from Sen. [Joni] Ernst (R-Iowa) and other senators — is be very aggressive,” he told reporters Tuesday.

  • McKinney: U.S., Japan discussing trade deals. USDA’s top trade official, Ted McKinney, said during a call from Japan on Tuesday that U.S. and Japanese agricultural leaders are moving ahead in efforts to strike deals for new sales and to grow the bilateral trade relationship, regardless of whether the two allies can reach a formal trade agreement. He stressed the talks were “more transactional” and are focused on building out more two-way sales. Formal trade deal negotiations are left to the Office of the U.S. Trade Representative and the White House, he said. He was accompanied by leaders from 15 state departments of agriculture and 42 agribusiness groups.

  • Another tax policy bill coming? "Before the election we'll see that bill," Rep. Steve Scalise (R-La.) said of a measure to make individual tax cuts permanent that GOP leaders have been calling "tax reform 2.0."

  • WOTUS rule update. During his visit to Dedonder Farms in Kansas, EPA Administrator Scott Pruitt told farmers that he would send the agency’s new Waters of the U.S. rule to OMB later this week.

  • RFS reform update. GOP Sen. John Cornyn (R-Texas) said finding common ground on an overhaul of the Renewable Fuel Standard (RFS( is “like trying to come up with peace in the Middle East.” Cornyn is holding discussions and hopes to introduce a bill this year. “It’s not easy,” he said. “There’s a reason this has been hanging around for a long time. We’re just trying to grind it out day by day.” Of note, Cornyn is not enamored with swapping out the RFS for a national octane standard, a policy that seems to have the focus in talks led by Rep. John Shimkus (R-Ill.). The octane standard has some backing from both oil and ethanol interests. “I’m not sure we need another government mandate when we’re trying to get rid of one, so that’s a concern,” Cornyn said.

  • Commerce slaps provisional duties on olives from Spain. Imports of ripe olives from Spain will be subject to provisional dumping duties ranging from 16.88% to 25.50%, the Commerce Department announced late Tuesday. Commerce also hit the olive imports with provisional subsidy duties ranging from 7.52% to 27.02%. The International Trade Commission (ITC), which investigates injury to the U.S. industry, will have the final say on whether the duties will be locked in. The ITC decision is expected on July 24, Commerce said. Imports of ripe olives from Spain were valued at an estimated $67.6 million in 2017, Commerce said in a fact sheet (link). The decision is a victory for two California producers, Bell-Carter Foods, Inc. and Musco Family Olive Co., which formed the Coalition for Fair Trade in Ripe Olives last year to ask for protection against what they said were unfairly priced and subsidized ripe olive imports. The new duties are noticeably higher than preliminary levels announced in November and January.

  • Navarro labels as “inappropriate” his comments on Trudeau. President Trump's trade adviser Peter Navarro called his Sunday statement that "there's a special place in hell" for Canadian Prime Minister Justin Trudeau "inappropriate" at a Wall Street Journal CFO Network event Tuesday morning. "In conveying that message I used language that was inappropriate and basically lost the power of that message. I own that, that was my mistake, my words." were "inappropriate". Navarro said he had been trying to use strong words to back Trump’s trade stance but went too far. But President Trump, asked about his own harsh words for Trudeau, who sparked Trump’s anger initially when he said Canada “will not be pushed around” said: "We just shook hands. It was very friendly," Trump said. "He learned. That's going to cost a lot of money for the people of Canada."

  • USDA again extended signup for the Margin Protection Program for dairy, this time to June 22. Around 1,000 producers enrolled last week when the signup was extended from June 1 to June 8, bringing the total to 21,000. USDA said this will be the last chance for dairy farmers to take advantage of changes Congress made to parts of the program via the Bipartisan Budget Act of 2018.

  • From milk bar to beer bar. Some dairy farms are opening breweries to help save their livelihoods, the New York Times reports. Link.

  • Rep. Mark Sanford loses GOP primary in South Carolina. Sanford on Tuesday became the second incumbent to lose a Republican primary this year, defeated by a challenger who questioned his loyalty to President Donald Trump. With 99% of precincts reporting in South Carolina's 1st District, state Rep. Katie Arrington was leading Sanford 51% to 47%when the Associated Press called the race. Trump attacked Sanford on Twitter just hours before the polls closed Tuesday in South Carolina, calling the congressman "very unhelpful," "MIA and nothing but trouble," and urging voters to support Arrington.

Markets. The Dow on Tuesday fell just 1.58 points, less than 0.1%, to 25,320, as traders await today's FOMC decision on interest rates (wide expectations for a 25 basis point hike) and comments from Fed Chairman Jerome “Jay” Powell during a press event. (Powell is considering holding a press conference after every policy meeting rather than every other meeting, the Wall Street Journal reported). Powell doesn’t want any change in the process to be misread as a signal of plans to raise rates more aggressively — for example, by foreshadowing rate increases at consecutive meetings. “I would want to think very carefully about it and make sure that no one would take more frequent press conferences as a signal of the path of policy,” he said in March. More regular press conferences could overshadow the policy statement issued after each meeting. Meanwhile, new pricing data on Tuesday morning indicated that inflation is steadily rising, which would further encourage the Fed to proceed with its gradual pace of interest-rate increases. The S&P 500 advanced 4.85 points, 0.2%, to 2,786.85. Meanwhile, the Nasdaq Compositerose 43.87 points, 0.6%, to a record close of 7,703.79.

AT&T will be allowed to complete its $85 billion acquisition of Time Warner, with a federal judge on Tuesday rejecting an antitrust challenge by the U.S. Justice Department. The ruling is expected to set off a chain reaction of other mega-mergers, while the AT&T-Time Warner tie-up will remake the media, tech and telecom landscapes.

U.S. gasoline prices are expected to peak at $2.92 per gallon in June and average $2.87 per gallon this summer, up from $2.41 last summer, according to the Energy Information Administration’s latest short-term energy outlook, released Tuesday (link). The higher gas prices are largely due to higher crude oil prices, EIA said. Brent crude oil prices averaged $77 per barrel in May — the highest monthly average since November 2014 — and are expected to average $71 per barrel this year.

The IEA warned of a massive oil-supply gap. The International Energy Agency (IEA) said the collapse of Venezuela’s oil industry coupled with the loss of Iranian oil after the U.S. re-imposes sanctions could hurt global oil supply and drive up prices next year. Link for details.

 


 

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