Navarro-Authored Report Blasts Chinese 'Economic Aggression'

Posted on 06/20/2018 5:32 AM

Ross testifies before Senate panel | House Ag panel leader optimistic

Peter Navarro, the aggressive trade adviser for President Trump, issued a self-authored report (link) Tuesday that blasts Chinese “economic aggression” and tries to explain Trump's trade policy. While Chinese leaders disdain Navarro, the report will likely be a must-read in Beijing.
     Commerce Secretary Wilbur Ross appears today before the Senate Finance panel where he will face hard-hitting trade policy questions from both Republicans and Democrats.
     House Ag Chairman Mike Conaway (R-Texas) continues in a good mood on the fate of a likely House farm bill vote Thursday or Friday. The upbeat assessment follows positive news on the topic from a key House Freedom Caucus member.
     Record cold in the Atlantic could lower hurricane strengths.
     The number of Americans seeking Social Security disability benefits is plunging, the latest evidence of a stronger economy pulling people back into the job market.


U.S./China trade skirmish update. The White House said it is prepared to see China retaliate beyond simply imposing tariffs, but offered reassurances to U.S. companies on Tuesday, saying China had more to lose in a trade war. “President Trump has given China every chance to change its aggressive behavior. China does have much more to lose than we do,” Navarro said Tuesday, noting that the value of China’s exports to the U.S. was nearly four times what the U.S. exports to China.

This president will have the back of Americans, whether they are here on a farm in Iowa or in Shanghai trying to operate there,” White House trade adviser Peter Navarro told reporters. (Link to article on possible aid to the U.S. ag sector.)

Meanwhile, the White House released a new report authored by Navarro that blasts Chinese “economic aggression” and attempts to lay out President Trump's argument for tariffs. Link to report. Titled How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World, the 65-page report doesn’t provide any new policies beyond the trade and investment restrictions already announced or under consideration. The study includes 300 footnotes and a 30-page appendix and a synthesis of existing public reports examining Chinese economic policies.

This is the initial report issued by the small White House Office of Trade and Manufacturing Policy created for Navarro just over a year ago.

House Ag Chairman continues upbeat mood on chances of House farm bill passage. Echoing remarks he made Saturday at a Cape Cod event, House Agriculture Chairman Mike Conaway (R-Texas) was optimistic the House will reconsider his panel's farm bill and pass it as soon as Thursday, with the possibility of a Friday vote. The farm bill vote will come after the chamber completes votes on one or several immigration measures. Conaway said he plans to get an update on which members intend to be in town on the morning of any possible vote. Asked for a vote count, Conaway told reporters, “It'll be tight. We'll do a nose count to make sure who all’s going to be here Thursday and Friday and what makes the most sense when people will be here.”

Why Conaway may be in a good mood. House Freedom Caucus Chairman Mark Meadows (R-N.C.) said Tuesday evening he will be able to deliver enough votes to pass the House farm bill if a vote on unrelated immigration legislation is held as planned and "a few" additional items are addressed.

Meadows said he discussed terms of a potential arrangement with Conaway and Majority Whip Steve Scalise (R-La.). "It's my belief that if we have a vote on the Goodlatte [immigration reform bill], as we have discussed, that I can move enough members to vote for the farm bill," Meadows said. He added that the arrangement would depend on whether Conaway and Senate Agriculture Chairman Pat Roberts (R-Kan.) "are willing to look at a few items that are important to me and a couple of our members." Meadows said, "Chairman Conaway acted like he wanted to do that."

Ross expected to receive lots of trade policy questions on China, other countries. Commerce Secretary Wilbur Ross at a hearing today before the Senate Finance Committee (link) will face questions about President Donald Trump’s latest tariff escalation with China.

While the hearing is slated to focus on Trump’s use of Section 232 investigations, Ross will garner questions on the administration’s larger trade agenda. Sen. Chuck Grassley (R-Iowa) said Tuesday that he will ask Ross about Trump’s decision to slap tariffs on Chinese goods. "It'd be nice if we don't go this route. I'm kind of scared for agriculture,” Grassley told reporters. "The president expects to win this war by tariff on tariff on tariff because we're stronger than China, but I hope he doesn't forget that they're the second-largest economy in the world."

Ross may also be asked to comment about recent reports that he shorted stock in a shipping firm — a tactic for profiting if share prices fall — days after learning that reporters were preparing a potentially negative story about his dealings with the Kremlin-linked company. Link for more on this via a New York Times report.

Commerce confirms preliminary dumping decision on imports of China common alloy aluminum sheet. The Department of Commerce confirmed it has reached an affirmative preliminary determination in the first antidumping duty (AD) trade case the federal government has self-initiated since 1985. This investigation, and the companion countervailing duty investigation, was initiated by the Enforcement and Compliance division of the Commerce Department’s International Trade Administration under the authority granted to the Secretary in the Tariff Act of 1930. The CVD investigation reached a preliminary determination in February 2018.

The Department of Commerce will do everything in its power to stop the flow of unfairly subsidized or dumped goods into U.S. markets,” said Commerce Secretary Wilbur Ross. “We will continue to strictly enforce U.S. laws to defend American workers, industries, and communities from the scourge of unfair and unbalanced trade.”

The Aluminum Association Monday announced the preliminary decision had been made by DOC, and the agency confirmed they determined Chinese exporters have sold common alloy aluminum sheet in the U.S. at 167.16% less than fair value.

U.S. Customs and Border Protection (CBP) will now collect cash deposits from importers of common alloy aluminum sheet from China based on these preliminary rates. In 2017, imports of common alloy aluminum sheet from China were valued at an estimated $897.9 million.

The final decision from Commerce is expected Oct. 30, with a final determination by the U.S. International Trade Commission due on or around Dec. 12.

Other items of note:

  • The Wall Street Journal's editorial board warned Republicans on Tuesday that the GOP could lose their House and Senate majorities over immigration in November and called for an end to a Trump administration policy that has resulted in family separations at the southern border. "This is self-destructive politics. This year is the GOP’s best opportunity for immigration reform in a decade," the editorial board wrote. Link.

  • Record cold in the Atlantic could lower hurricane strengths. Temperatures at the surface of the tropical Atlantic Ocean are the coldest they’ve been in decades. That could have an effect on this hurricane season, potentially weakening any storms, as warm water is the source of tropical storms. “Currently, sea surface temperatures averaged over the tropical Atlantic … are the coldest that they have been in the middle of June since at least the early 1980s,” Phil Klotzbach writes for the Washington Post. Link.

  • India continues to eye China market for cotton as tariffs on U.S. supplies loom. Cotton exporters are becoming more optimistic on opportunities to sell cotton to China as the country is prepared to hit U.S. cotton with a 25% tariff as of July 6. Some reports indicate that India could export up to 850,000 tonnes of cotton to China in the next marketing year due to the tariffs. A decline in the Indian rupee also is providing a potential benefit. However, Reuters reports China buyers will likely turn to supplies from Australia and Brazil that are machine harvested and lack foreign material present in India cotton such as bits of leaves and empty bolls, with the report also indicating the extra cost to clean the cotton would still make it cheaper than U.S. cotton with the 25% tariff.

  • When tariffs raise import prices it doesn’t take long for the effects to filter into company earnings and consumer prices. The Wall Street Journal reports (link) that earlier tariffs imposed by the Trump administration — including a 20% levy on washing machines and import penalties on steel and aluminum — have had narrow but steep economic impacts. The index for laundry equipment shot up 17% over the past three months, the biggest such gain in the last 12 years. “The steel and aluminum tariffs have increased production costs for many U.S. companies, and economists say that could make those businesses less likely to create jobs. Even Whirlpool Corp., which theoretically might have benefited from higher washing-machine prices, said in a first-quarter earnings report that metals tariffs would cost it an estimated $50 million.” The Trump administration says it is readying a new round of tariffs on Chinese goods, and administration officials say the president is prepared to withstand pressure from U.S. businesses that might suffer from the conflict.

  • Nominations hearing. Senate Committee on Environment and Public Works will hold a hearing on the nominations of William Charles McIntosh and Peter C. Wright to be assistant EPA administrators

  • Energy and tax reform. House Energy and Commerce Subcommittee on Energy holds a hearing on “the Benefits of Tax Reform on the Energy Sector and Consumers.”

  • Energy report. The Atlantic Council holds its U.S. launch of the 2018 BP Statistical Review of Energy. Link.

  • FDA to revamp added sugars labeling for honey, maple syrup. The Food and Drug Admin. (FDA) said Tuesday it will "swiftly" develop a new approach to added sugars labeling for honey and maple syrup after producers complained the Nutrition Facts update could create confusion.

  • Health insurance associations. The Trump administration issued a sweeping new rule Tuesday that takes a step toward fulfilling the president’s campaign promise to make it easier for companies to sell insurance across state lines. The rule, issued by the Labor Department and touted by the president on Tuesday, invites small businesses to band together and set up health insurance plans that skirt many requirements of the Affordable Care Act, offering lower costs but also fewer benefits. Link to article from the New York Times.

Markets. The Dow on Tuesday closed down 287.26 points, 1.15%, at 24,700.21. The Nasdaq was down 21.44 points, 0.28%, at 7,725.59. The S&P 500 was 11.16 points lower, 0.40%, at 2,762.59.

GE removed from Dow Jones Industrial Average. Walgreens Boots Alliance will replace General Electric in the Down Jones Industrial Average, removing GE from the index for the first time since 1907 it will not be a part of the Blue Chip index that was introduced in 1896. GE was a part of the Dow when it was launched. "The U.S. economy has changed: consumer, finance, health care and technology companies are more prominent today and the relative importance of industrial companies is less," David Blitzer, Managing Director and Chairman of the index committee at S&P Dow Jones Indices, explained in Tuesday's announcement. "Today's change to the DJIA will make the index a better measure of the economy and the stock market." GE's stock has declined which also was a factor. The change will take effect before markets open June 26.

The number of Americans seeking Social Security disability benefits is plunging, the latest evidence of a stronger economy pulling people back into the job market. The drop is so significant that the agency has added four years to its estimate of how long the program will be financially secure. Link to New York Times article.

API reports fall in crude supplies. U.S. crude stockpiles declined 3 million barrels the week ended June 15, according to those familiar with data released by the American Petroleum Institute (API). The data also showed an increase of 2.1 million barrels in gasoline supplies and 750,000 barrels for distillates. The U.S. government data due out this morning is expected to show a fall of more than 3.5 million barrels. The API data did lift futures in electronic trading.

ICE Futures U.S. expands cotton daily trading limit. The daily price limit for cotton futures will expand to five cents, effective today, according to an announcement from ICE Futures U.S. The exchange took the action after futures Tuesday plunged with the nearby July contract settling down four cents and the December contract down 3.95 cents.

Calling for investors to "stay calm and rational," the PBOC injected a total of about $37 billion into its financial system after the Shanghai Composite dropped to near two-year lows. According to China's central bank, this will "ensure liquidity and reasonable stability" amid trade threats from the U.S. It also recommended a reserve ratio requirement cut as mainland companies pledged to stock buybacks to help stabilize equity prices.

"We are, broadly speaking, opening a new chapter," declared Germany's Angela Merkel as she met with France's Emmanuel Macron for talks on reforming the euro-zone. "Our goal is to keep Europe from becoming more divided." The two agreed to a common euro-zone budget — hoped to be in place by 2021 — but details of how they would pursue closer EU coordination on the economy, security and refugee policies remained vague.

"Oil is not a weapon — it is not a political tool to be used against some countries, producers or consumers," Iranian Oil Minister Bijan Zanganeh declared, following tweets from President Trump that sought to hold OPEC accountable for an upswing in oil prices. Ahead of a meeting in Vienna, Saudi Arabia and Russia have been pushing the group to loosen its supply controls —introduced in January 2017 — while Iran, Iraq and Venezuela are lobbying against any changes.


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