Commerce Secretary Ross Sees Limited Results from Any Trump/Xi Meeting

Posted on 06/17/2019 6:53 AM

Iran | Hong Kong | India | MFP 2 | U.S. corn demand to take a hit


A rather bleak assessment of U.S./China talks came from Commerce Secretary Wilbur Ross in remarks made Sunday to the Wall Street Journal. "I think the most that will come out of the G20 might be an agreement to actively resume talks," Ross said. “At the presidential level they're not going to talk about the details of how do you enforce a trade agreement… The most that might come is new ground rules for discussion and some sort of schedule for when detailed technical talks might resume.”
    
The U.S. Trade Representative’s Office today will kick off seven days of testimony from U.S. retailers, manufacturers and other businesses about President Trump's plan to hit another $300 billion worth of Chinese goods with tariffs. The timeline means Trump would not be able to trigger the fresh wave of levies until after July 2, when a seven-day final rebuttal comment period ends. The duties would hit consumer goods hard, including cellphones, laptop computers, toys, video game consoles, television sets, clothing and footwear.
    
Iran said it would exceed limits on its stockpile of enriched uranium in 10 days, jeopardizing European efforts to save the international nuclear deal, as tensions between Washington and Tehran accelerate.

     Hong Kong’s protesters forced the government to backtrack. The city’s chief said she would indefinitely suspend a bill allowing the extradition of suspects to mainland China. Hong Kong still saw another massive protest yesterday calling for the bill to be totally withdrawn, amid anger over police use of force.
     Mexico’s Senate is expected to pass the USMCA this week, which would make it the first of the North American trade partners to ratify the replacement deal for NAFTA. Meanwhile, House Speaker Nancy Pelosi (D-Calif.) and other House Dems want to see how a recently passed law in Mexico will overhaul the country’s existing labor structure.
     More MFP 2 details coming in about two weeks, sources advise, with the package now at the Office of Management and Budget (OMB).
     As U.S. corn yield/supply expectations go down and prices up, corn demand will see a hit for several sectors including ethanol use, feed and exports. One analyst noted bewilderment when USDA last week raised the price of corn 50 cents with no impact on corn-for-ethanol. Another analyst said, “The price of corn will soon make it more attractive to sell corn stocks previously destined for the ethanol market into other usage markets.”
     An internal USDA battle is brewing and has come to Ag Secretary Sonny Perdue’s attention. Sources say “an aggressive USDA lawyer” wants to make Risk Management Agency bulletins subject to public comment, a move that would significantly delay overall RMA operations.
    


 

— U.S./China trade policy update:

  • Commerce Secretary Wilbur Ross Wilbur played down prospects of a major trade deal if Presidents Trump and Xi meet at the Group of 20 summit later this month. “I think the most that will come out of the G20 might be an agreement to actively resume talks,” Ross said in a phone interview Sunday with the Wall Street Journal. “At the presidential level they’re not going to talk about the details of how do you enforce a trade agreement… The most that might come is new ground rules for discussion and some sort of schedule for when detailed technical talks might resume,” said Ross. Meanwhile, Ross told CNBC today that President Trump is ready to proceed with tariffs on the remaining $300 billion in Chinese goods in the absence of a trade deal. "We will eventually make a deal, but if we don't, the president is perfectly happy with continuing the tariff movements."
  • Secretary of State Mike Pompeo said in a television interview Sunday that he expected Trump and Xi would meet and that the two leaders had an array of issues to discuss during a session around the G20 summit June 28-29 in Osaka, Japan. China has yet to confirm whether Xi will meet Trump.
  • Demonstrators in Hong Kong on Sunday dismissed the government’s suspension of a bill that would allow extraditions to mainland China, and returned to the streets with a growing list of demands. Among them: the departure of Hong Kong’s leader, Carrie Lam, who said over the weekend that she would delay a vote on the bill indefinitely, adding that she would “take on criticisms in the most sincere and humble way.”
  • The mass protests in Hong Kong might have given Trump unexpected leverage if he meets his Chinese counterpart, Xi Jinping, in Japan next week, but Beijing will try to prevent the controversy from affecting the broader China/U.S. relationship, Chinese analysts told the South China Morning Post. On Fox News on Sunday, Secretary of State Mike Pompeo said he was certain Hong Kong would be raised in talks between the two leaders. “I think we’ll get the opportunity to see President Xi at the G20 summit. I’m sure this will be among the issues that they discuss,” Pompeo said. On Friday, China summoned Robert Forden, deputy chief of mission at the U.S. embassy in Beijing, to protest against Washington’s interference in Hong Kong’s controversial extradition bill, which would allow the city to send suspects to jurisdictions with which it does not have a formal extradition treaty, including mainland China.
  • Hearings on more U.S. tariffs on Chinese goods begin. It is the first of seven days of public discussions on President Trump’s proposed tariffs on $300 billion worth of Chinese goods, as major American businesses warn of massive layoffs and potential damage to economic growth. Businesses will then have an additional week — until July 2 — to provide comment. After that, the U.S. can consider the feedback and act.
  • From window curtains to fireworks, American importers are struggling to find alternative suppliers for the goods they bring in from China. An analysis of federal import data shows China accounts for more than 90% of imports in 273 categories of the items targeted by new tariffs, the Wall Street Journal reported (link), reaching deep into U.S. supply chains. “The difficulties among U.S. importers shows how global supply chains have been redrawn over the past 20 years, and how successful China has been in becoming the factory floor for the world, in some cases crowding out competition from other countries,” the article noted.
  • Still no word if China buyers of U.S. cotton can get a reprieve from Chinese tariffs on the product. The request recently was filed.

— Timing for more details of MFP 2 program: About two weeks. That is the assessment of industry and government sources familiar with the topic. Contacts report the proposed second Market Facilitation Program (MFP 2) is at the Office of Management and Budget (OMB) pending final approval.

The MFP 2 rule was submitted to OMB May 30; questions about the program reportedly have results in some late changes to the plan.

Other items of note:

  • Chinese President Xi Jinping to visit North Korea for first time on July 20-21. Xi’s visit at the invitation of North Korean leader Kim Jong Un would mark the first visit by a Chinese leader in 14 years. The visit comes ahead of the Group of 20 meeting in Japan and a U.S/South Korea summit at the end of June.

  • Iran announced plans to enrich more uranium soon and if so, would be a violation of the 2015 nuclear deal that the U.S. withdrew from last year. Iran’s atomic agency said that within ten days it would breach nuclear restraints placed upon it. A pact aimed at preventing Iran pursuing a nuclear weapon has been under severe strain since the U.S. pulled out of it last year. European countries, which have tried to stop the 2015 deal collapsing, have warned Iran they will reimpose sanctions if it is violated. The announcement comes as Iran faces more blame for last week’s attack on two oil tankers in the Persian Gulf.

  • India said it will introduce tariffs of up to 70% on 28 goods imported from the U.S, including apples, almonds and some chemical products. The move is in response to the White House revoking India’s preferential trade status, which exempted around $6 billion of Indian goods from tariffs. The countries’ bilateral trade is worth around $142 billion in total. New Delhi initially issued an order in June last year to raise import taxes as high as 120% on many U.S. items, incensed by Washington's refusal to exempt it from higher steel and aluminum tariffs, but repeatedly delayed the decision as the two nations engaged in trade talks.

  • EU/U.S. talks on auto tariffs on hold. Commerce Secretary Wilbur Ross told Bloomberg TV a lack of clarity after the European Parliament elections means that EU/-U.S. talks on auto tariffs are on hold. “For the moment, it’s complicated to negotiate with the European Union, because they just had their parliamentary election, they haven’t picked a new president of the European community yet, they haven’t picked a new trade commissioner and so there’s really nobody to negotiate with who will be around in the long term,” Ross told CNBC at the Paris Airshow.

  • Nearly half of House Democrats back impeachment hearings. Support is growing among Democrats to begin an impeachment inquiry into President Trump, a new Wall Street Journal/NBC News poll finds, presenting a challenge to House Speaker Nancy Pelosi (D-Calif.).

  • The biggest U.S. meat company is effectively building a new agriculture supply chain to meet changing consumer tastes. Tyson Foods Inc. this summer plans to introduce nuggets made from peas, flaxseed and other plants, the Wall Street Journal reports (link), in a strategic pivot prompted by the rapid growth of upstarts that have launched plant-based foods businesses. Upstarts Impossible Foods Inc. and Beyond Meat Inc. have rolled out a new generation of meat-free products to  restaurants and grocery stores. The efforts have converted consumers and investors. The article says analysts project the market for meat alternatives could reach tens of billions of dollars in annual sales, a substantial chunk of the $200 billion U.S. meat industry. Rival producers have developed similar blended products and other food companies including Nestlé SA, Unilever PLC and Brazil’s JBS SA aim to turn their test kitchens and distribution networks to meat imitations. Meanwhile, a New York Times article (link) says Impossible Foods hasn’t been able to keep up with demand after agreeing to supply Burger King with a plant-based Whopper burger.

  • Food deliveries and illegal migrants. Some couriers for food-delivery services like Uber Eats and Deliveroo in Europe are employing illegal migrants for low wages. Link to New York Times article.

Markets. The Dow on Friday declined 17.16 points, 0.07%, at 26,089.61. The Nasdaq dropped 40.47 points, 0.52%, at 7,796.66. The S&P 500 was down 4.66 points, 0.16%, at 2,886.98.

Saudi Arabia became the latest country to blame Iran for explosions on two oil tankers in the Gulf of Oman last week. The Kingdom’s crown prince, Mohammed bin Salman, said that while his country did not want a war, it wouldn’t hesitate to deal with threats to its vital interests. Iran hinted at an American plot.


 

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