Canada Preparing New List of U.S. Products to Target Via Metal Tariffs Dispute

Posted on 04/09/2019 7:22 AM

Trump administration threatens EU with tariffs | China media urges patience in trade talks

Canada is preparing a new list of U.S. products that it would target with retaliatory tariffs over U.S. Section 232 steel and aluminum import duties, Canadian Ambassador to the U.S. David MacNaughton told the North American Ag Journalists meeting in Washington.
     The Trump administration is threatening the EU with tariffs. The White House said it was looking into tariffs on just over $11 billion of imports from the European Union in response to subsidies the EU gives to the Boeing rival Airbus.
     China's state media list four key factors in any U.S./China trade accord, with the Global Times cautioning patience is needed. Meanwhile, the U.S. is still not satisfied with all issues relative to U.S./China trade talks, according to a White House official.
     China's Ministry of Commerce is prepared to review its antidumping duties put in place on imports of U.S. distillers' dried grains (DDGs), according to a document from the China Alcoholic Drinks Association that was reviewed by Reuters.
     Mexican tomato growers have offered the Commerce Department a proposal for a new agreement with the U.S. that would significantly boost the price floor for selling the fruit here.
     Trump blocks Cuban baseball pact. The administration blocked Major League Baseball from signing players directly from Cuba to play professionally in the U.S. The move reverses the league's deal with the nation's baseball federation, which Trump officials said is allied with the Cuban government.
     A Chinese woman arrested recently at President Trump's Mar-a-Lago resort had a device to detect hidden cameras and $8,000 in a hotel room, a federal prosecutor has said. Link for details from the New York Times.


Canada readying a refresh of retaliation list, likely to include additional U.S. ag products. Canada is preparing a new list of U.S. products that it would target with retaliatory tariffs over U.S. Section 232 steel and aluminum import duties, Canadian Ambassador to the U.S. David MacNaughton told the North American Ag Journalists meeting in Washington.

"We will be refreshing that retaliation list shortly," MacNaughton said of the list that will likely be released next week, "though that will be more out of sorrow than out of anger."

"There are a variety of agricultural products we would look at and see to what degree they would impact Canadian producers and consumers," MacNaughton noted, a reference to a 45-day comment period that will open once the list is released. "But I would think it would be a fairly long list,” he added, noting that the U.S. exports a lot of applies, pork, wine and ethanol to Canada.

Canada is not seeking to "escalate anything" with the U.S. but wants to match U.S. tariffs "dollar for dollar,” MacNaughton declared. Canada has waived more than $214 million worth of tariffs on targeted U.S. products, Canada’s Finance Department said Monday. Canada imposed retaliatory tariffs on nearly $12.5 billion worth of U.S. goods last July in response to Trump’s tariffs on Canadian steel and aluminum via national security grounds. Mexico has also discussed changing the items on its retaliation list, but officials have not announced a date to update those countermeasures, which hit around $3 billion worth of U.S. goods.

MacNaughton also defended the U.S.-Mexico-Canada Agreement (USMCA), saying it is a "good deal." But the Section 232 tariffs remain a sticking point, especially since President Donald Trump has indicated the USMCA deal is "the best trade agreement ever negotiated." Based on that, MacNaughton said the tariffs need to be removed for the Canadian government to move the agreement through parliament. He added there are no talks between the two sides on dropping the tariffs, merely discussions that are a "restating of positions" on the matter.

As for USMCA approval, MacNaughton hopes the deal will be taken up by parliament before they leave mid-June for elections. Should USMCA not be cleared by then, he predicted the U.S.-Canada relationship would be a "central part of the campaign, and it won't be a really positive discussion."

Outlook: The Trump administration is seeking to replace the metal tariffs with some quota-related limits on steel and aluminum trade. Talks with Mexico on the topic are nearing a conclusion, sources advise, while conversations with Canada are at an impasse — “There are no negotiations at the present moment,” MacNaughton said, referring to 232 relief talks. “There have been what I would describe as restating positions.” While U.S. Trade Representative Bob Lighthizer has reportedly urged Trump to lift the tariffs, the president has resisted. Before the USMCA was agreed to between negotiators from the three countries, Trump said the metal tariffs would be lifted with any USMCA accord. The president altered his stance, adding angst to the situation via frustrated officials from Canada and Mexico, and also among U.S. lawmakers and many in the U.S. ag sector who want to see the metals tariffs lifted, as well as Canada's and Mexico’s counter-tariff measures against the U.S., which include key farm products.

The U.S. threatened Europe with $11.2 billion in tariffs. Helicopters, aircraft parts, wine, and cheese are among a long list of products that could be slapped with duties in retaliation for EU subsidies to Boeing rival Airbus. The World Trade Organization (WTO) says European subsidies to Airbus have harmed the U.S.

The new tariffs would come into effect when the WTO confirms the extent of the subsidies’ harm this summer.

This case has been in litigation for 14 years, and the time has come for action,” said U.S. Trade Representative Bob Lighthizer. “Our ultimate goal is to reach an agreement with the EU to end all WTO-inconsistent subsidies to large civil aircraft. When the EU ends these harmful subsidies, the additional U.S. duties imposed in response can be lifted.”

Outlook: Any settling of the U.S. trade war with China may free the U.S. to launch another one with the EU, including a disagreement of including ag trade provisions in any U.S./EU trade agreement. Trump has threatened auto tariffs on the EU relative to various spats with the U.S. and this may eventually spark investor concerns about the world economy if the topic escalates.

U.S./China trade policy update:

  • Global Times editorial urges “patience is probably the most important thing.” A Global Times editorial appears to be trying to manage expectations about any U.S./China trade agreement. “The fruit is not yet ripe, and if either side makes a hasty move to pick it, that side may have to pay an extra price or it may have to force the other side to pay an extra price,” said the editorial which was published on Monday. “It will incur serious problems down the road and weaken the deal’s ripeness and fairness.” The editorial said President Trump’s suggestion that a deal could be reached by the end of the month is “just an uncertain timetable.” The newspaper, closely afflicted with the People’s Daily, sets out four areas that still need to be resolved: (1) The two sides first need to resolve their differences over the text of the agreement, although the remaining issues are seen as the most difficult to resolve. (2) Both governments must exhibit “stronger” will to confront domestic opponents of a trade deal, given that some elements will be controversial, the editorial argued. (3) Washington and Beijing should also reduce bilateral “political and security frictions” so that there will be sufficient political and public goodwill to reach a trade deal. (4) The two countries must treat a trade deal as a step towards better bilateral relations in general. “It is a bad idea to assume that the two sides can sort out their trade matters and then to focus on fierce political and security rivalry,” the editorial said.
  • Reuters: China to review antidumping duties on U.S. DDG imports. China's Ministry of Commerce is prepared to review its antidumping duties put in place on imports of U.S. distillers' dried grains (DDGs), according to a document from the China Alcoholic Drinks Association that was reviewed by Reuters. The U.S. Grains Council has asked the antidumping and anti-subsidy duties be removed on U.S. DDGs. The document sent to the member companies of the China Alcoholic Drinks Association asks them to submit information to the association before April 10 on their DDG production and sales levels, plus their income from recent years. It also asks for views on whether removing the tariffs would impact the domestic industry and companies along with the local ag industry, farmer incomes and poverty alleviation programs. Removal of the duties has been pushed by the U.S. side and the issue is anticipated to be dealt via the U.S./China trade discussions as DDGs have been mentioned as one of the commodities that is expected to be part of purchase commitments made by China as part of the deal.
  • U.S. still not satisfied with all issues relative to U.S./China trade talks: White House official. While progress has been made with China, U.S. officials are not yet satisfied with progress in all areas. White House official Clete Willems told Reuters on the sidelines of a U.S. Chamber of Commerce event in Washington. "We're making progress on a range of things, and there’s some stuff where we're not satisfied yet," he said, offering no specifics on which issues remain unsettled. He also shied away from offering a timeline for completion of the deal. "It should be a good sign for people that we're not rushing into this, we want to get it right and we need to nail down specifics," he observed. He did note that existing tariffs put in place by both countries were an issue that is yet to be settled.

Mexico offers tomato trade plan. Mexico's tomato industry April 5 presented the U.S. Commerce Department with a proposal for a new tomato trade deal between the two countries, including a significantly higher floor price for selling Mexico tomatoes to the U.S. The offer comes in the wake of the Commerce Department announcing earlier this year it was preparing to end the suspension agreement between the two countries on tomatoes as of May 7. That action would set the stage for the U.S. to resume an investigation of Mexican tomato shipments to the U.S. that could result in hefty antidumping duties being put in place.

Reports indicate that Mexico has proposed elimination of a pricing distinction between winter and summer tomatoes, with a discount applied to those shipped in the summer. That would result in the winter reference price applying for the full year on each of four tomato categories.

The final determination is up to the U.S. Department of Commerce, but the Florida Tomato Exchange said in a statement that they welcomed the Mexican offer as it "contains some useful suggestions on how to prevent circumvention of the suspension agreement by Mexican producers."

Other items of note:

  • Attorney General William Barr will appear before a congressional panel today for the first time since special counsel Robert Mueller completed his report into Russian interference in the 2016 presidential election.

  • Treasury Secretary Steven Mnuchin is expected to testify today on Capitol Hill. Democrats are likely to press him on whether the agency intends to comply with their request for President Donald Trump's tax returns. He could also be asked about any updates to ongoing trade agreement talks with China.

  • Saudis barred entry into U.S. Sixteen Saudis, including a top aide to Prince Mohammed bin Salman, will be denied entry to the U.S., Secretary of State Mike Pompeo announced Monday. The Trump administration has been criticized for playing down C.I.A. findings that show Prince Mohammed played a role in the killing of the Saudi dissident Jamal Khashoggi.

  • Mexico is about to pass a major overhaul of its labor laws, a reform it agreed to make as part of the new USMCA/NAFTA 2.0 trade deal, and a step House Speaker Nancy Pelosi (D-Calif.) said must take place before the House will consider a bill to implement USMCA. Once the legislation is passed, implementation will start immediately, said Jesús Seade, Mexico’s undersecretary for North America. Pelosi said last week the House will also wait to see how the reforms are implemented, noting it will “take some time.”

  • DHS and Labor Dept. back proposal to allow more foreign workers into U.S. The New York Times reports (link) that the Trump Administration “wants to issue more visas for foreign workers to take temporary jobs in housekeeping, landscaping and other fields.” The Departments of Homeland Security and Labor “said they planned to issue up to 30,000 additional H-2B visas through Sept. 30,” but “only workers who had previously secured the visas would be eligible for the proposed additional ones.” This echoes similar reports about the likely increase earlier this month.

  • Walmart Inc. is getting more robotic in its drive to cut labor costs. The retailer is expanding its use of robots in stores to help monitor inventory, unload trucks and even clean floors, the Wall Street Journal reports (link), as the company looks to reset its workforce and operations to serve online business. The country’s largest private employer said at least 300 stores this year will add machines that scan shelves for out-of-stock products. And Walmart will more than double to 1,200 the number of conveyor belts that automatically scan and sort products as they come off trucks. “Walmart wants to save money even as it raises wages, but the effort is also aimed at flexibility. The retailer says automation at truck dock doors can cut the number of workers there from eight to four, allowing for more hiring targeted at expanding e-commerce efforts” the article notes.

  • Roundup faces a legal reckoning. The weedkiller's owner, Bayer, says studies prove the product is safe amid lawsuits alleging a cancer link. Two juries have found in favor of plaintiffs who developed lymphoma and who claim company cooperation with scientists skewed the research. Link to Wall Street Journal article for details.

  • Congress approves Colorado River drought deal. Congress on Monday approved a landmark water-sharing deal on the Colorado River as the waterway serving 40 million people. The bill, HR 2030, passed by a voice vote in the House Monday evening with identical legislation, S 1057, clearing the Senate a few minutes later. The Senate agreed to pass the House version once it formally receives the necessary paperwork from the lower chamber, clearing the way for the bill to go to the White House for the president's signature. The deal aims to reduce the risk that the water levels at the river's two main reservoirs will drop to catastrophically low levels, and it has been more than three years in the making among the seven Colorado River basin states.

  • 2020 election: Now 18 Democratic presidential candidates with the inclusion of Rep. Eric Swalwell of California. Link to a New York Times tracker of the candidates from both political parties, which are expected to grow further.

Markets. The Dow on Monday lost 83.97 points, 0.32%, at 26,341.02. The Nasdaq rose 15.19 points, 0.19%, at 7,953.88. The S&P 500 moved up 3.03 points, 0.10%, at 2,895.77.

U.K. Prime Minister Theresa May traveled to Berlin and Paris today for talks with the German and French leaders in a bid to secure backing for a second delay to Brexit. EU leaders will meet in Brussels Wednesday for an emergency summit.

China's State Council calls on central bank to cut rates, reserve requirements to boost lending. The People's Bank of China and the country's banking and insurance regulator need to boost targeted cuts in the reserve requirement ratio (RRR) for small and medium-sized banks, according to the Chinese cabinet — the State Council, in a bid to increase liquidity to boost the availability of loans to private and small firms. They also called for lowering interest rates, with both actions aimed at boosting credit and lowering lending costs.


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