The Cherry Blossoms are out, and so is the Mueller Report. Spring has finally come to your Nation’s Capital. There were hopes in the international commerce community that release of the Report on possible collusion with Russia would allow a return to focus on broader issues facing Congress and the Administration. Unfortunately, both branches immediately turned their attention to . . . health care. This suggests that there may be no wins on the horizon on the international trade front. Despite high level negotiations with China later this month, it does not appear today that any resulting agreement will be comprehensive enough to convince the President to eliminate the Section 301 duties which have been dogging the FTZ industry.
The U.S. is not the only country with trade issues to grapple with this month. The U.K. has been unable to resolve exactly how it will extract itself from the European Union. In a strange twist, that may actually mean that more goods from the U.S. will be duty free into the U.K. after the split, now scheduled to take place on April 12th. See more below.
At the end of last week President Trump said once again that trade talks with China were going very well, but cautioned that he would not accept anything less than a “great deal” after top U.S. and Chinese trade officials wrapped up two days of negotiations in Beijing.
“It is a very comprehensive, very detailed enlisting of problems that we’ve had with China over the years,” the President said of the talks. “And it’s going to have to be a great deal. If it’s not a great deal, we can’t do it.”
White House economic adviser Larry Kudlow said the negotiations are “not time dependent” and could take weeks or even months to complete.
This could explain why the Administration, despite wind in its sails after release of the Mueller Report, pivoted to an agenda headlined by health care instead of international trade negotiations.
Senate Majority Leader Mitch McConnell however, acutely aware of the perils that health care poses for Republicans, does not intend to wade extensively into the issue, senators and aides said, even as the President has revived his campaign promise to eliminate former President Barack Obama’s health-care law.
Without such critical support in the Senate perhaps the Administration will yet need to come back to trade for a pre-election win.
Trade negotiations are set to resume this week in Washington with a Chinese delegation led by Vice Premier Liu He.
U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer were in the Chinese capital for the first face-to-face meetings between the two sides since the President delayed the March 2 increase in ‘List 3’ tariffs on $200B worth of Chinese goods.
Lobbyists, company executives and U.S. lawmakers from both parties have urged the President not to settle simply for Beijing’s offers to make big-ticket purchases from the United States to help reduce a record trade gap. Thus the Presdient’s push to change what are widely viewed as China’s market-distorting trade and subsidy practices has drawn broad support, which portends protracted discussions before Section 301 tariffs are reduced or eliminated.
Reuters has reported previously that the two sides were negotiating written pacts in six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and nontariff barriers to trade.
Such an ambitious agenda will take time, and entail pain for industries caught paying additional tariffs on imports or new barriers to their exports. This may have lead the Administration to a topic they were hoping for a nearer-term win on, and health care got the call from the bench.
Not only is there no such health-care overhaul in the works on Capitol Hill — there are no plans to make such a plan.
Republicans have no intention of heeding President Trump’s urgent demands for a new health-care plan to replace the Affordable Care Act, fearing the potential political damage that such a proposal could cause in 2020 and hoping he will soon drop the idea, according to interviews with numerous GOP lawmakers, legislative staffers and administration aides.
Senate Republicans, who were caught off guard by The President’s rapid shift to focus on health care last week, said the White House would need to make the first move by putting forward its own proposal. But administration officials said nothing firm is in the works.
Nor does Senate Finance Committee Chairman Charles E. Grassley (R-Iowa), whose panel would be central to any such debate. When asked whether the two Senate committees overseeing health-care policy are planning to draft a replacement proposal for Obamacare, Grassley responded flatly: “No.”
“Obamacare is something that’s not going to be replaced unless the courts would declare it unconstitutional,” Grassley said in an interview. “You won’t know that for a long time.”
The FTZ industry is already faced with Section 232 tariffs and quotas on steel and aluminum. Late last month, the specter that such tariffs could be levied on auto imports once again made the news.
This time, it involves the Cause of Action Institute (CoA), the Department of Commerce , and a lawsuit to enforce a Freedom of Information Act (FOIA) document request. The lawsuit, at the request of the CoA, is in response to an FOIA request that the Department of Commerce did not fulfill. Originally, the CoA requested a copy of the Commerce Secretary’s final report to the President regarding the Section 232 investigation.
“Commerce claims that the information contained in their report justifies the proposed auto-tariffs, but the government refuses to release this report. The public should not have to take the government’s word that the report supports tariffs when the administration withholds the document it claims support its position. The tariffs will harm American consumers and businesses, and the public has a right to see the information contained in the report. We are dedicated to placing this vital information into the public sphere, ensuring that the government complies with its statutory obligations, and we look forward to a robust debate about the merits of the report,” said James Valvo, counsel and senior policy advisor at Cause of Action Institute.
This request occurred on two occasions, with the Department of Commerce stating it wouldn’t release the report to the public. Now the CoA has filed suit against the Department of Commerce for not releasing the report within the statutory time frame.
The British Parliament has rejected a Brexit arrangement for a third time, intensifying the UK’s political chaos just two weeks before the country breaks up with the European Union.
Members of Parliament (MPs) defeated the latest deal, 286 to 344 — a much closer margin than the previous two votes in March and January, but still short of a majority. This ‘strike three’ has dealt another deep blow to the already flailing authority of Prime Minister Theresa May.
The UK is now slated to break up with the European Union on April 12 without a deal, unless it can come up with a new strategy before that date, potentially leading to a much, much longer Brexit extension.
Prime Minister May tried a new tactic to get her deal through Parliament this time: offering to resign if MPs backed her plan. The bargain won the support of dozens of hardline pro-Brexit MPs in her party who had rejected her deal twice in the past. But it did not persuade May’s allies in Northern Ireland, the Democratic Unionist Party (DUP), who have staunchly opposed the deal, which ultimately doomed it.
Parliament may have one more chance to take control of the Brexit process today, when it’s expected to debate and vote on various Brexit options yet again. Parliament voted last Wednesday on eight different strategies, with none winning outright. MPs are expected to take the most popular plans — including a customs union with the EU — and see if they can settle on a new approach in the second round.
The UK was originally scheduled to leave the EU last Friday. The political impasse has pushed the Brexit process to the brink once again, with alternatives and time running out.
The EU agreed last week to extend the Brexit deadline until April 12, unless the UK could pass the Brexit deal this week. If it could, the EU would delay Brexit until May 22, to give the UK time to pass the necessary domestic legislation, and for the EU Parliament to ratify it.
If Parliament can agree on a new solution, it will be up to May and her government to decide whether to follow it — if May is still prime minister. May has said she wants to deliver Brexit for the country but has failed so far, and she may step aside anyway amid a third embarrassing defeat. May could also put forward a motion for general elections, leaving it up to the people to break the Brexit impasse by electing new leaders.
If the UK can’t agree on an alternative plan, that leaves one option: a no-deal Brexit, in which the UK crashes out of the EU without a deal on April 12. It is the only option Parliament agrees it wants to avoid. But it might be the only one it can’t stop.
Nearly a year after imposing stiff Section 232 tariffs on foreign metals, the United States is pressing Canada and Mexico to agree to permanent limits on the amount of steel and aluminum they export to America each year.
The demand, reiterated in meetings with Canadian officials this past week, has been rejected by Canada and Mexico and is eliciting opposition from American companies that use foreign steel and aluminum in their products.
The dispute is further complicating efforts to finalize the United States-Canada-Mexico Agreement (USMCA), the replacement to NAFTA. The USMCA faces a long battle in Congress and must be ratified by legislators in all three nations.
Canada and Mexico had hoped that President Trump would remove the tariffs last year, when the three countries agreed on a new trade deal known as the United States-Mexico-Canada Agreement. That did not happen, and Mexico and Canada are now demanding that the United States drop the levies as a condition of ratifying the deal.
But the President’s advisers appear hesitant to do away with what they see as a source of leverage with Canada and Mexico. Democrats, who now control the House, have made clear they will not approve the new agreement without changes that could require all three countries to sign off, and the White House may use the tariffs as a cudgel to force Canada and Mexico to agree to any alterations in such a negotiation.
On Monday, Chrystia Freeland, the Canadian foreign minister, called the tariffs “illegal and unjust” and “completely unacceptable.” Ms. Freeland’s comments came after she left a meeting with Robert Lighthizer, the United States Trade Representative, that focused mainly on the tariffs.
Ms. Freeland said Canadians would be “really troubled” with the prospect of moving forward to ratify the new trade pact while the tariffs were still in place. “To a lot of Canadians, it just doesn’t make sense,” she said.
To try to resolve the impasse, the Trump Administration has proposed switching Canada’s current 25 percent tariff on steel and 10 percent tariff on aluminum to a quota system, in which a specific amount of Canadian metal would be allowed into the United States each year, people familiar with the discussions say.
But Canada has rejected that idea, as have American companies that use foreign steel and aluminum in their products — from beer brewers to jet makers. They argue that capping metal imports at a specific level would be more disruptive than tariffs and could result in steep price increases or a scarcity of metals.
The United States and Mexico are locked in similar negotiations over American tariffs on Mexican metal. Jared Kushner, the president’s son-in-law and a senior White House adviser, traveled to Mexico last week to discuss the tariffs, the new trade deal and investment.
The impending release of the U.S. International Trade Commission (ITC) report on USMCA, intended to provide members of Congress with in-depth analysis of the trade deal's potential economic impact, may very well have minimal impact in swaying Congressional opponents.
According to a recent report in Politico, the ITC’s analysis is likely to suggest the USMCA will have a negligible impact to U.S. GDP, which won’t serve as a bulwark against complaints by House Democrats that the agreement is short on enforcement mechanisms for its labor provisions.
On Tuesday, associations representing the aluminum industry in all three countries sent a letter to President Trump asking for their industry to be exempted from any tariff or quota. “Replacing a tariff with a quota on aluminum imports in North America would be highly detrimental,” the letter said.
The President has credited his tariffs with reviving the United States steel and aluminum industries, saying last week that American steel mills were “roaring back to life.” And American giants like United States Steel and Nucor say the tariffs have helped them build new facilities and hire workers.
Still, economists suggest those gains have come at a high price. Calculations published by the Peterson Institute for International Economics in December showed that the tariffs would create 8,700 jobs in the United States steel industry, but that steel users would pay an extra $650,000 for each job created.
Some American steel makers have promoted the idea of quotas as a way to prevent surges of cheap metal, particularly Chinese steel and aluminum, from being routed into the United States through countries like Canada and Mexico. Mr. Lighthizer, who negotiated similar quotas to help the United States steel industry during the Reagan administration, has supported the approach.
Although Canada and Mexico repeatedly insisted that they would not negotiate a revised NAFTA with the threat of levies hanging over their heads, the three countries signed their pact in November without the levies being lifted.
The US trade deficit hit a 10-year high in December, dealing at least a temporary blow to President Trump’s efforts to reduce the deficit through tariffs.
The gap between the goods US companies sell to China and Chinese imports ballooned to a record $419B, while the total deficit in goods with all countries jumped to $891B. A surplus in services trade was unable to prevent the overall deficit for 2018 from rising nearly 19% in December to a decade-long high of $621B, the Commerce Department reported.
With US consumers continuing to demand imported phones, laptops and computer accessories, mostly from China, analysts said the trade gap was likely to widen further and forecast that the Presdient might redouble his efforts to impose tariffs.
Exports, which fell for a third month in a row, also weakened in response to slowing global demand and a strong dollar, which is making US-made goods less competitive on the international market.
Chris Beauchamp, chief market analyst at the derivatives trading firm IG, said the recent $1T of tax cuts and higher government spending had boosted domestic consumption and increased imports. “The chances of a deal with China this month look a bit weaker now, while more trade conflict with Europe seems increasingly likely. The assumption now is that trade wars will intensify, and that growth will suffer as a result,” Beauchamp said.
The US economy grew 2.6% on an annualized basis in the last quarter of 2018, slowing from the third quarter’s brisk 3.4%.
The Cherry Blossoms are out, and so is the Mueller Report. Spring has finally come to your Nation’s Capital. There were hopes in the international commerce community that release of the Report on possible collusion with Russia would allow a return to focus on broader issues facing Congress and the Administration. Unfortunately, both branches immediately turned their attention to . . . health care. This suggests that there may be no wins on the horizon on the international trade front. Despite high level negotiations with China later this month, it does not appear today that any resulting agreement will be comprehensive enough to convince the President to eliminate the Section 301 duties which have been dogging the FTZ industry.
The U.S. is not the only country with trade issues to grapple with this month. The U.K. has been unable to resolve exactly how it will extract itself from the European Union. In a strange twist, that may actually mean that more goods from the U.S. will be duty free into the U.K. after the split, now scheduled to take place on April 12th. See more below.