#1 – TRUMP ENDS 232 EXEMPTIONS: THE TARIFF LISTS AND THE STRATEGY
On Wednesday, with no NAFTA deal in sight (after the President reportedly nixed a deal) and no progress made in talks with the E.U., the Trump Administration opened three new fronts in the global trade war. Tariffs are now being imposed or threatened between the U.S. and Canada, Mexico, and the E.U. (not to mention those already in place with China).
Below are links to the full tariff lists or press releases each country has released.
CANADA: https://www.fin.gc.ca/activty/consult/cacsap-cmpca…
• Canadian retaliation strategy (according to Foreign Affairs Minister Chrystia Freeland): “The idea is, you look at a map of the congressional districts of the United States, you look at which members of Congress are in leadership positions and then you look at the big industries in those districts and then you draw up your list accordingly. And this list was clearly drawn up with this in mind.“
• There is a two-week consultation period for Canadians to weigh in on the list, with tariffs taking effect July 1.
• More HERE on strategy and the products Canada plans to hit from a great piece from the CBC including this take from John Weekes, Canada’s lead negotiator in the first NAFTA negotiations: “The general reasoning is to choose items which won’t hurt Canadian consumers — they won’t have to buy them at inflated prices. And items that are in sensitive political areas.”
• Freeland says the list of items that Canada is targeting could expand.
THE E.U.: http://trade.ec.europa.eu/doclib/docs/2018/march/tradoc_156648.pdf
The European commission said it “needed to consult with member state diplomats before announcing the goods that will be targeted.”
• European strategy (according to the E.U.’s Trade Commissioner, Cecilia Malmostrom): This is a “very proportional response…We are not in a trade war but we are in a very difficult, dangerous situation. The US is playing a dangerous game. We are not seeking to escalate the situation. But we need to respond.”
MEXICO: While Mexico has not yet released an offical list of tariffs, they did put out a press release that states: “Faced with tariffs imposed by the US, Mexico will impose equivalent measures to various products such as flat steel (hot and cold foil, including coated and various tubes), lamps, pork legs and shoulders, sausages and food preparations, apples, grapes, blueberries, various cheeses, among others, up to an amount comparable to the level of affectation.“
• Mexican strategy (According to Mexican Economy Minister Ildefonso Guajardo): “You have to be careful that the products you select don’t have an important impact on national consumption, that it doesn’t have an important impact on the topic of inflation, and that you have alternative sources,” he said. Guajardo added that products were selected “that have implications in some districts where there’s important Congressmen and Senators … because, finally, the effect will fall on voters and citizens that live in the districts of people who have a voice and vote in the American Congress.”
A roundup on all the tariff lists from Axios is HERE.
#2 – THE TRUMP TEAM’S DEFENSE: NOTHING MORE THAN A “FAMILY QUARREL”
Watch Larry Kudlow duel with Chris Wallace on Fox News Sunday over the announcement:
The big takeaway: Kudlow claims that Canada is overreacting and that the trade dispute amounts to nothing more than a “family quarrel.”
Here is the President’s response via twitter over the weekend:
#3 – CHINA TRADE WAR VERY MUCH OFF “HOLD” AS ADMINISTRATION MOVES FORWARD ON 301
Last week, the Trump Administration announced a specific date – June 15th – when a full 301 tariff list will be released and announcing that tariffs of 25% would take effect shortly after.
While the announcement noted that a “final list” of Chinese products that will be taxed will be released, the Administration has already released a list of goods they intend to target.
• The list, which you can find HERE, includes “industrially significant technology” and products included in China’s “Made in China 2025” program.
• China has also already announced the list of U.S. exports that they plan to retaliate against should the U.S. follow through. That list can be found HERE.
Last week’s announcement also said that proposed investments restrictions and export controls will be announced June 30th and take effect soon after.
What it means:
• While the Administration is taking a more aggressive tact with this statement, there is still room to avoid these tariffs being imposed, most specifically, through negotiation that Commerce Secretary Wilbur Ross has taken the lead on (more on that below).
• The President will make a final call on these tariffs based on the politics of the moment on June 15th. Until that happens we should expect threats and counter-threats in the talks between the U.S. and China.
#4 – ROSS LEAVES CHINA EMPTY HANDED; CHINA ISSUES WARNING ON 301 TARIFFS
Shortly after announcing that the U.S. would be moving forward with $50 billion in new tariffs on China, Commerce Secretary Wilbur Ross embarked on a third round of negotiations with China, this time to secure the purchase of more U.S. agriculture and manufacturing products. Unsurprisingly, in the wake of massive tariff threats, the talks fell flat.
• Here are the key takeaways from Keith Bradsher’s (the NYT’s man on the ground in China) piece from over the weekend.
“The United States and China ended trade talks in Beijing on Sunday without any announced deals and with Chinese officials refusing to commit to buying more American goods without a Trump administration agreement not to impose further tariffs on Chinese exports.“
• The specific warning from China: “If the United States introduces trade measures, including an increase of tariffs, all the economic and trade outcomes negotiated by the two parties will not take effect.”
#5 – OTHER G7 COUNTRIES OFFER REBUKE OF TRUMP TRADE TACTICS
The AP reported last week that the U.S. was called out by economic ministers at G7 talks among economic ministers for the steel and aluminum tariffs:
“After a three-day meeting of finance ministers from the G7 industrial nations that ended Saturday in Canada, Canadian Finance Minister Bill Morneau issued a summary saying the other six members want Trump to hear their message of “concern and disappointment” over the U.S. trade actions.”
Bruno Le Maire, France’s finance and economy minister, was blunt in his assessment of the meeting: “It has been a tense and tough G7 — I would say it’s been far more a G6 plus one than a G7.”