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Monument Analysis

March 19th – Monument’s Week In Trade: 7 Days, 7 Stories

By March 19, 2018 No Comments

 

#1 – 301 ANXIETY RAMPS UP

POLTICO scored the trade scoop of the week with a story on the White House’s plans for tariffs stemming from the 301 investigation into Chinese intellectual property trade abuses. The key paragraph in the story peeked into a White House meeting that had not yet been reported on:

“U.S. Trade Representative Robert Lighthizer presented Trump with a package of tariffs that would target the equivalent of $30 billion a year in Chinese imports. In response, Trump urged Lighthizer to aim for an even bigger number — and he instructed administration officials to be ready for a formal announcement in the coming weeks, according to two people involved in the administration’s trade deliberations.”

Beyond tariffs: In addition to the over $30 billion in tariffs, the Trump administration could also impose restrictions on foreign investment from China and restrictions on Chinese immigration by curtailing Chinese visas.

Industry reaction: The $30 billion plus tariff number has sent waves of panic and uncertainty through the business community. One immediate result has been diverse groups of DC trade associations linking hands to fight back against the coming tariffs.

Timing: The tariffs could come as early as next week. However, many observers feel that announcing the tariffs during a week when Administration officials will be testifying on the Hill (see story below) invites danger. More likely: the Administration announces the tariffs after Congress has gone home for the Spring recess at the end of this week.

 

#2 – EU RELEASES STEEL AND ALUMINUM RETALIATION TARGETS

Last Friday, the European Union published their retaliatory targets after the Trump Administration announced they’ll be moving forward with tariffs on imported steel and aluminum. The list goes after €6.4 billion in U.S. exports, including €2.8 billion that can be hit with tariffs of up to 25 percent immediately.

In addition to targeting U.S. steel exports, the list also zeros in on textiles and ag products. The ag retaliation and its political fallout could be critical, given how important ag voters and red ag state members of Congress are to the Trump political base. Among ag products, the EU targeted corn, kidney beans, rice, cranberries, orange juice, peanut butter and bourbon.

Here is the political rationale behind targeting some of these products:

o Bourbon – The goal here is to target Senate Majority Leader Mitch McConnell. 59% of bourbon exports go to the EU. A 25% tariff would hit Kentucky hard.

o Cranberries – Wisconsin is the top producer at about 57%. House Speaker Paul Ryan is the political target here.

o Corn – Iowa is the top producing state. Chuck Grassley, the Senior Senator is the #2 epublican Senator on the Finance Committee and potential next Chairman is among the top targets here.

#3 – BUSY WEEK OF TRADE HEARINGS ON THE HILL

Congressional Budget season means that key Administration trade officials will be in the hot seat this week at a round of Congressional hearings. Expect Congressional Republicans in particular to press hard on the impacts of steel, aluminum, and potential 301 tariffs. Also look for both parties to grill officials about transparency in NAFTA and KORUS negotiations. Here are the dates and times to circle:

Wednesday at 10 AM – U.S. Trade Representative Robert Lighthizer goes before the House Ways and Means Committee to discuss the Administration’s trade agenda

Thursday at 9 AM – Commerce Secretary Wilbur Ross goes before Ways and Means to discuss the steel and aluminum tariffs.

Thursday at 10 AM – Lighthizer goes before the Senate Finance Committee on the Administration’s trade agenda

To kick it all off: On Tuesday morning at 9 AM, Finance Chairman Orrin Hatch will headline a Business Roundtable/Farmers for Free Trade event. Look for Senator Hatch, who as a lame duck is less constrained by politics, to take aim at the Administration over the recent tariff announcements.

#4 – EVERYBODY LOBBIES TO BE EXEMPTED OR EXCLUDED FROM STEEL AND ALUMINUM TARIFFS

The Trump Administration is out today with guidance on the process for granting exclusions for individual products to be protected from the forthcoming steel and aluminum tariffs. For the details on the process visit HERE.

In the coming days, we also expect to see guidance from the Trump Administration on how they will exempt additional countries (the U.S. and Canada are already carved out) from the tariffs. That guidance is expected to come from the U.S. Trade Representative’s office.

Brazil is reportedly next in line for an exemption consideration and has been directly lobbying USTR Lighthizer. The Administration criteria for a country exemption will reportedly rest on whether a country has shown that it has fought back against global steel and aluminum overcapacity and dumping in their own countries.

The NY Times reports that lobby shops across D.C. are promising clients a path to exclusion.

On the other side: Steel manufacturers are pressing the Administration in a new letter to limit country exemptions and be transparent in the product exclusion process.

#5 – WAPO SCOOP: PRESIDENT ADMITS TO MAKING UP TRADE DEFICIT

On Thursday, the Washington Post unearthed a fundraiser transcript in which President Trump boasts of having made up that the U.S. has a trade deficit with Canada in a conversation with Prime Minister Justin Trudeau. The U.S. Trade Representative’s website correctly notes that the United States maintains a trade surplus with Canada. Despite the story, Trump still went on to defend the incorrect assertion in a tweet last week.

#6 – MTB AND GSP LIKELY TO MAKE THE OMNIBUS CUT

Look for the renewals of important tariff cutting bills to be included in the Omnibus Appropriations bill that Congress is looking to pass by the end of this week. While Ways and Means Chairman Kevin Brady has not yet confirmed their inclusion, it is expected that the Generalized System of Preferences and Miscellaneous Tariff Bill will be passed as part of the massive spending package. Both bills, which cut tariffs on imports, are broadly popular with both parties and passed by huge margins in the House.

#7 – FARMERS ROLL OUT $500,000 AD BUY TARGETED AT TRUMP

Farmers for Free Trade, a campaign co-chaired by ex-Senators Max Baucus and Richard Lugar, last week unveiled a new ad campaign with a pointed message from farmers to the President. Watch the ad – which is part of a $500k ad buy on cable news programs the President is known to watch – here:

https://youtu.be/k7XkVmWIWyo

Prepared by Matt McAlvanah (matt@monumentpolicy.com) and the Monument Trade Team