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Trade Wars
June 10, 2019

The tariff-averting agreement the U.S. and Mexico announced on Friday night doesn't appear to have many new elements or enforcement mechanisms, but it was a win-win in that both President Trump and Mexican President Andres Manuel Lopez Obrador are declaring victory.

At the same time, Trump tweeted several aggrieved defenses of the deal before heading to his golf course in Virginia on Sunday, and members of his administration insisted on Sunday talk shows that Mexico agreed to new immigration measures in the deal and that Trump's tariff threats, which frayed ties with congressional Republicans, forced Mexico to hasten or commit to things it had been reluctant to put to paper.

The 5 percent tax on Mexican imports, rising incrementally to 25 percent, would have been economically painful for U.S. consumers, especially in key states that voted for Trump, notably Texas. So not everyone was convinced Trump would actually follow through with his threat.

And Schumer did predict Trump would balk, on the Senate floor on June 4 — there's video. On Sunday, Schumer reiterated his belief that Trump's "bogus 'deal' Mexico volunteered to do months ago" follows his "bogus tariff threat even GOP in Congress rejected." And he wasn't the only Democrat who predicted Trump would find a way to declare victory. "Bet your bottom dollar, Trump will back off by the weekend," tweeted Rep. Maxine Waters (D-Calif.) on June 7, hours before the late-night deal was announced. "Just another bluff!"

It's worth noting that Mexico took Trump's threat seriously enough to send up a delegation soon after Trump threatened the new tariffs. And unlike Democrats, Mexican officials are being careful not to contradict Trump in public on the agreement. "They're just trying to say anything to come out of the mess," Ken Smith Ramos, a former top Mexican trade negotiator, tells Politico. Peter Weber

May 31, 2019

Financial markets were not pleased with President Trump's announcement Thursday that he will impose new, gradually increasing tariffs on all Mexican imports "until such time as illegal migrants coming through Mexico, and into our country, STOP." Plenty of conservatives were unhappy, too. The Heritage Foundation's James Carafano and Jack Spencer, for example, said the tariffs are "the wrong policy" to address the border "crisis" and would "punish our citizens." Phillip Klein at The Washington Examiner called it "mindbogglingly stupid on so many levels."

White House Chief of Staff Mick Mulvaney said Trump is imposing the tariffs, starting at 5 percent and rising to 25 percent, under the International Emergency Economic Powers Act, which gives presidents authority to regulate commerce during a national emergency. Republican leaders in the House and Senate were largely supportive of the tariffs, he added.

Senate Finance Committee Chairman Chuck Grassley (R-Iowa) was not supportive. "Trade policy and border security are separate issues," he said in a statement. "This is a misuse of presidential tariff authority and counter to congressional intent. Following through on this threat would seriously jeopardize passage of USMCA, a central campaign pledge of President Trump's and what could be a big victory for the country."

The White House has just started the process toward possible ratification of the U.S.-Mexico-Canada Agreement (USMCA), an update to NAFTA, earlier Thursday, and ratification is uncertain in the House. At the Examiner, Klein agreed that slapping tariffs on Mexican goods will "surely disrupt" the USMCA ratification process, and he listed four other objections, including that the tariffs amount to "a tax increase of up to 25 percent on American families and businesses purchasing any products from Mexico, one of the U.S.'s leading trade partners."

"Congress should immediately intercede to block this reckless policy by reclaiming its traditional power over tariffs," Klein concludes. "House Democrats should pass something and force Senate Republicans to either rebuke Trump's policy, or answer for their cowardice." Grassley? Peter Weber

May 17, 2019

Agriculture Secretary Sonny Purdue said Wednesday night that he is putting together a second round of financial assistance for farmers and ranchers hit by President Trump's trade war with China. Purdue said the farm bailout will total between $15 billion and $20 billion, and include more direct payments and commodity purchases, but "many farmers doubt the scale of that aid package is anywhere near sufficient to make up for a trade spat that has shut them out of a lucrative Chinese market of 1.4 billion consumers," The Wall Street Journal reports.

"Though we are glad that the administration is considering additional assistance," Roger Johnson, president of the National Farmers Union, tells the Journal, "such temporary solutions are not sufficient to address the permanent damage the trade war has inflicted on agricultural export markets." China has retaliated against Trump's tariffs by raising tariffs on soybeans, sorghum, pork, and other U.S. agricultural products, plus slowed down purchases by state-owned companies. U.S. farm exports have plummeted and prices are at 10-year lows.

Last year, Congress approved $12 billion in trade war farm aid. So far, only $8.5 billion of that has been paid directly to farmers — and, the New York Daily News reported Thursday, $62 million of the bailout went to a Brazilian pork processing company that doesn't appear to be struggling under the trade war and is owned by two Brazilian brothers who can't leave Brazil because they are being investigated for corruption.

Agricultural areas that voted for Trump are losing patience, as The Late Show touched on Thursday night.

But the anger, despair, and financial hardship are real. "We cannot withstand another year in which our most important foreign market continues to slip away," John Heisdorffer, an Iowa soybean farmer and chairman of the American Soybean Association, tells the Journal. "Our patience is waning, our finances are suffering, and the stress from months of living with the consequences of these tariffs is mounting." Peter Weber

May 10, 2019

President Trump's threatened 25 percent tariff on $200 billion worth of Chinese exports took effect at 12:01 a.m. Friday, halfway through high-level trade talks in Washington, D.C., led by Chinese Vice Premier Liu He. The tariffs, up from 10 percent, will be in force for shipments leaving China on Friday, so there is still a little time to work out a last-minute agreement. Both sides agreed the trade talks will continue Friday, as planned.

China's Commerce Ministry said it "deeply regrets" Trump's decision and Beijing "will have to take necessary countermeasures." A ministry spokesman added, "We hope that the U.S. and China will meet each other halfway and make joint efforts to solve the existing problems through cooperation and consultation." U.S. officials said the trade talks were progressing smoothly until China sent over significant edits over the weekend, prompting Trump's tariff threat.

Equalizing the trade imbalance with China was one of Trump's big campaign themes, and "U.S. officials said Trump's 'America First' stance rocked Chinese leaders and halted the erosion of American manufacturing and technology industries by Chinese trade practices," The Washington Post notes. But the tariffs — those imposed by Trump and the retaliatory tariffs from China — are hurting both countries, economists say.

On the U.S. side, U.S.-based companies pay Trump's tariffs and pass much of that cost onto consumers, and China's retaliatory tariffs are harming U.S. agriculture and many large industries. A study in March from the World Bank's chief economist and colleagues from UCLA, UC-Berkeley, and Columbia Business School found that "workers in very Republican counties bore the brunt of the costs of the trade war, in part because retaliations disproportionately targeted agricultural sectors." Read The Week's Jeff Spross explain why Trump may have the upper hand on China anyway. Peter Weber

March 5, 2019

President Trump is ending a preferential trade status for India and Turkey, effective in about 60 days, U.S. Trade Representative Robert Lighthizer announced Monday.

The Generalized System of Preferences (GSP) allows countries to export up to $5.6 billion in goods to the U.S. duty-free. India, the program's largest beneficiary, shrugged off the news. "It's meant for least-developed countries, and India has graduated out of that," said Monideepa M. Mukherjee, a spokeswoman for India's commerce ministry, adding that India will hold off on retaliatory tariffs.

Turkey was less sanguine, slamming the decision as harmful to Turkish and American small and medium businesses. Trump complains frequently about trade deficits. Peter Weber

January 9, 2019

China and the U.S. wrapped up three days of trade negotiations in Beijing on Wednesday, one day later than scheduled, and the U.S. delegation sounded upbeat about the talks. It has been "good few days," U.S. Under Secretary of Agriculture Ted McKinney told reporters. The talks "went just fine," he added. "It's been a good one for us." President Trump tweeted late Tuesday night that "talks with China are going very well!" China's Foreign Ministry said only that "the two sides were indeed very serious in conducting the consultations," and a formal statement was forthcoming.

China and the U.S. are racing to reach a deal before a March 2 deadline set by Trump and Chinese President Xi Jinping in December. This was the first face-to-face negotiations between China and the U.S. since that agreement, and if no deal is reached, Trump says he will raise tariffs on $200 billion worth of Chinese imports to 25 percent, from 10 percent. Analysts are skeptical that the two sides can reach a deal addressing America's concerns about Chinese structural trade barriers and investment regulations before the March 2 deadline.

"Even if a deal is cobbled together, the more strident trade hawks in the White House and Trump may not sign off," suggested Mizuho Bank's Vishnu Varathan. China has made concessions on agricultural and energy imports, but neither side seems to have shifted their position on the structural reforms, said Jake Parker at the U.S.-China Business Council. "These issues are much more difficult to solve immediately but are, frankly, much more compelling to U.S. companies." Higher-level talks are scheduled for later in January. Peter Weber

January 2, 2019

U.S. and Chinese trade negotiators are meeting in Beijing this week to begin high-stake talks to avert a bigger trade war before a March 2 deadline announced by President Trump and Chinese President Xi Jinping after a recent meeting in Argentina. The task of redefining the U.S.-China trade relationship in a way that benefits the U.S. rests largely with U.S. Trade Representative Robert Lighthizer, a longtime China hawk and Trump's chief U.S. trade negotiator.

Before he does that, "Lighthizer will need to keep a mercurial president from wavering in the face of queasy financial markets, which have suffered their steepest annual decline since 2008," The New York Times reports. "Trump is increasingly eager to reach a deal that will help calm the markets, which he views as a political electrocardiogram of his presidency." On Saturday, after speaking to Xi on the phone, Trump cheered investors by tweeting that the "deal is moving along very well."

Specifically, Lighthizer views his role as "preventing the president from being talked into accepting 'empty promises' like temporary increases in soybean or beef purchases," and he has a tool at his disposal, the Times reports:

When Mr. Lighthizer senses that anyone — even Mr. Trump — might be going a little soft on China, he opens a paper-clipped manila folder he totes around and brandishes a single-page, easy-reading chart that lists decades of failed trade negotiations with Beijing, according to administration officials. [The New York Times]

Lighthizer also has Florida real estate on his side, the Times reports: "He has joked to colleagues that he has more influence with Mr. Trump during winter months because he is able to hitch a ride on Air Force One during the president's flights down to Mar-a-Lago, which is several miles from Mr. Lighthizer's own $2.3 million waterfront condo in Palm Beach." You can read more at The New York Times. Peter Weber

September 14, 2018

On Thursday, The Wall Street Journal reported that Treasury Secretary Steven Mnuchin had asked Chinese officials for a new round of trade talks in September, giving Beijing a chance to avert new tariffs on $200 billion in Chinese exports. Some Trump administration officials believe the U.S. has China over a barrel, the Journal says, but there's also "a steady rise in political pressure on President Trump to ease up on trade fights" from farm and business groups, and "Chinese officials said they have grown wary of the Trump administration's unpredictable decision-making process and may be hesitant to accept without a clear sign U.S. negotiators have authority to speak for the president."

Trump validated those concerns with a tweet on Thursday: "The Wall Street Journal has it wrong, we are under no pressure to make a deal with China, they are under pressure to make a deal with us. Our markets are surging, theirs are collapsing."

"The president's expectation that financial hardship will prompt Chinese President Xi Jinping to cave in a fresh round of diplomatic talks is misplaced," The Washington Post reports, citing analysts. Chinese markets have fallen significantly this year while U.S. markets are rising, "but unlike in the United States, the ups and downs of the Chinese stock market affect relatively few people, meaning sell-offs are unlikely to translate into pressure on Chinese leaders," the Post notes. And China's slowing economy — its economy is growing at about 6.5 percent — is due to a lot of factors that have nothing to do with the U.S. trade war.

"There's a lot of overly wishful thinking on the American side," Jeff Moon, a former U.S. trade negotiator, tells the Post. "Every economy has problems. We have ­trillion-dollar deficits. That doesn't mean either economy is in fundamental danger. It's a massive miscalculation." You can read more about the complexities of the trade war at The Washington Post. Peter Weber

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