#1 – CHINA LAUNCHES SORGHUM INVESTIGATION
In response to the Trump administration’s recent tariffs on imports of solar panels and washing machines, China last week launched a dumping and subsidy investigation into imports from the U.S. of sorghum. The news caused the Sorghum prices to drop 25 percent.
• Why it’s a big deal: Many experts see this tit-for-tat as a marked escalation in tensions resulting from the administration’s aggressive, self-initiated trade enforcement actions. It’s also a reminder that our trading partners are savvy political operators who target commodities and products in regions that hold political sway. Sorghum, which is used to feed China’s livestock, is grown largely in Trump country. The top five growing states are Kansas, Texas, Colorado, Oklahoma, and South Dakota, which together include exactly one Democratic Senator.
• Is this the opening skirmish in a trade war? Many experts are looking to the Trump administration’s looming decision on another self-initiated investigation into China’s violation of U.S. intellectual property rights (as well as cases on aluminum and steel) and the Chinese response to any potential tariffs in those cases as an indicator of whether this results in a full-on trade war.
More on Chinese sorghum action from Reuters HERE
#2 - U.S. AG HAS TARGET ON ITS BACK
• Purdue acknowledges ag at risk: In testimony before the House Agriculture Committee last Tuesday shortly after the sorghum announcement, U.S. Ag Secretary Sonny Purdue reinforced the precarious position ag now finds itself in: “It just shows you as an example how fragile and sensitive the [agriculture] economy and commodity prices are now to trade disruptions and we need to be careful as we take actions there,” Purdue testified.
• Reuters, the Washington Post and the NY Times all posted stories on how the sorghum case has ramped up anxiety in the ag community over retaliatory actions. Historically, because of agriculture’s symbolic and actual power in American politics, it has been a central target of trading partners who’ve taken retaliatory trade actions.
#3 - PORTER DEPARTURE MEANS LOSS OF WHITE HOUSE TRADE MEDIATOR
Amid the firestorm of news surrounding the departure of White House staff secretary Rob Porter last week, a few outlets mentioned the implications to trade policy in passing.
• What we hear: Porter’s role in internal deliberations was significant. In addition to organizing and running internal meetings, he was seen as a critical mediator between the “America first” and “globalist” bases of power. It remains to be seen what, if any, impact his departure will create. However, many believe that U.S. Trade Representative Robert Lighthizer has amassed enough power on trade policy that the factions matter less now than they did in the early months of the administration before Lighthizer was in place.
#4 – REP. KIND SAYS LIGHTHIZER FLOATED CLOSING NAFTA WITH MEXICO FIRST, MEXICO SAYS NO THANKS, USTR WALKS BACK
Emerging from a closed door meeting between U.S. Trade Representative Robert Lighthizer and the full House and Ways Committee last week, Representative Ron Kind said that Lighthizer had floated the idea of closing NAFTA renegotiations with Mexico before Canada. The theory being that since U.S.-Canada negotiations have been particularly contentious, the U.S. would first complete a deal with Mexico to increase leverage in talks with Canada.
• Would Mexico go along with the plan? The short answer is no – particularly according to Kenneth Smith Ramos, head of the Mexican Ministry of the Economy's Trade and NAFTA Office, who took to Twitter following the “Mexico first” news:
• Consider the source: Rep. Kind, who is seen as a thought leader on trade among the moderate Democratic caucus is also from Wisconsin and has a significant parochial interest in driving a hard bargain with Canada on dairy access issues.
• Shot down by USTR: After initially not offering a comment, USTR eventually shot back in a statement that: “The U.S. objective has been and remains renegotiating and modernizing NAFTA on a trilateral basis. It is our hope that the United States, Mexico and Canada can successfully complete an agreement that benefits workers, farmers and ranchers from all three countries.”
#5 - TRUMP MEETS WITH FINANCE REPUBLICANS ON ARRAY OF TRADE CONCERNS
Last week President Trump met with nearly every Republican member of the Senate Finance Committee to hear their laundry list of concerns about administration trade policy, in particular the impact of NAFTA uncertainty on their states. POLITICO has a readout story on the meeting, including the reaction of several Senate participants HERE.
#6 - USTR DEPUTY NOMINATIONS NOW SET TO MOVE
One concrete result of the Trump-Finance Republicans meeting was that Senator Tim Scott announced that he would lift his holds on two USTR Deputy nominees that he was opposing due to frustrations about the level of communications he was receiving from the White House on trade. Look for the nominees, Dennis Shea (who would be the U.S. Ambassador to the WTO) and C.J. Mahoney to be moved fairly quickly in the Senate now that the hold has been lifted.
#7 – BIPARTISAN RENEWAL OF GENERALIZED SYSTEM OF PREFERENCES INTRODUCED IN THE HOUSE
Last week, House members introduced a bill to renew the Generalized System of Preferences (GSP) for three years, which maintains tariff cuts on imports from 121 developing countries. More on the basics of the GSP program HERE.
• Path to passage: The bill will be voted on in the House quickly, perhaps as soon as this week. The path forward in the Senate is less clear. The Senate will need to find a must-pass moving vehicle to attach GSP and, more than likely, the Miscellaneous Tariff Bill (MTB), another non-controversial tariff cutting program. Looking at the Senate calendar, there are limited options for moving vehicles. One vehicle could be an Omnibus Appropriations bill, now that budget caps have been set.