Posts Tagged ‘Mexico’

Trump push for quick NAFTA deal slowed by persistent divide — Mexico needs for the U.S. to present a complete plan

April 19, 2018
  • U.S., Canada and Mexico differ on several major issues
  • Digging in for more technical talks after seven rounds
  • Sides say deal could be completed within weeks

President Donald Trump’s push for a quick resolution to NAFTA talks is being stymied by persistent differences among the U.S., Canada and Mexico over a handful of make-or-break issues.

After seven rounds of talks rotating between the three countries, negotiators have entered what they’ve called a permanent round in Washington and are expected to keep going until a deal is struck.

Digging in for more technical talks starting on Monday, they remain at loggerheads over regional content rules for automobiles and other sticking points, even as U.S. Vice President Mike Pence and Canadian Prime Minister Justin Trudeau said over the weekend that an agreement could be wrapped up in weeks.

A meeting between cabinet-level trade officials planned for last week to deal with the toughest issues was canceled when U.S. Trade Representative Robert Lighthizer skipped a regional summit in Peru. On Monday, Mexican Economy Minister Ildefonso Guajardo told reporters that he spoke to his Canadian counterpart and plans to talk with Lighthizer on Tuesday about rescheduling their meeting for Thursday in Washington. He repeated his assessment that the nations may reach a deal in the coming weeks.

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Guarjardo speaks during the World Economic Forum on Latin America in Buenos Aires, Argentina, on April 6, 2018.

Photographer: Sarah Pabst/Bloomberg

Guajardo said that it’s important for Lighthizer to look for solutions with Mexico and Canada so that he can turn his attention to China and tariff decisions.

“The faster that he resolves one of these various issues, the better,” Guajardo said.

While talks are continuing on less contentious topics such as the environment and financial services, they weren’t the catalysts that spurred Trump to call for a renegotiation of the decades-old trade deal in the first place. And on key topics — from cars to government procurement — the U.S. is sticking with demands that its partners consider untenable.

Although leaders of the countries say a deal could be completed within weeks, that won’t be possible if the sides remain as far apart on the most important points as they are now, according to people familiar with the talks.

“The only way that this thing gets done, frankly, is if Donald Trump capitulates,” Jerry Dias, head of Unifor, Canada’s largest private sector union representing auto workers, said Friday after meeting with Canada’s lead Nafta negotiator, Steve Verheul.

“Ultimately, he is going to have to find a way to claim a victory while backing off of a whole host of U.S. proposals. I don’t know how you do both,” Dias said.

Emily Davis, a spokeswoman for USTR, declined to comment.

Trump’s negotiating team is pushing for a deal by early May. That’s in order to meet U.S. timelines for having an agreement approved, at the latest, by the lame-duck congressional session following mid-term elections in November, according to two people familiar with the negotiations.

While Mexico has a presidential election in July, the nation has fewer legal timing requirements, and a potential deal reached as late as August could probably be debated and voted on before the nation’s next Senate is seated in September. Mexico’s new president will take over in December; President Enrique Pena Nieto isn’t eligible for another term.

Other trade talks could potentially complicate the near-term schedule. Several Mexican negotiators will be in Brussels this week in a push to close an update of the nation’s 17-year-old free-trade agreement with the European Union, said two people familiar with the schedule.

Guajardo plans to join them later in the week, and is expected to remain there next week, when Pena Nieto arrives in Germany for Hannover Messe, an industry show where Mexico is the chosen partner country this year. Mexican negotiators are aiming to announce the close of that agreement with the EU during Pena Nieto’s visit, the people said.

Deepening ties with the EU is part of Mexico’s push to diversify from the U.S., which was the destination for 72 percent of the nation’s $435 billion in exports last year.

Schedulers are attempting to arrange this week’s Nafta talks around the Mexican negotiators who are departing Washington for Belgium. Topics on the agenda include labor guidelines, financial services and agriculture, according to two people familiar with the plans.

Content rule

Talks last week included a focus on content rules for cars, where the U.S. is pushing for more regional content and higher salaries for Mexican factory workers. Progress has been clouded by the lack of a paper proposal from the U.S. — its suggestions continue to be debated verbally without any clear text, according to the people.

And on the key topic of autos, the impasse that’s existed over regional content since the initial U.S. proposal was presented in October still stands, although the U.S. softened its position by dropping a demand for specific American content. Recent adjustments in the U.S. proposal go in the right direction, but “the devil is in the details,” and Mexico needs for the U.S. to present a complete plan, Guajardo said Monday.

The differences in positions contrast with the upbeat public statements by the top officials in the U.S., Canada and Mexico, who’ve expressed optimism recently about the process.

Moody’s: Michigan among most at risk in NAFTA termination

“I’ll leave this summit very hopeful that we are very close to a renegotiated Nafta,” Pence told reporters at the Summit of the Americas in Lima.

After the meeting with Pence, Trudeau said the “positive momentum” included the thorny issue of U.S. demands around automobile production. “We would like to see a renegotiated deal land sooner rather than later,” he said.

Bloomberg

https://www.bloomberg.com/news/articles/2018-04-16/trump-push-for-quick-nafta-deal-slowed-by-division-on-top-issues

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Mexico leftist opens up 22-point lead in presidency race

April 19, 2018

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Leftist front-runner Andres Manuel Lopez Obrador of the National Regeneration Movement (MORENA) greets supporters during his campaign rally in Cuautitlan Izcalli, Mexico, April 13, 2018. REUTERS/Henry RomeroREUTERS

BY MIGUEL GUTIERREZ

MEXICO CITY (Reuters) – Mexican leftist Andres Manuel Lopez Obrador has widened his lead in the race to win the July 1 presidential election, opening up a gap of 22 percentage points, a poll by newspaper Reforma showed on Wednesday.

The April 12-15 voter poll showed Lopez Obrador winning 48 percent, a jump of six points from a February survey by Reforma. His nearest rival, Ricardo Anaya, who heads a right-left coalition, dropped by six points to 26 percent.

Running third was Jose Antonio Meade, candidate of the ruling Institutional Revolutionary Party (PRI), whose backing remained steady at 18 percent, the poll showed.

The figures for the three stripped out the 19 percent of respondents who expressed no preference. The poll surveyed 1,200 voters and had a margin of error of 3.7 percentage points.

A separate survey by polling firm Mitofsky published late on Wednesday also showed Lopez Obrador pulling further ahead.

In that poll, Lopez Obrador garnered 31.9 percent support, up from 29.5 percent in a Mitofsky survey last month. Anaya trailed in second with 20.8 percent and Meade polled at 16.9 percent.

Lopez Obrador, a 64-year-old former mayor of Mexico City, has capitalized on widespread disenchantment with the PRI over political corruption, rising levels of violence and sluggish economic growth to consolidate his lead in recent weeks.

He says Mexico should reduce its economic dependence on foreign powers, and has vowed to put U.S. President Donald Trump “in his place” if he wins.

Trump’s barbs against Mexican immigrants and complaints that Mexico has taken advantage of the United States over trade have made him very unpopular south of the border, and a Lopez Obrador presidency could usher in a testier bilateral relationship.

Support for Anaya, a former leader of the center-right National Action Party (PAN), has slipped since he came under attack from rivals over allegations of financial impropriety in a property deal in his home state of Queretaro.

Anaya, 39, has denied any wrongdoing.

Runner-up in the last two presidential contests, Lopez Obrador has promised an “austere” budget, to be achieved by battling corruption and cutting government waste.

He has threatened to undo the centerpiece of President Enrique Pena Nieto’s economic agenda, the opening of the oil and gas industry to private investment. However, several top advisers say Lopez Obrador is unlikely to make major changes.

Lopez Obrador has raised doubts over the future of Mexico City’s $13 billion new airport, now well under construction. Arguing it is too expensive and tainted by corruption, he is threatening to scrap the hub for a cheaper alternative. That has put him at loggerheads with Mexico’s richest man Carlos Slim, who has a major stake in the project.

The Reforma survey also showed Lopez Obrador comfortably beating his two main rivals in direct head-to-head contests. Facing Anaya, he wins by a margin of 51 percent to 31 percent, and against the 49-year-old Meade, by 57 percent to 22 percent.

Lopez Obrador’s party, the National Regeneration Movement (MORENA), is poised to become the largest in Congress, four years after it was formally registered, the Reforma poll showed.

No party has held an outright majority since 1997 and it was not clear MORENA would do so either under the mix of direct election and proportional representation Mexico uses.

MORENA was projected to win 37 percent of support in voting for the lower house of Congress, the PAN 21 percent and the PRI 17 percent, the Reforma survey showed.

The leftist Labor Party (PT), which is allied to MORENA, had 5 percent of support. Another MORENA ally, the socially conservative Social Encounter Party, polled 1 percent, below the 3 percent threshold needed to enter Congress.

(Additional reporting by Dave Graham; Editing by Alistair Bell and Leslie Adler)

Billionaire banking heir Matthew Mellon dies in rehab facility

April 17, 2018

Banking heir and cryptocurrency bigwig Matthew Mellon has died, a representative for his family said in a statement.

Mellon, an early backer of global settlement network Ripple, was the ex-husband of Jimmy Choo guru Tamara Mellon and of designer Nicole Hanley, his second wife.

A rep said in a statement: “Billionaire Matthew Mellon, 53, died suddenly in Cancun, Mexico, where he was attending a drug rehabilitation facility. Mellon made his fortune in cryptocurrency, turning a $2 million investment into $1 billion. He is survived by his three children, Force, Olympia and Minty. The family asks that their privacy be respected at this very painful time.”

Mellon, a former chair of the New York Republican Party’s finance committee, had battled addiction.

In 2016, he told The Post, “OxyContin is like legal heroin. And it needs to be addressed,” while at a Malibu treatment center kicking a habit of $100,000 a month.

But he was in Forbes this year for his latest investments.

Tamara, who with Mellon had daughter Araminta, aka Minty, said in 2013, “He keeps fighting and coming back.”

Mellon and Nicole, parents of Force and Olympia, announced their split in 2015 after an attempted reconciliation.

https://pagesix.com/2018/04/16/banking-heir-matthew-mellon-dies-in-rehab-facility/?_ga=2.176044706.1290953022.1519666445-253902147.1519666445

Nafta: Why the US car industry is trapped in Trump’s trade crossfire

April 15, 2018

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The Toyota Tundra looks every inch the all-American truck, but even it risks falling foul of rules touted by the Trump administration

Shawn Donnan in San Antonio, Texas

 

Blunt-nosed, broad-shouldered and towering on 20-inch chrome wheels, the latest Toyota Tundra roars to life as it turns into the final station of tweaks and checks that will wrap up a 20-hour journey down the production line. Polished to a sparkle by the robots in the paint shop, the pick-up truck has a swagger worthy of its birthplace, a 2.2m square foot state-of-the art factory emerging from the scrub of a former cattle ranch just a 25-minute drive from the Alamo, spiritual birthplace of Texas.

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“When we decided we wanted to build a pick-up truck we thought where better than Texas,” says Mario Lozoya, a former Marine sergeant and line supervisor who handles external relations for Toyota in the Lone Star State.

But the Tundra is also an example of how international supply chains and business investments come up against global trade rules and how President Donald Trump’s vision of the American economy is already helping to reshape the global economy even as the world nervously eyes the prospect of a US-China trade war.

Like every other car produced on the continent the Tundra sits in the crossfire of Mr Trump’s plans to renegotiate the North American Free Trade Agreement. The US hopes there will be a deal in the weeks to come, but the prickliest issue by far in Washington’s discussions with Canada and Mexico is over how and where vehicles should be made.

The Trump camp argue that Nafta’s current rules, which require 62.5 per cent of a vehicle to be made in North America in order to qualify for the tariff-free trade the pact enshrines, have fuelled the relocation of much of the US auto industry to Mexico, costing thousands of American manufacturing jobs. They have proposed lifting that threshold to as much as 85 per cent and requiring a 50 per cent US-production quota for vehicles sold in the US, by far the region’s largest auto market.

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Such a move, the US auto industry argues, would hurt its global competitiveness by removing its ability to access cheap labour in Mexico much as the German car industry does in eastern Europe or Japan does in China. It has also added an unwelcome distraction.

“[Preparing for a new Nafta] takes [executive] time away from other stuff,” says Bruce Belzowski, managing director of the University of Michigan’s Automotive Futures group. “They could be doing R&D on electric vehicles if they didn’t have to worry about what to do with their supply chains.”

The Tundra looks like an all-American beast of a truck. And yet its story is heavily global: its bodywork is stamped out of US steel at the Texas plant, its 5.7-litre V8 engine is built at a Toyota factory in Alabama, but it all sits on a frame shipped in from Mexico.

According to the National Highway Transportation Safety Administration 65 per cent of the Tundra’s components — exceeding Nafta content rules — originated in the US or Canada. Yet even it risks falling short of the 85 per cent threshold that Mr Trump’s top trade negotiator, Robert Lighthizer, has been seeking, raising questions about how Toyota might have to reconfigure its supply chains to meet the higher quota.

Canada and Mexico, both of which have their own politically influential motor industries, have resisted the US demands. The result has been a search for compromises ranging from how to include research and development costs (most of which are in the US) to how to account for the higher salaries paid to US autoworkers compared to their Mexican counterparts.

Production values

A Toyota Tacoma pick-up truck moved through final inspection at the company’s plant in San Antonio, Texas © Bloomberg
8.5%
Of the $17.5tn global annual trade in goods is made up by vehicles and auto parts

62.5%
Of a vehicle has to be made in North America to qualify for tariff-free status in the Nafta region . . .

85%
. . . but a proposal from the Trump administration would see that figure rise to as much as 85%

The discussion has led major producers to freeze investment decisions and Mr Trump to hail moves by companies like Ford to shift production to the US. “We can negotiate forever,” he said last week. “Because as long as we have this negotiation going, nobody is going to build billion-dollar plants in Mexico.”

The Trump administration has already altered the path of globalisation in a way likely to be felt for decades, by abandoning the move towards bigger regional blocs.

Vehicles and auto parts account for 8.5 per cent of the $17.5tn worldwide annual trade in goods and since the 1990s the industry has become dependent on global just-in-time supply chains.

That scale helps explain why Mr Trump, when he vents his trade frustrations, often focuses on the gap between the 2.5 per cent levy charged by the US on imported passenger cars and higher tariffs in the EU or China as he did last week when he pointed to the corresponding 25 per cent Chinese tariff in a tweet.

Xi Jinping, China’s president, a day later used a high-profile speech to reiterate an offer to lower China’s auto tariffs. And hinted that Beijing could revisit investment restrictions that force foreign carmakers into joint ventures with Chinese counterparts to enter what is now the world’s largest auto market.

The international trade in cars has long been governed not just by tariffs but by a jumble of pacts like Nafta. Rules of origin, as well as safety and other regulations, present further barriers to trade.

Before Mr Trump entered the White House the world was on a path toward a significant reduction of those regulatory barriers and the introduction of far-broader regional trade rules that would have boosted the global market in cars.

The Trans-Pacific Partnership with Japan and 10 other economies, including Canada and Mexico, was negotiated by his predecessor Barack Obama. It would have established new content rules across not just Nafta but almost 40 per cent of the global economy. It would also have liberalised the trade in cars between two of the world’s three largest economies, eventually putting big Japanese carmakers like Toyota and Honda and US counterparts like GM and Ford under the same set of trade rules wherever they operated in the bloc.

Mr Trump made pulling out of the TPP one of his first acts in office, though he last week raised the possibility of rejoining. His administration has also frozen talks over a pact with the EU that would have had a similar impact.

Among the biggest areas of focus in the so-called Trans-Atlantic Trade and Investment Partnership, which would have covered almost half the global economy, was finding a way to lower regulatory barriers for cars. These ranged from the colour of headlights to regulating emissions that most in the industry argue are a far greater barrier to transatlantic trade than tariffs.

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President Donald Trump shows the executive order that withdraws the US from the Trans-Pacific Partnership © Getty Images

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US and European officials considered the pact a way to solidify transatlantic standards and counter a rising China with ambitions to dominate emerging areas like electric vehicles as part of Mr Xi’s “Made in China 2025” plan. By building a stronger transatlantic market, the argument went, both European and US carmakers would be in a better place to repel the competition from emerging Chinese rivals.

By abandoning the TPP and suspending the discussions with the EU Mr Trump has ceded the US’s ability to lead efforts to set the global rules for things like the auto industry, critics argue.

Yet his desire and effort to put the brakes on globalisation has not stopped the push for greater economic integration. It has just scrambled the roles of the actors, argues Philip Levy, who advised former president George W Bush on trade policy.

“All the fundamental forces that were there before are still there,” says Mr Levy who adds that the EU and others have started taking the lead, building the de facto networks of economies that come out of trade agreements.

The US is still finding ways to make its influence felt. EU talks with Mexico to update their existing trade agreement have stalled, largely due to uncertainty surrounding Nafta. But the EU and Japan last year concluded negotiations on a trade deal that will cover a third of the global economy and reinforce the lead in the Japanese market that European carmakers have over US rivals.

“That momentum is going to continue,” Mr Levy says. “The problem for the US is that if we continue taking President Trump’s approach we’ll just be sitting on the sidelines.”

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Toyota is producing the Tundra in Texas

The fact Toyota is producing the Tundra in Texas is the result of a longstanding US trade barrier that Mr Trump has embraced as part of his greater adventures in protectionism. “I’m here to protect,” the president told a news conference in March as he defended new tariffs on steel and aluminium imports. “I’m protecting our workers. I’m protecting our companies.”

As Mr Trump keeps pointing out, the US tariff on passenger car imports is low at 2.5 per cent but the tariff on light trucks has remained as high at 25 per cent since the 1960s. That has helped protect domestic producers from competition in a lucrative part of the US auto market where one in six of the more than 17m new vehicles sold last year were pick-up trucks like the Tundra.

It has also forced foreign manufacturers like Japan’s Toyota to produce pick-up trucks in the US. When the US and South Korea announced that they had reached an agreement in principle last month to rewrite their 2007 trade deal the main concession that the Trump administration extracted was a 20-year extension on the 25 per cent tariff on light trucks, thereby protecting US-based carmakers from a possible assault from Korean rivals like Hyundai.

The benefit of forcing overseas carmakers to build factories in the US, the Trump administration argues, is the securing of American jobs like the 7,000 at Toyota’s Texas plant.

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Donald Trump’s trade representative, Robert Lighthizer

The first version of the Toyota Tundra came off a production line in Indiana in 1998 and manufacturing was moved to Texas in 2003. Last year, the Texas plant, where robots do 90 per cent of the welding and autonomous vehicles ferry parts to the assembly line, produced more than 136,000 Tundras and more than 129,000 of the smaller Tacomas, with the trucks coming off its assembly line at the rate of one a minute.

Many of the suppliers that work out of Toyota’s Texas plant are the product of international partnerships with local entrepreneurs. One of the biggest, Avanzar, which provides most of the interiors for both the Tundra and the Tacoma, is a joint venture between Michigan-based Adient, the world’s largest car seat-maker, and Shanghai-based Yangfeng Automotive and a San Antonio-based company. In addition, many of the Texas suppliers work with another Toyota plant in Mexico, adding to their reliance on Nafta.

For Frank DuBois, a business professor at American University in Washington DC, who publishes an annual Made in America auto index, globalisation has turned determining the origin of parts in cars into “an accounting nightmare”.

The complexity of 21st century auto supply chains, with up to 15,000 individual parts going into a single car, highlights another reality. With his quest to rewrite the rules for the auto industry Mr Trump appears to be tilting at windmills, Mr DuBois says, particularly in an era where factories are increasingly automated and even nationalist voters are willing to embrace foreign brands.

“I see a hell of a lot of Trump stickers on Toyota pick-up trucks,” Mr DuBois says. “Trump is living in this antiquated view of auto manufacturing where it is a lot of Joe Lunch Boxes going to work every morning and operating a piece of machinery . . . Those days are gone.”

Nafta talks open the way to a Trump trade win

Donald Trump’s bid to launch a trade war against China may be dominating headlines but in his quieter efforts to renegotiate the North American Free Trade Agreement may lie his first major trade success.

After threatening repeatedly to pull the US out of the 24-year-old agreement the indications are that Mr Trump is nearing at least a preliminary deal with Canada and Mexico.

A similar “agreement in principle” with South Korea announced in March saw another trade pact that the president had threatened to rip up survive with what in the end amounted to relatively minor tweaks.

But Nafta is a bigger beast. The US’s $1.1tn in trade with Canada and Mexico last year was almost twice its trade with China and 10 times that with South Korea.

The Nafta renegotiation had an acrimonious start last August and plenty of barbs have been traded since. In recent weeks, however, the talks have accelerated becoming more focused on securing at least the broad outlines of a deal — including the stricter auto content rules, a rewriting of Nafta’s dispute provisions and a review of the pact every five years — before Mexican elections in July.

Mr Trump continues to argue that he would rather pull out of Nafta and negotiate something from scratch but he has bowed to pressure from his own Republican party and business not to do something so disruptive.

“We’re going to make it great. And we’re getting pretty close to a deal,” the president said last week in a meeting with farm state politicians. “It could be three or four weeks. It could be two months. It could be five months. I don’t care.

“In fact, if everybody in this room closed their ears, I’d say I’d rather terminate Nafta and make a brand new deal, but I’m not going to do that because I want everyone to be happy in this room, OK?”

Financial Times (FT)

https://www.ft.com/content/9c49498e-3e33-11e8-b9f9-de94fa33a81e

Nafta Agreement Could Come in Weeks, Pence and Trudeau Say

April 15, 2018
  • U.S., Canada leaders spoke after meetings in Peru Saturday
  • Trudeau says progress has been seen on contentious auto file
Mike Pence at the CEO Summit of the Americas on Saturday. Photographer: Guillermo Gutierrez/Bloomberg

The Nafta trade agreement could be renegotiated in the next few weeks, U.S. Vice President Mike Pence and Canada’s Prime Minister said Saturday in Peru, avoiding new political opposition that could emerge during Congressional and Mexican elections later this year.

“I’ll leave this summit very hopeful that we are very close to a renegotiated Nafta,” and “there is a real possibility that we could arrive at an agreement within the next several weeks,” Pence told reporters at the Summit of the Americas in Lima.

After the meeting with Pence, Canada’s leader Justin Trudeau said the “positive momentum” included the thorny issue of U.S. demands around automobile production. “We would like to see a renegotiated deal land sooner rather than later,” he added.

Justin Trudeau

Photographer: Guillermo Gutierrez/Bloomberg

“There is a desire and a recognition by all three Nafta partners that the time-lines imposed upon us by both the upcoming, the imminent Mexican elections and the upcoming American midterms, means that we have a certain amount of pressure to try and move forward successfully in the coming weeks,” Trudeau said.

The comments restore some more optimism on Nafta after U.S. President Donald Trump earlier this week canceled a trip to Peru where Nafta could have been discussed further, and said he could let trade talks go on indefinitely because it would deter companies from investing there.

Pence later tweeted that it was “great to speak” with Trudeau. “We discussed progress toward reaching an agreement on Nafta as soon as possible and that a deal must ensure FAIR and RECIPROCAL trade.”

Pence also said funding of a wall on the U.S.-Mexico border didn’t come up during a meeting with Mexican President Enrique Pena Nieto. “We are very close to the kind of breakthrough on issues of immigration, drug interjection” that will be of benefit to both sides, Pence said.

By Greg Quinn, Ben Bartenstein , and  Jennifer Epstein

Bloomberg

https://www.bloomberg.com/news/articles/2018-04-15/nafta-agreement-could-come-in-weeks-pence-and-trudeau-say

China Retaliates Against Trump Tariffs With Duties on American Meat and Fruit — “Beijing’s response is designed to be limited and doesn’t seek to escalate tensions.”

April 2, 2018

Penalties range from 25% on American pork and eight other kinds of goods to 15% on fruit and 120 types of commodities

President Donald Trump speaking about the new steel and aluminum tariffs during a meeting with industry leaders last month. China has now responded.
President Donald Trump speaking about the new steel and aluminum tariffs during a meeting with industry leaders last month. China has now responded. PHOTO: MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES

BEIJING—China imposed tariffs on a range of U.S. goods, following through on a promise to retaliate against the Trump administration’s penalties on imports of Chinese steel and aluminum.

The Chinese Finance Ministry said in a statement dated Sunday that the previously announced tariffs on the imports of American goods would take effect Monday.

Penalties range from 25% on American pork and eight other kinds of goods to 15% on fruit and 120 types of commodities, the ministry said.

The Finance Ministry renewed China’s criticisms of the Trump administration’s 25% tariffs on steel and 10% tariffs on aluminum under Section 232 of the Trade Act as violating global trading rules.

At the same time, the ministry suggested that Beijing’s response is designed to be limited and doesn’t seek to escalate tensions.

The tariffs on Chinese steel and aluminum “produced severe damage to our country’s interests,” the ministry statement said.

It said the Chinese penalties were being imposed “to protect our country’s interests and balance the damage created by the U.S. 232 measures.”

The Trump administration didn’t immediately comment on the Chinese action.

The back-and-forth over the U.S. steel and aluminum tariffs are part of a broader effort by the Trump administration to punish Beijing for what it sees as unfair trade practices and rally broader international support for it.

President Donald Trump has also ordered a series of actions to penalize Beijing under Section 301 of the Trade Act for the use of intimidation and other unfair practices to acquire American technology. Those actions include tariffs on as much as $60 billion in Chinese imports and filing a complaint with the World Trade Organization against Chinese technological licensing practices as well as considering other limits on Chinese investment in U.S. technology.

Chinese penalties range from 25% on American pork and eight other kinds of goods to 15% on fruit and 120 types of commodities, the Chinese Finance Ministry said.
Chinese penalties range from 25% on American pork and eight other kinds of goods to 15% on fruit and 120 types of commodities, the Chinese Finance Ministry said. PHOTO: GERRY BROOME/ASSOCIATED PRESS/FILE

U.S. and Chinese officials are engaged with one another to try to resolve the disputes, or at least prevent tensions from escalating. U.S. Treasury Secretary Steven Mnuchin is considering a trip to Beijing in the next several weeks to continue conversations with China’s economic czar, Liu He, on potential U.S. investment restrictions.

Beijing has promised retaliatory measures in response to specific actions by the Trump administration. Soybeans and other products from American farm states are high on the list of potential targets, as well as other big-ticket U.S. goods like Boeing Co. aircraft.

“It’s nothing we like to see,” said David Salmonsen, senior director of the American Farm Bureau Federation, of potential tariffs. “We know it will have some impact.”

On steel and aluminum, the U.S. has granted temporary exceptions to most every exporter to the U.S. other than China and Japan—and Tokyo is negotiating for exceptions.

To keep their access to the U.S. market, the Trump administration hopes those nations will limit their own imports of Chinese-made steel and aluminum, which is often further processed and then exported to the U.S. In doing so, the Trump administration hopes to bring broad-based pressure against Beijing to rein in excess production.

This week, the Trump administration is expected to release a list of potentially targeted products for China’s alleged intellectual-property violations. Senior administration officials have said they are looking at 1,300 different product categories, including such high-tech areas as semiconductors, communications and aerospace.

U.S. industry will have 30 days to comment. After that, the U.S. has at least 180 days to decide which products—if any—to hit with tariffs.

Write to Charles Hutzler at charles.hutzler@wsj.com

Appeared in the April 2, 2018, print edition as ‘China Retaliates With Own Tariffs.’

https://www.wsj.com/articles/china-retaliates-with-new-tariffs-on-u-s-meat-and-other-products-1522618533

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China’s Ministry of Commerce: tariffs of up to 25 per cent on 128 US products including frozen pork

April 2, 2018

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BEIJING (REUTERS, AFP) – China has slapped extra tariffs of up to 25 per cent on 128 US products including frozen pork, as well as on wine and certain fruits and nuts, in response to US duties on imports of aluminium and steel, China’s finance ministry said.

The tariffs, to take effect on Monday (April 2), was released late on Sunday and matches a list of potential tariffs on up to US$3 billion (S$4 billion) in US goods published by China on March 23 .

China’s Ministry of Commerce (MOFCOM) said it was suspending its obligations to the World Trade Organization (WTO) to reduce tariffs on 120 US goods, including fruit. The tariff on the products will be raised to 15 per cent.

Another eight products, including pork, will now be subject to tariffs of 25 per cent, it said, with the measures effective from April 2.

China has imposed the tariffs amid escalating trade tensions between Beijing and Washington.

US President Donald Trump is preparing to impose tariffs of more than US$50 billion on Chinese goods intended to punish Beijing over US accusations that China systematically misappropriated American intellectual property – allegations Beijing denies.

China has repeatedly promised to open its economy further, but many foreign companies continue to complain of unfair treatment. China warned the United States on Thursday not to open a Pandora’s Box and spark a flurry of protectionist practices across the globe.

In a statement published on Monday morning, MOFCOM said the United States had “seriously violated” the principles of non-discrimination enshrined in World Trade Organization rules, and had also damaged China’s interests.

“China’s suspension of some of its obligations to the United States is its legitimate right as a member of the World Trade Organisation,” it said, adding that differences between the world’s two largest economies should be resolved through dialogue and negotiation.

“We hope that the United States can withdraw measures that violate WTO rules as soon as possible to put trade in the relevant products between China and the US back on a normal track,” the Commerce Ministry statement said.

“Cooperation between China and the United States, the world’s two largest economies, is the only correct choice.”

Mr Trump has temporarily suspended the tariffs for the European Union as well as Argentina, Australia, Brazil, Canada, Mexico and South Korea.

Beijing has so far held fire against major US imports such as soybeans or Boeing aircraft – items that state-run daily the Global Times suggested should be targeted.

The nationalistic newspaper said in an editorial last week that China has “nearly completed its list of retaliatory tariffs on US products and will release it soon”.

“The list will involve major Chinese imports from the US,” the newspaper wrote, without saying which items were included.

“This will deal a heavy blow to Washington that aggressively wields the stick of trade war and will make the US pay a price for its radical trade policy toward China,” the Global Times wrote.

Despite the rhetoric, US Commerce Secretary Wilbur Ross on Thursday suggested the new measures on intellectual property were a “prelude to a set of negotiations”.

The United States ran a US$375.2 billion deficit with China last year.

Trade conflict fears likely to keep markets on edge for weeks — Plus the latest on Tariffs and possible trade war — “China has a lot to answer for…”

March 30, 2018

Reuters

BRUSSELS (Reuters) – A full-scale global trade war has not broken out yet – but that hasn’t stopped the market from fretting about one or analysts from warning about the potential cost.

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Whether such concerns remain a driving force for asset prices in the coming days depends largely on decisions, tweets and formal announcements from Washington and Beijing, but it seems certain that the uncertainty has at least another month to run.

South Korea has cut a deal with the United States, agreeing to reduce its steel exports to avoid tariffs. The European Union, Canada, Mexico, Brazil, Australia and Argentina face a May 1 deadline to reach equivalent deals.

U.S. President Donald Trump has tied the suspension of tariffs for Canada and Mexico to a renegotiation of NAFTA. Officials have said the next round of talks was due to start on April 8, but that date is not certain and there are mixed messages on the chances of a quick breakthrough.

China has meanwhile warned that it could target a broad range of U.S. businesses if Trump slapped tariffs on $50 billion-$60 billion of largely high tech Chinese goods, although the latter may not happen until early June.

SLIPPERY SLOPE

Economists at ING split such a conflict into four stages from a lone Trump attack to a tit-for-tat battle to U.S. escalation, such as including EU cars, and finally an all-out trade war.

The last, ING estimates, would harm all economies, with the United States facing the heaviest hit, of some 2 percent of gross domestic product (GDP) over two years, with U.S exporters facing high tariffs at all borders while the rest of the world keeps its prevailing arrangements in place.

Only in the first scenario, in which Trump imposes tariffs and no one retaliates, would the United States make any noticeable economic gain – of some 0.3 percent of GDP.

ING’s head of international trade analysis Raoul Leering said that the conflict was currently somewhere between the first scenario and the second ‘tit-for-tat’ stage.

“If other countries give in and give Trump something in return, then we’re looking at scenario one,” he said. “It’s a conflict in which Trump could turn out to be the winner.”

Harm Bandholz, chief U.S. economist at UniCredit, believes that the trade conflict is likely to be the main driver of market sentiment for weeks to come, although for the time being it is “barely more than tough talk”, with strong announcements then watered down, such as with the metal tariff exemptions.

“If it stays like this it’s not really altering anything in the macro outlook. The risk is, once you’ve started, you’re on a slippery slope and you don’t know if you can stop. That’s the risk markets are worried about,” he said.

“People are worried about accidents happening. Clearly, if you are more aggressive, the chances of mistakes or something bad happening will increase.”

EUROPEAN PRICES, U.S. JOBS

All that said, and even with many in Europe off for Easter vacation, some major economic data is due in the coming week.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York (AP Photo/Richard Drew)

The Bank of Japan’s quarterly tankan survey, out on Tuesday, is expected to show business sentiment deteriorating slightly in the three months to March with the outlook for the coming quarter also fading, reflecting concerns over the strong yen eroding business profits.

In Europe, the first estimate of euro zone inflation will be released on Wednesday and is forecast to have risen to 1.4 percent in March from 1.1 percent in February, with some economists pointing to a potential 1.5 percent.

An earlier Easter this year, pushing up prices of package holidays and accommodation in March, cold weather that drives fruit and vegetable prices higher and a steeper year-on-year increase in energy costs will all contribute.

Even if inflation remains short of the European Central Bank’s target of almost 2 percent, its policymakers are now debating whether to end lavish bond buys later this year. The purchase program currently runs until the end of September.

U.S. monthly non-farm payrolls round off the week on Friday. The economy is seen adding far fewer jobs than the 313,000 of February, but the average Reuters forecast for March of 203,000 is still strong and the unemployment rate is set to fall to 4.0 percent, a level not seen since 2000.

“We see further declines of the rate below the level the Fed thinks is the natural rate of unemployment. Over time, you would expect it would exert upward pressure on wages, which admittedly we have not really seen,” Commerzbank’s Bernd Weidensteiner.

Global trade: China warns US not to open ‘Pandora’s Box’

“It should happen during the course of this year. Otherwise, we really need to rethink our picture of the workings of the U.S. labor market.”

Reporting by Philip Blenkinsop; Editing by Hugh Lawson

Related:

  (Wall Street Journal)

 (The New York Times)

Stocks Slide as China-U.S. Trade Conflict Kicks Off

March 23, 2018

European and Asian markets fall amid escalating trade tensions

Chinese border police officers watching the arrival of a container ship at a port in Qingdao in Shandong Province. On Friday, China said it planned to impose tariffs on a wide range of American products.CreditChinatopix, via Associated Press
  • Japan’s Nikkei drops 4.5%
  • U.S. stock futures edge lower
  • Bonds gain, yen hits highest since 2016

The global equities swoon deepened Friday in Europe and Asia, as market participants dumped stocks amid escalating trade tensions.

The Stoxx Europe 600 fell 0.9% in the early minutes of trading, following a 4.5% drop in Japan’s Nikkei and declines of 2%-4% in Hong Kong, South Korea, Australia and Shanghai. Futures suggested U.S. stocks would open slightly lower with the S&P 500 poised to edge down 0.2% and the Nasdaq off 0.6%.

The jitters came after the Trump administration on Thursday said it would impose tariffs on tens of billions of dollars of Chinese imports on top of duties on steel and aluminum imports. China’s commerce ministry responded Friday announcing it would levy tariffsagainst $3 billion worth of U.S. goods including pork and recycled aluminum.

“The market is so fixated on the potential effects of tariffs that it’s overshadowing anything else that’s occurring,” said Brent Schutte, chief investment strategist at Northwestern Mutual Wealth Management Company.

“Overall, I still think the risk of a large trade war, while probably bigger than a year ago, is still not large enough to derail the broader economic story,” he said, but noted there would be a lot of guess work for some time about just how far trade tensions can go.

On Thursday the Dow industrials fell 2.9%, their biggest one-day percentage decline since Feb. 8, while the S&P 500 fell 2.5% to erase all gains for the year.

Although the import tariffs had been telegraphed for weeks, Thursday’s package, covering about $60 billion in goods, sent investors into safe havens. Bonds and gold prices rose and the yen, which tends to rise in times of market stress, hit its highest level against the dollar since Donald Trump won the presidential election.

Gold was last up 1% at $1,340 an ounce. Yields on 10-year Treasurys fell to 2.820% Friday from 2.832% late Thursday in New York, following their biggest daily decline since September. Yields move inversely to prices.

“Yes, the news was out for a while, but the actual action was a bit of a surprise to the market,” said Shinchiro Kadota, a senior forex and rates strategist at Barclays . “Maybe they thought it would be smaller, maybe later.”

In Europe, the basic resources sector led declines with steel manufacturer Outokumpu Oyj down 4.8%. Banks also came under pressure as government bond yields fell.

The U.S. president suspended tariffs for Argentina, Australia, Brazil, Canada, Mexico, the European Union nations and South Korea, which effectively means tariffs will apply to three major steel exporters; China, Russia, and Japan.

Japan’s Nikkei Stock Average closed down 4.5% Friday as the yen’s sharp gains hit the export-heavy index.

Stocks in China also fell with the Shanghai Composite Index down 3.4%, and the Shenzhen Composite Index down 4.3%.

Hong Kong’s Hang Seng Index skidded 2.8% as index heavyweight Tencent added to Thursday’s 5% post-earnings drop with a 4.3% decline. The drop for the Chinese internet giant, Asia’s biggest company by market value, came as major shareholder Naspers , a South African media and internet firm, said it would sell a small portion of its one-third stake in the company.

China-based pork producer WH Group slumped 5.1%. It owns U.S.-based Smithfield, and its imports of U.S. pork into China will be hit by the new tariffs.

Asian companies, many of which are export-reliant, could get caught in the middle of tit-for-tat trade actions between the U.S. and China. While market sentiment is expected to remain downbeat in the short term, some analysts are cautioning about the longer-term impact.

A trader at the New York Stock Exchange on Thursday. U.S. stocks ended lower Thursday, with the Dow plunging over 700 points, after President Donald Trump announced tariffs on Chinese imports.
A trader at the New York Stock Exchange on Thursday. U.S. stocks ended lower Thursday, with the Dow plunging over 700 points, after President Donald Trump announced tariffs on Chinese imports. PHOTO: WANG YING/ZUMA PRESS

“Given the high costs of escalation on both sides, and also for the broader Asian supply chain, an extended and comprehensive trade war remains unlikely,” said Hannah Anderson, global market strategist at J.P. Morgan Asset Management.

She noted while there may be some negotiating before the tariffs go into effect, “investors should be prepared for headlines to continue to rock markets” meanwhile.

China’s reaction to the Trump administration’s announcement has so far not been as substantial as many had feared. Beijing, for example, hasn’t announced tariffs on the two largest U.S. exports to China—soybeans and airplane parts.

“We retain the view that China is willing to negotiate and is likely to offer concessions,” said Citibank. However, “uncertainty and the fear of escalation will likely hold back market sentiment in the short run.”

Chinese metals futures slumped 5%, and Shanghai rubber futures for a time were down the 7% daily limit.

Soybeans and soybean meal were trading higher in China as investors worried potential tariffs on the oilseed could impact supplies.

Write to Riva Gold at riva.gold@wsj.com and Lucy Craymer at Lucy.Craymer@wsj.com

https://www.wsj.com/articles/stocks-slide-as-trump-kicks-off-trade-war-1521765378

Related:

  (Wall Street Journal)

 (The New York Times)

US: EU, 6 other economies exempt from metals tariffs for now

March 22, 2018

AFP

© POOL/AFP/File | US trade representative Robert Lighthizer announces temporary exemptions on metals tariffs for the EU and six other economies

WASHINGTON (AFP) – The European Union and six other economies will be exempt at least temporarily from the harsh steel and aluminum tariffs President Donald Trump has imposed, a top US trade official said Thursday.US Trade Representative Robert Lighthizer told a Senate committee that Trump authorized a “pause” in the imposition of the tariffs, which take effect Friday, while talks are underway to find a more permanent solution.

Argentina, Australia, Brazil, Canada, Mexico and South Korea will also be exempt from the penalties of 25 percent on steel imports and 10 percent on aluminum, along with the EU, he said.

Washington already had announced that major metals exporters Canada and Mexico would be exempt as talks continue to revamp the North American Free Trade Agreement.

And this week EU and US officials issued a joint statement saying they were working towards a solution to avoid tariffs on the trading bloc.

“The idea that the president has is that, based ona certain set of criteria, that some countries should get out,” Lighthizer said in testimony before the Senate Finance Committee.

“There are countries with whom we’re negotiating” and there will be “a pause in imposition of tariffs with respect to those countries,” he said.

Many countries, including the EU, have warned the White House that they will retaliate forcefully if they are face with tariffs on metals products.

The Trump administration has stressed that the primary target is China, which has long had massive overproduction that has impacted the global market for steel and aluminum, which poses a national security threat to the US economy.