With Mexico and Canada balking at U.S. demands in NAFTA negotiations, President Donald Trump is contemplating replacing the deal with two bilateral agreements with Mexico and Canada, an administration official said June 5. The comment from Larry Kudlow, the president's chief economic adviser, followed a remark from Trump on June 1 that separate deals make sense "because you're talking about a very different two countries."
Businesses that rely on steel are being whipsawed by the shifting parameters of 25 percent tariffs, and some have been waiting two months to find out if any of what they import will be spared. None of the thousands of product exclusion requests have been accepted or rejected so far by the Commerce Department's Bureau of Industry and Security.
Canada requested a Chapter 20 panel under NAFTA to dispute the imposition of steel and aluminum tariffs, Foreign Affairs Minister Chrystia Freeland announced June 1. That's in addition to filing a complaint at the World Trade Organization. Canada says the U.S. is violating international trade obligations with its "improper use of national security pretexts for protectionist purposes." "Canada will closely collaborate with the European Union, which also filed a WTO challenge...." she said. She also noted that U.S. law designates Canada as part of the military industrial base. Earlier, Canada issued its list of goods that will face retaliatory tariffs (see 1806010022), which included appliances, mattresses, maple syrup, condiments and candy, in addition to aluminum and steel goods.
Chinese pledges to buy more U.S. agricultural products and natural gas (see 1805200002) are still on the table, but China said that if Section 301 tariffs are levied, these purchases will not happen. On June 4, the White House issued a summary of the talks between the Chinese and a delegation led by Commerce Secretary Wilbur Ross that happened in Beijing the previous two days. "The meetings focused on reducing the United States’ trade deficit by facilitating the supply of agricultural and energy products to meet China’s growing consumption needs, which will help support growth and employment in the United States," the statement said.
Consultations at the World Trade Organization have failed to resolve trade barriers to U.S. wine in British Columbia grocery stores, so the U.S. has asked for a dispute settlement panel to take up the issue, the U.S. announced on May 25. Consultations started last October. The issue is the stores require that imported wine be stocked in a separate building from the main store (see 1701180083). The news release announcing the panel request said that as far as the U.S. has been able to learn, no stores have made the investment to sell imported wines. American wines are still sold at liquor stores, which used to be the only place to buy wine in the province.
A Republican senator who opposed Donald Trump during the primary campaign and the Senate minority leader both reacted to New York Times reporting that the administration will roll back the seven-year export ban on Chinese telecommunications equipment giant ZTE. Sen. Marco Rubio, R-Fla., tweeted a link to the story, and said it is a great deal for China. China "crushes U.S. companies with no mercy & they use these telecomm companies to spy & steal from us. Many hoped this time would be different. Now Congress will need to act," he said.
House Ways and Means Committee ranking member Rep. Richard Neal, D-Mass., along with all the committee's other Democrats, asked committee Chairman Kevin Brady, R-Texas, to hold hearings on U.S.-China trade, calling administration officials as witnesses. The letter, sent May 24, says the administration is holding high-level meetings on trade with China, and members of Congress only know what's going on during those talks by following press reports. They said this is unacceptable, and said "press reports indicate an increasingly baffling set of circumstances and developments." They said that the messages from different officials conflict, including what Treasury Secretary Steven Mnuchin says and what President Donald Trump says about Chinese telecommunications equipment company ZTE and how the talks are going.
Appropriations bills for fiscal year 2019 that are moving through both chambers of Congress ignored the president's suggestion to cut the Harbor Maintenance Tax (see 1802150028), and aim to dedicate more funding for dredging, locks maintenance and jetty maintenance. The tax is currently $0.125 per $100 of cargo value. In the current fiscal year, the government is spending $1.4 billion out of the Harbor Maintenance Trust Fund. The House appropriations bill recommends increasing that to $1.6 billion; the Senate version recommends $1.53 billion. Steve Fisher, executive director of the American Great Lakes Ports Association, said, "$130 million more, that's quite a bit."
The Commerce Department has launched an investigation into the need for tariffs on cars and auto parts in a move widely seen as an attempt to pressure Mexico to accept a NAFTA rewrite. Commerce Secretary Wilbur Ross said on May 24 that "there is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” and the department will explore whether by damaging the U.S. economy and reducing research in auto-related technology, the decline of domestic auto and auto part manufacturing therefore is a national security issue. Currently, SUVs and trucks face a 25 percent tariff, while cars and auto parts face a 2.5 percent tariff outside the NAFTA region, or if a Canadian or Mexican vehicle fails to meet a 62.5 percent rules of origin quota.
Sen. Joe Manchin, D-W.Va. largely agrees with President Donald Trump that the U.S. has been on the losing end of most trade agreements, Manchin said while speaking at an event on trade May 23 at the Heritage Foundation. Manchin said he's happy with the trade relationships the U.S. has with Canada and Europe, but, "other than that, we're very skeptical." He said he likes where adviser Peter Navarro is going and how U.S. Trade Representative Robert Lighthizer, approaches trade, but he doesn't like other views in the administration. "I think [Trump] has had a lot of infighting, which is to be expected, but it's the undecidedness right now that is causing a lot of inaction."