Trump signs tariff-cutting bill into law Presented by Semiconductor Industry Association

With help from Doug Palmer

TRUMP SIGNS TARIFF-CUTTING BILL INTO LAW: President Donald Trump signed legislation on Thursday that would reduce tariffs on nearly 1,700 imported products used by U.S. manufacturers — an uncharacteristic move for the leader who has shown an affinity for imposing tariffs on foreign goods.


The bill, which House lawmakers passed last week, temporarily reduces or suspends tariffs on various imported raw materials and intermediate goods that are not produced in the U.S. The Miscellaneous Tariff Bill has long received strong support from congressional trade leaders and major business groups like the U.S. Chamber of Commerce, but it expired in 2012 after it became entangled in the House Republican ban on earmarks.

A win for U.S. manufacturers: The American Chemical Council welcomed Trump’s signature as a win for American chemical manufacturers “who rely on select foreign inputs to retain our position as the world’s leading, low-cost producer of chemicals.” Chemicals make up more than half of the products that will see tariff reductions, the group said.

“We hope the success of the MTB will help the president see that a zero-tariff policy that helps create new markets for producers and brings innovative products of chemistry to new regions is the best course for U.S. trade policy,” ACC said in a statement.

“President Trump has freed manufacturers and other businesses from a pointless $1 million a day tax,” said National Association of Manufacturers President and CEO Jay Timmons. “Now that the MTB is law, manufacturers can better compete against companies in China, Europe and elsewhere.”

The China connection: Trump’s decision to sign the bill seems at odds with his trade actions in recent months, as he has slapped duties on $50 billion worth of Chinese goods and threatens to impose duties on another $200 billion or more.

Although the MTB tariff cuts apply to all countries, the measure would suspend duties on about 150 products found on the list of $50 billion worth of Chinese imports slapped with duties. The bill also would cover roughly 1,000 Chinese products that are targeted on Trump’s list worth $200 billion, Rep. Bill Pascrell said during House debate on the measure.

Doug has more here.

IT’S FRIDAY, SEPT. 14! Welcome to Morning Trade, where your host hopes everyone has a safe and dry weekend after far too many years of dealing with hurricane conditions in Miami. Got any news or tips while stuck inside? Send it to [email protected] or @sabrod123.

NAVIGATE THE TWISTS AND TURNS OF THE CANADA-U.S. TRADE RELATIONSHIP. Now live, POLITICO Pro Canada, Pro’s latest subscription-based product, provides news and policy analysis on the deeply integrated Canada-U.S. relationship. Created for business leaders and policy professionals, coverage focuses on federal and state policies that affect bilateral economic interests and government relations. Visit www.politicopro.com/canada to learn more.

U.S., MEXICO COULD FACE ROADBLOCKS WITHOUT CANADA: The U.S. and Mexico may be willing to go ahead on two-way NAFTA text without Canada, but that could mean revisiting some of the thorniest issues that were thought to be settled between the two neighbors.

The U.S. and Mexico will have to modify some of their compromises on issues such as automotive rules of origin. Mexican Economy Secretary Ildefonso Guajardo acknowledged that four or five issues would need to be reopened, as some issues were addressed under the notion that it would be a three-way deal.

“I don’t know if [the U.S. and Mexico] can work out those details and then convert that into the legal text in time,” said Antonio Ortiz-Mena, the former head of economic affairs at the Mexican Embassy and current senior vice president of Albright Stonebridge Group. Rules of origin is a “big political issue, a big technical issue,” he added.

Crunch time: Mexican negotiators returned to Washington on Wednesday to work on the legal text that must be turned over to Congress by Sept. 30 if all sides want the deal signed before Mexican President Enrique Peña Nieto leaves office. Canadian negotiators are also in town trying to reach a breakthrough that would allow for Canada to be included in a new North American trade pact.

"I don't think there's a Plan B. They have to have the text by" Sept. 30, said Antonio Ortiz-Mena, the former head of economic affairs at the Mexican Embassy and current senior vice president of Albright Stonebridge Group. "Even if it’s a trilateral deal, they cannot just reach agreement in principle. The handshake has to be translated into legal language."

Guajardo said a deal with Canada must happen soon, as negotiators need “a pair of weeks, 10 days in sight to organize what’s going to be presented in any of the scenarios.”

Mexico “played the cards on the idea that a deal was better than no deal, and that Canada would have enough time to hop on,” a source close to the talks told Morning Trade. “But it’s the middle of September and I don’t see Canada in the rush I think [Mexico was] hoping for.”

Mexico sells both scenarios as a win: Guajardo and other Mexican officials have reiterated their desire for a trilateral agreement, but they see an upside to a bilateral deal — much needed certainty in the bilateral relationship.

“The agreement in principle that we closed with the US is positive for Mexico because it preserves free trade and modernizes our trade agreement in key areas for today's economy such as #digital trade; #telecoms; and #SMEs, among others #NAFTAWorks,” Mexico’s chief NAFTA negotiator, Kenneth Smith Ramos, posted on Twitter on Thursday evening. More from your host here.

TRUMP KEEPS UP TOUGH TALK ON CHINA: Trump downplayed on Thursday the likelihood of the U.S. and China reaching a breakthrough in the trade war amid reports that the world’s two largest economies may relaunch trade talks later this month.

“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. We will soon be taking in Billions in Tariffs & making products at home. If we meet, we meet?” Trump posted on Twitter.

But an invite has been sent: Despite Trump’s tough talk, White House chief economic adviser Larry Kudlow confirmed that discussions are ongoing to potentially hold another round of talks, which would be led by Treasury Secretary Steven Mnuchin.

“It’s just an invitation as far as I know. There’s some discussions and information that we received that the Chinese government — the top of the Chinese government — wished to pursue talks,” Kudlow told Fox Business, adding that he considered talking “a plus.”

Beijing welcomes the gesture: The Chinese government said Thursday it received the invitation and welcomed Washington’s goodwill gesture. Gao Feng, a spokesman with China’s Ministry of Commerce, said “an escalating trade war is not beneficial to the two nations.”

REPUBLICAN SENATORS YEARN FOR TPP RE-ENTRY: Republican farm state senators on Thursday urged Trump to consider rejoining the Trans-Pacific Partnership, complaining his strategy of negotiating bilateral trade deals is too slow to make up for the lost market share caused by his tariffs. “Farmers and ranchers who depend on sending much of what they produce across borders are living in an economic nightmare because their products have been targeted by retaliatory tariffs,” Sen. John Thune (R-S.D.) said at a Senate Agriculture Committee hearing.

Chief U.S. agricultural negotiator Gregg Doud did his best to reassure the panel that the administration is looking to make bilateral trade deals in Southeast Asia and Africa, and possibly with Japan. But senators on both sides of the aisle said the bilateral approach is too slow to give much of a lift to commodity prices buffeted by retaliatory action against Trump’s tariffs.

“I think we should take into consideration a blend of bilateral and multilateral trade agreements as a good strategy going forward here because knocking these pins over one at a time in a series fashion is going to take a lot of time, and we’re running out of time in farm and ranch country,” Sen. Steve Daines (R-Mont.) said. To read more, click here.

THE AGRICULTURAL CASE AGAINST CHINA: Typical of any trade hearing, Doud fielded questions and offered views on a variety of subjects, including the administration’s firm position that agriculture should be part of any future trade negotiations with the EU.

Turning to China, he acknowledged concerns that Trump’s trade war jeopardizes a market worth about $20 billion to U.S. farmers in recent years. But he also argued that China maintains far too many barriers against U.S. farm goods.

"They don't buy the wheat they said they would buy when they became a member of the WTO. They don't buy the corn. They buy no rice from us. Their tariff on distillers grains is 80 percent. Their tariff on ethanol is 70 percent. They don't buy any poultry from us because of [bird flu concerns],” Doud said.

A small victory came after China agreed last year to open its market to U.S. beef exports for the first time since 2003, but Doud said it was a hard-fought change.

“We finally got a thimbleful of beef in there after 15 years of me personally working on that. The grain sorghum thing is difficult, and we aren't selling them what we think would be a billion dollars’ worth of pet food. The point being with China is that they need to change their behavior." For more, click here.

USDA BREAKS DOWN TRUMP’S TRADE AID FORMULA: The Agriculture Department released a paper on Thursday explaining its economic analysis on how it calculated the payments farmers will receive as part of the trade aid package. The analysis comes after some agricultural industry leaders have argued that growers are not getting their fair share of the $6.3 billion aid package aimed at helping farmers hit by retaliatory tariffs tied to Trump’s tariffs against China and allies, such as Canada and the European Union.

USDA Chief Economist Robert Johansson, who testified before the Senate Agriculture Committee on Thursday, faced repeated questions from lawmakers about the methods USDA used when deciding how to dole out $4.7 billion in direct payments to farmers.

A look at the numbers: The overwhelming share of direct payments — some $3.6 billion — is going to soybean growers. But other growers and producers — particularly corn and dairy — expressed frustration when USDA released the numbers last month, arguing that the plan barely covers any of their losses.

USDA examined "gross trade damage" instead of "price methodology" when reaching its conclusions, Johansson said. That explains why soybean farmers received the largest amount of assistance, because their large export market has been hit hardest, he said before the paper was released.

More aid could be coming: USDA has budgeted up to $12 billion in aid, with the remaining money to be spent if farmers continue to suffer from retaliatory tariffs.

“The second part will be announced, if necessary, in December and may account for other factors, such as new tariff levels, regional basis effects, or other market conditions that may have mitigated some of the trade damages calculated above," the paper says.

NO HILL TIME FOR LIGHTHIZER TODAY: Lighthizer’s meeting with House Ways and Means members this morning has been postponed, a Hill aide confirmed on Thursday. Lighthizer was expected to brief committee members on the status of trade talks with Canada and other pending issues. This marks the second scheduled meeting between Ways and Means and Lighthizer in less than two weeks that has been postponed.

REPORT: COMPANIES SHOULD PRESS FOR OPEN TRADE, INVESTMENT AMID GLOBAL TRADING CRISIS: Trump’s trade actions will likely divert certain trade and investment opportunities away from the U.S. and to other countries, leaving American companies at a disadvantage, according to a new report by former Commerce Secretary Carlos Gutierrez and former EU trade chief Peter Mandelson. Gutierrez is chairman of Albright Stonebridge Group and Mandelson is chairman of Global Counsel.

“In the current environment, global firms cannot assume that their home governments understand the value of an open, rules-based global trading system,” the report explains. “Companies should also invest in increasing coordination and coalition activities across sectors and nationalities to build out constituencies that support maintaining an open, rules-based global trading system.

With increased tensions, it’s up to multinational firms to push for open trade and make sure governments know their contributions to national economies, the report says.

“There is a risk that U.S. businesses can get caught up in an anti-American wave,” Gutierrez told Morning Trade. “We’re telling companies — don’t make big strategic decisions until you have to … and have the right networks inside of countries.”

INTERNATIONAL OVERNIGHT

— USTR negotiator says ending Mexico’s retaliatory tariffs on agriculture is on a separate track from NAFTA, POLITICO Pro reports.

— Trump plans to rebrand NAFTA as the “USMC” trade pact — named after the three countries — and will drop the “C” if Canada isn’t on board, The Wall Street Journal reports.

— Chinese investment faces backlash in around the world – not just the U.S., South China Morning Post reports.

— U.S. negotiators may need to add Canadian potato dumping to NAFTA to-do list, the National Post reports.

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