Tag: US

India may be in a position to retaliate, says US on tariff hikes

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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India may be in a position where it would want to retaliate, a top Trump administration official said today, even as the US continues to be on the cusp of triggering a global trade war by unveiling high import tariffs on a number of items.

The US Trade Representative (USTR), Robert Lighthizer, told lawmakers during a Congressional hearing that India’s system is not open and has a lot of “vulnerabilities”.

“My guess is that India may be in a position where they want to retaliate. I think there’s some vulnerability there. India has a substantial trade surplus with the US and they have a system which is not particularly open,” Lighthizer said.

“They have a system that has a number of vulnerabilities. So to the extent, there are individuals who have this problem, all I can say is we’ll try to work with them. It’s a serious problem and one that we have considered,” the USTR said.

He was responding to a question from Senator Ben Cardin from Maryland, who shared concerns of the American spice industry who depend largely on countries such as India on the import of spices and are now fearing a retaliatory action from them.

“I have another set of problems in regards to potential retaliatory actions. And I’ll use McCormick spices as an example. It’s a good American company, they source as much as they possibly can in our country, but you can’t move the equator and they products from other countries in order to have their spices (sic),” Cardin said.

Baltimore-based McCormick is one of the top spice companies in the US.

“That’s exactly the type of concern we have that they could be targeted for retaliatory actions that they have no choice. What do I tell McCormick?” Cardin asked.

“I don’t know enough about where they buy spice from. A lot of places — presumably where they buy spices from are not going to be on the list where they’re going to be significantly affected by (Section) 232 in aluminium or steel,” Lighthizer said.

“One that probably does come to mind, what they probably do is from India. I would presume India. I don’t know. Once again, I’m not an expert in the spice industry. At least I remember from the old days, the whole spice trade, the whole opium trade was basically started with Europeans getting spice out of India and selling it to China. So that’s kind of my frame of reference,” he said.

The USTR said that the companies ought to draw their attention towards any specific retaliation.

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Trump orders huge tariffs on China, raises trade war worries

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Primed for economic combat, President Donald Trump set in motion tariffs on as much as $60 billion in Chinese imports to the U.S. on Thursday and accused the Chinese of high-tech thievery, picking a fight that could push the global heavyweights into a trade war.

Japan and China, the country’s closest allies, were hit with a separate round of tariffs on as much as $60 billion in imports to the U.S. China threatened retaliation, and Wall Street cringed, recording one of the biggest drops of Trump’s presidency. But he declared the U.S. would emerge “much stronger, much richer.”

The Trump administration, however, said it would temporarily exempt the European Union, Canada, Mexico, Argentina, Australia, Brazil and South Korea from the tariff, Morgan Stanley’s Chetan Ahya highlighted.

It was the boldest example to date of Trump’s “America first” agenda, the culmination of his longstanding view that weak U.S. trade policies and enforcement have hollowed out the nation’s workforce and ballooned the federal deficit. Two weeks ago, with fanfare, he announced major penalty tariffs on steel and aluminium imports that he said threatened national security.

Also read: China may hike tariffs on US pork, aluminum, other goods

However, even as Trump was talking tough at the White House, his administration moved to soften the sting of the metal tariffs, telling Congress on Thursday that the European Union, Australia, South Korea and other nations would join Canada and Mexico in gaining an initial exemption. And that raised questions about whether his actions will match his rhetoric.

China responded early Friday by announcing a list of U.S. goods, including pork, apples and steel pipe, it said may be hit with higher import duties.

The Commerce Ministry said the higher U.S. tariffs “seriously undermine” the global trading system. The ministry urged the U.S. “to resolve the concerns of the Chinese side as soon as possible,” and appealed for dialogue “to avoid damage to overall Chinese-U.S. cooperation.”

At home, investors on Wall Street showed their rising concern about retaliation and business-stifling cost increases for companies and consumers. The Dow Jones industrials plunged 724 points.

Trump himself, joined by supportive business executives, complained bitterly about the nation’s trade deficit and accused China of stealing America’s prized technology.

“Any way you look at it, it is the largest deficit of any country in the history of our world. It’s out of control,” Trump said of the U.S-China imbalance. The U.S. reported a $375 billion deficit with China last year, which Trump has blamed for the loss of American jobs and closing of plants.

The president said the tariffs could cover “about $60 billion” in trade with China, but senior White House officials said the U.S. Trade Representative had identified 1,300 product lines worth about $50 billion as potential targets.

That list will include aerospace, information and communication technology, and machinery, according to a USTR fact sheet. But further details were scant.

The order signed by Trump directed the trade representative to publish a list of proposed tariffs for public comment within 15 days. Trump also asked Treasury Secretary Steven Mnuchin to come up with a list of restrictions on Chinese investment and said the administration was preparing a case before the World Trade Organization.

Despite Trump’s confident words, business groups and Republican lawmakers are worried his tariffs could undercut actions they have welcomed in his first year.

“The vast majority of our members are very concerned that these trade actions will at a minimum undermine the strong business confidence that has been created by the tax and regulatory process,” said Josh Bolten, president and CEO of the Business Roundtable. “And if it’s taken to an extreme, it will reverse that progress.”

Dozens of industry groups sent a letter last weekend to Trump warning that “the imposition of sweeping tariffs would trigger a chain reaction of negative consequences for the U.S. economy, provoking retaliation, stifling U.S. agriculture, goods, and services exports, and raising costs for businesses and consumers.”

Kansas Sen. Pat Roberts, Republican chairman of the Senate Agriculture Committee, suggested lawmakers may need to consider what he called a “Trump Tariff Payment” to compensate farmers if their crops face retaliation.

But some labor unions and Democrats said Trump was justified in delivering a swift blow to China after years of a lax response from the U.S.

“Chinese cheating has cost American jobs and I applaud the administration for standing firm in its commitment to crack down on China’s continued violations,” said Sen. Sherrod Brown of Ohio.

Thursday’s announcement marked the end of a seven-month investigation into the hardball tactics China has used to challenge U.S. supremacy in technology, including, the U.S. says, dispatching hackers to steal commercial secrets and demanding that U.S. companies hand over trade secrets in exchange for access to the Chinese market.

Business groups mostly agree that something needs to be done about China’s aggressive push in technology, but they worry that China will retaliate by targeting U.S. exports of aircraft, soybeans and other products and start a tit-for-tat trade war of escalating sanctions between the world’s two biggest economies.

“China has been trying to cool things down for weeks. They have offered concessions,” said Mary Lovely, a Syracuse University economist and senior fellow at the Peterson Institute for International Economics. “I fear they will take a hard line now that their efforts have been rebuffed. … China cannot appear subservient to the U.S.”

The move against China comes just as the United States prepares to impose tariffs of 25 percent on imported steel and 10 percent on aluminum — sanctions that are meant to hit China for flooding the world with cheap steel and aluminum.

Trump campaigned on promises to bring down America’s massive trade deficit — $566 billion last year — by rewriting trade agreements and cracking down on what he called abusive practices by U.S. trading partners. The president said Thursday, “It’s probably one of the reasons I was elected, maybe one of the main reasons.”

But he has been slow to turn rhetoric to action. In January, he did impose tariffs on imported solar panels and washing machines. Then he unveiled the steel and aluminum tariffs, saying reliance on imported metals jeopardizes U.S. national security.

To target China, Trump dusted off a Cold War weapon for trade disputes: Section 301 of the U.S. Trade Act of 1974, which lets the president unilaterally impose tariffs. It was meant for a world in which large swaths of global commerce were not covered by trade agreements. With the arrival in 1995 of the World Trade Organization, Section 301 fell largely into disuse.

Trump and Chinese President Xi Jinping enjoyed an amiable summit nearly a year ago at Trump’s Mar-a-Lago resort in Florida. But America’s longstanding complaints continued to simmer.

Chinese Premier Li Keqiang this week urged Washington to act “rationally” and promised to open China up to more foreign products and investment.

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Stocks wobble and end lower after Fed raises interest rates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After a jittery afternoon of trading, major U.S. stock indexes fell Wednesday while smaller companies fared better. The Federal Reserve raised interest rates, as investors expected, and said it could raise rates at a quicker pace next year.

Stocks traded higher early in the day and jumped after the Fed announced its decision. The Dow Jones industrial average climbed 250 points, but gave it all up as new Fed Chairman Jerome Powell addressed reporters. At the end of trading it wobbled and ended lower. The dollar weakened and bond yields turned lower. Yields had risen earlier in the afternoon.

The Fed said the U.S. economy and the job market continued to improve over the last two months. It still expects to raise interest rates three times this year, and said it might raise rates three more times next year instead of two.

Brent Schutte, the chief investment strategist for Northwestern Mutual Wealth Management, said Powell is trying to tell Wall Street what the Fed’s plans are without worrying investors too much. He said stocks dropped after Powell said rates might rise higher than the Fed expects.

“The market will have to get to know Jerome Powell a little bit and will have to test his credibility as Fed chairman,” he said. “I would imagine the bar is higher for him in the shorter term because he is not a trained economist,” unlike Janet Yellen and other predecessors.

Small and mid-size companies climbed. Energy companies led the way as oil prices jumped for the second day in a row. Homebuilders advanced following a report that sales of previously occupied homes increased in February. Cereal and packaged foods companies slumped after General Mills reported rising expenses and cut its annual profit forecast and airlines skidded after Southwest said its revenue is suffering as it cuts fares to compete with other companies.

The S&P 500 index slid 5.01 points, or 0.2 percent, to 2,711.93. The Dow Jones industrial average lost 44.96 points, or 0.2 percent, to 24,682.31. The Nasdaq composite fell 19.02 points, or 0.3 percent, to 7,345.29. The Russell 2000 index of smaller companies gained 8.90 points, or 0.6 percent, to 1,579.30.

Bond prices edged lower. The yield on the 10-year Treasury note declined to 2.88 percent from 2.90 percent Tuesday. It had risen as high as 2.93 percent as investors expected quicker gains in interest rates.

David Kelly, the chief global strategist for JPMorgan Asset Management, said stocks usually do well when rates are rising, but only up to a point.

“If interest rates are rising from a low level, there’s more optimism about the economy, and that generally is a more positive thing,” he said. That’s the case right now, but with an important difference: the economy has been growing for almost a decade, and interest rates have been historically low for the whole time.

Kelly added that the Fed and the government need to be careful to focus on smooth growth, as the recent tax cuts will dump some short-lived stimulus into the economy.

“The overall effect of the tax cut is to deliver another keg to a keg party at 2 a.m.,” he said. “The party is probably going to go a little longer but the hangover is going to be worse.”

Nine of the ten biggest gainers on the S&P 500 were energy companies. Some of the biggest gains went to Marathon Oil and Anadarko Petroleum.

Benchmark U.S. crude rose $1.63, or 2.6 percent, to $65.17 a barrel in New York. Brent crude, used to price international oils, added $2.05, or 3 percent, to $69.47 a barrel in London.

General Mills, the maker of Cheerios cereal, Yoplait yogurt and other packaged foods, plunged after its third-quarter results were hurt by rising freight and commodity costs. The company also cut its annual profit outlook. The stock dropped $4.42, or 8.9 percent, to $45.51, and companies including Kellogg, J.M. Smucker and Post Holdings also fell.

After early losses, Facebook rose $1.24 to $169.39. The stock fell 9 percent Monday and Tuesday following reports a data mining firm working for President Donald Trump’s campaign took data from the accounts of 50 million Facebook users without their permission. Authorities in Britain and the U.S. launched investigations into Facebook’s handling of user data.

Facebook stock is down 12.5 percent from the all-time high it set Feb. 1.

Social media companies Twitter and Snap also regained a portion of their recent losses. Adding to Snap’s woes, its stock fell last week after pop star Rihanna called on her fans to delete the Snapchat app after an ad for game that made jokes about her assault in 2009 by her then-boyfriend Chris Brown. Snap apologized for the ad.

In other energy trading, wholesale gasoline added 5 cents to $2.01 a gallon. Heating oil rose 5 cents to $2 a gallon. Natural gas fell 4 cents to $2.64 per 1,000 cubic feet.

Metals prices also increased. Gold rose $9.60, or 0.7 percent, to $1,321.50 an ounce and silver jumped 23 cents, or 1.4 percent, to $16.42 an ounce. Copper gained 2 cents to $3.06 a pound.

The dollar fell to 106.10 yen from 106.46 yen. The euro rose to $1.2332 from $1.2253.

The CAC 40 in France declined 0.2 percent and Britain’s FTSE 100 fell 0.3 percent. Germany’s DAX finished with a small gain.

Hong Kong’s Hang Seng index erased earlier gains to fall 0.4 percent and South Korea’s Kospi finished little changed. Markets in Japan were closed for a holiday.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Trump to unveil China trade sanctions on Friday

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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President Donald Trump is likely to unveil sanctions against China tomorrow, the White House indicated today, as the officials from the US Trade Representatives (USTR) said the US has strong evidence of Beijing violating its commitments on intellectual property and technology transfers.

“Tomorrow the president will announce the actions he has decided to take based on USTR’s 301 investigations into China’s state-led, market-distorting efforts to force, pressure and steal US technologies and intellectual property,” White House Principal Deputy Press Secretary Raj Shah said today.

US President @realDonaldTrump is set to announce sanctions on China after IP probe. @Manisha3005 with details https://t.co/ycPggGDE25

— CNBC-TV18 (@CNBCTV18Live) March 22, 2018

Officials, however, refrained from giving any further details even as USTR submitted its Section 301 report on its investigation into “unfair” Chinese trade practices to the president.

Tariffs and a potential WTO case are certainly on the table, a USTR official told reporters during a briefing on Section 301 investigation report.

The administration, according to the official, is not satisfied with the type of responses the United States has been getting from China.

“We have strong evidence against China. These are deeply concerning to the administration and raise severe questions about China and its commitment to market-oriented practices that they promised to engage in,” said the official, who spoke on condition of anonymity.

The USTR looked into four types of allegations: charges that China is putting pressure on companies to enter into joint ventures where they would transfer their technology to a Chinese company; US companies do not have the same ability to license their IP as a Chinese company; whether or not china is using state funds to purchase IP in the US; concerns that China was involved in intruding into US commercial networks for commercial gains.

Responding to a question, the official said not every bad trade action violates the WTO.

“It’s difficult to use the WTO that involves the informal pressure stakeholders have complained about. The idea that you can take this to the WTO isn’t practical. To the extent we can get at these things at the WTO, we will do so. We’re pursuing a number of cases against them right now. We’ll use it where we can but we can’t use it to address everything,” the official said.

The administration does not think that China’s commitments have been fulfilled.

Noting that the US has tried dialogue with China, the official said the administration hasn’t turned its back on these conversations.

“All of us need to be aware of the history. It does raise a question about the history of the dialogue. That is something policymakers will have to take into account. The administration has been clear that China presents unique challenges. The principles recognise the gravity of the situation,” the official said.

Tariffs are a potential legal option, the official said, adding that a potential WTO case is another outcome.

The administration is investigating whether China is using State funds to get into the US market and buying IP.

The US has a massive USD 500 billion trade deficit with China.

From the very beginning of his presidential campaign and now as the president, Trump has been seeking to reduce this trade deficit, which he thinks is against America’s national security interest, killing jobs in the US and hurting its economy.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Trade War: Limited impact on Indian steel, aluminium industry, says Steel Secy

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The decision of the US president imposing heavy tariff on steel and aluminium is expected to affect many countries’ export.

Talking about its effect on Indian economy, Steel Secretary Aruna Sharma said that there will not be any direct impact on India as only 2 percent of country’s steel export is to the US.

The onus lies more on the US to prove that Indian steel is going to have an impact on US security measures.

Section 232 of the US law gives the President the ability to issue tariffs based on national security concerns.

India under WTO, has objection to 232 and will work out the details with Ministry of Commerce because aluminium is also getting affected. She said that approaching WTO would be post discussions with Ministry of Commerce.

“As of now, the ministry is in a wait and watch mode and haven’t yet made a representation for an exemption”, said Sharma.

Talking about the outlook for the steel sector, she said that the approach is that we do not contribute to the excess capacity of the world, but in fact we are increasing consumption in tandem with production.

Sharma concluded that the upward trend will continue in FY19 as well.

Below is the verbatim transcript of the interview.

Ekta: What is the impact on Indian steel manufacturers with regards to the tariffs which are imposed by the US government on steel as well as what the reaction might be from the government now?

A: What you have said before – if you look at it, we are 10th in the series of descending order of the exports that are receding US and ours is only 2 percent of the total exports going to US. So immediately there is definitely no impact but yes, we have an issue of principle.

What is being imposed is not something which is WTO compliant. We will look forward for any measures, which are WTO compliant because that can be argued and discussed. It has been done under 232 – what you were correctly said and under the name of security. So the onus lies more on the US to prove that steel going from India is going to have an impact on their security measures.

The second thing is that their own 232 is now getting more opened up by giving exemption to Canada and Mexico – Canada being the biggest importer – between two of them out of 35, 10 million tonnes are being exported to US. The other countries which are top on the list is Brazil, Japan and South Korea. So in the name of friendly countries, let us see how it emerges then we are 10th in the line.

So we don’t expect any immediate impact but yes, under principle we have an objection to 232 and with Ministry of Commerce, we will be working out the details because aluminium is also getting affected and accordingly proceed ahead.

Prashant: The Prime Minister of Australia – over the last 48 hours – put out a statement saying that Australia in-principle has an agreement with the US, they have reached some sort of an understanding to be exempt. The list of countries which are being exempted seems to be growing. Have we reached out for the same although the exports out of India are pretty small into the US?

A: What you say is right. With so many exemptions, the whole clamping itself gets so diluted that I am very sure that it will find its own declining trend. So wait and watch is the best way to proceed ahead with this.

Nigel: If this is not WTO compliant, will we be approaching the WTO to complain against this? Also, are we looking at any additional measures to save our steel industry, anti-dumping duty (ADD) is already at place but it is at quite a low price compared to current steel prices?

A: If you look at it, our anti-dumping duty is very reasonable, logical and well-argued upon which any country can question and there can be a debate on it and that is an absolutely WTO compliant measure and that has also redressed the crisis, which India was facing against the dumping. So we have found a solution within WTO complaint’s trade measure.

Now, unilateral tariff measures is not which is WTO compliant or WTO agreed trade measures. So definitely there is a question about resorting to unilateral tariff measures and that is where it said that it may trigger the trade wars if you go accordingly.

But with the kind of windows that are going to opened up and the dilution that is happening – we are very sure that it will emerge to be a much logical way of proceeding into the trade tariffs.

Nigel: Will we approach the WTO, that is the big question?

A: That with Ministry of Commerce we are working out so it will not be appropriate for me to talk only of steel.

Ekta: You cannot talk about whether you would be approaching the WTO but would there be any sort of quid-pro-quo kind of measures from India on American exports, is that something that you would be privy to or you would be able to talk on as well?

A: Not at all because in case exemptions are given to many countries, we will be pitching hard because you cannot have steel coming from a few countries 25 percent more expensive than steel coming from other countries. There has to be an equity into whatever measures that are being taken. When there is an equity, the steel buyer is going to pay more than 25 percent. The realisation of the exporter is going to remain the same. It is not going to make a difference to the exporters except that the steel being important in the US will be 25 percent more and not only that downstream the cost is going to enhance for the consumer in US. So definitely it is not a straight line kind of an arrangement and India will definitely question in case there is a differential treatment given to India, there is no doubt about it.

Prashant: To the earlier point, have you made the representation for an exemption as of now?

A: At this moment, no. as of now, we are discussing, we are watching, how it is proceeding because we don’t expect with so many windows what you correctly talked about Australia when you are having a free trade agreements that Australia may not be a steel contributor but it is definitely the coking coal contributor or raw material contributor to these countries. So it is going to make a difference. Therefore, it is unveiling now. We should not open all our cards just now.

Nigel: FY18 has seen a good turnaround of the steel sector and the last time you joined us, you told us that sales losses will come down and that has precisely what happened in Q3. For FY19, if you could tell us what kind of a steel demand growth are you looking at? This year is roughly around 4.5 to 5 percent so for FY19, what kind of a number can be looked at and for Steel Authority of India Ltd (SAIL) that profit number by the end of FY19 is still on the cards?

A: Definitely now, SAIL will be on an upward trend. All the adjustments and the facilities are getting ramped up. So that is as far as the PSU is concerned, that includes RINL as well. So let us not forget them. They are also on the upward trend, they have reduced the losses and by March figures, the losses will be reduced even though they don’t have the net profit as we are going ahead.

But as you rightly said, yes, steel sector has been on the reviving mode and our entire policy and approach is that we don’t contribute to the excess capacity of the world. We are enhancing our consumption in parallel to our production. So our consumption is also constantly going up day by day. We had a 5 percent increase and we expect much more with the country’s focus on infrastructure.

Let me tell you very interesting argument that we are a young country. So the young country will require more infrastructure, more housing, more aspirations, more consumption of steel. So with that angle, I see an upward trend. So FY19 will also bring in much more jump. Already we have reached 134 million tonne of capacity. So we expect an addition more in FY19.

Prashant: In 2016, India exported goods and services worth some USD 72 billion into the US. The surplus that India enjoyed with US was about USD 30 billion, USD 22 billion out of that on goods. The US trade deficit is about USD 800 billion. There is one view point that if there were to be some sort of a trade war, escalation of tensions, India being a small player should lie low and not lead the counter attack, go to the WTO, make a noise and find its way around but it is not the large player, the big target is China for the US, is that the view in the establishment as well?

A: No, in 232, China is definitely not the target because China exports only one percent of their exports to US. So it is hardly a market. For India also, the major market is Italy, Vietnam is there and US is a low miniscule market so definitely the hit is not here, the hit is going to be measure European Union.

Prashant: I did not mean steel per se, I mean overall not just steel?

A: Okay, so if you are thinking overall in business, the country’s interest stands first whether it is a small interest or a big interest, the country’s interest always is protected and will be protected.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow