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Trade issues dominate ag forum with Moran, Roberts and Perdue

Sen. Jerry Moran, Agriculture Secretary Sonny Perdue and Sen. Pat Roberts
FARM FORUM: Sen. Jerry Moran (left), Agriculture Secretary Sonny Perdue and Sen. Pat Roberts take questions from farmers and commodity leaders May 30 during a forum in Manhattan, Kan.

Kansas Sens. Pat Roberts and Jerry Moran joined U.S. Secretary of Agriculture Sonny Perdue to hold a forum Wednesday with Kansas farmers, ranchers and rural advocates in Manhattan, Kan.

Roberts told the group that Congress is fully aware of the serious challenges farm country is facing, both from the weather, with almost a quarter of the state still mired in drought in spite of recent rains, and from a fifth year of low commodity prices and farm income that is down 54% from two years ago.

He promised action on a new farm bill, saying it will on President Donald Trump's desk before the current bill expires Sept. 30. Moran, who sits on the Senate Appropriations Committee, said Congress is committed to making sure that there is funding in Fiscal Year 2019 for conservation, crop insurance, research and rural development programs.

But it was trade issues that brought the most questions and concerns from the farm leaders present at the forum.

Perdue said his administration is committed to negotiating solid trade agreements and finding the resources necessary to fight whatever tariffs China may impose as trade talks are carried out.

"Agriculture is lucky in that we inherited a good career staff of people dedicated to America's farmers," Perdue said. "There is no 'deep state' in the Department of Agriculture, just a bunch hard-working men and women."

EXPRESSING FAITH: U.S. Secretary of Agriculture Sonny Perdue told farmers and commodity leaders at a forum on the Farm Bill and trade issues that he has faith that President Trump's "unique negotiating style" will bear positive results as trade talks with China continue.

Lee Reeves, President of the Kansas Livestock Association said 20% of the production of Kansas stockmen is exported and that additional export markets are essential to keep producers in business.

"The president is very aware of the importance of ag exports," Perdue said. "We are optimistic that we are getting close on NAFTA. We are closer to agreement with Mexico than with Canada. Canada's protection of its domestic dairy industry continues to be a stumbling block."

Perdue said trade meetings with China in Washington in late May were a good start, with China agreeing to increase imports of agricultural products by $8 to $10 billion. But he acknowledged that the agreement isn't a sure thing.

"President Trump has a unique negotiating style and he has been very successful," Perdue said. "But certainty and predictability are not there yet on trade."

There are positive developments, such as an agreement to end the 179% tariff on U.S. sorghum in retaliation for U.S. tariffs on washing machines and solar panels, but more retaliation could be in store as tariffs on steel and aluminum are implemented.

Roberts said that Trump has suggested a program that would compensate farmers for lost trade, offering about $15 billion in aid for those impacted.

"We have made it clear that our farmers don't want another program or a trade subsidy. They want more markets," he said. "The trade representatives are headed to China in the coming weeks and I have confidence in Bob Lighthizer and Greg Doud to get the job done."

Moran said he has been working to make sure the administration understands that China is not a "captive" buyer for U.S. ag products.

"There's a popular notion among some people that China can't afford not to buy U.S. ag products," he said. "But the reality is there are plenty of options out there for China and for others to obtain farm products."

He cautioned that once U.S. ag customers find alternate suppliers, there is always a danger that they won't come back.

"Putting it simply, trade is the key to farm survival," Moran said. "There is nothing more important than trade. And it is not just ag. I was in Wichita last week for a ceremony commemorating a milestone in the delivery of Boeing 737 fuselages from Spirit Aviation. That airplane is 100% aluminum. Big increases in the price of aluminum is not a good thing for that production."

Moran said he is among a number of leaders who have explained to the president that the best weapon the U.S. has in the competitive struggle with China is membership in the Trans-Pacific Partnership. One of Trump's first actions was withdrawal from the agreement, which took years to negotiate and includes seven other nations.

SHARING CONCERNS: Jay Armstrong, left, with Armstrong Farms, takes advantage of the chance to share his thoughts with U.S. Secretary of Agriculture Sonny Perdue following a forum on the 2018 Farm Bill and trade issues May 30 in Manhattan, Kan.

Both Roberts and Perdue agreed that rejoining the TPP would give the U.S. a badly needed edge in the battle with China for markets, especially in Asia and South America.

Perdue expressed hope that might happen, but he said the administration needs to "rack up some wins" first.

"Basically, I just want to sell stuff," he said. "I think it is just a matter of time for TPP. But we need to get the steel and aluminum tariffs resolved and some wins on China. We need some wins on the board."

Moran said while trade issues dominate the conversation and farmers are concerned about the 2018 Farm Bill, he still has concern about the need to improve infrastructure with new roads, bridges and waterways to help provide relief for rural hospitals and expand technology.

"There's a lot of work ahead of us," he said

Trade issues dominate ag forum with Moran, Roberts and Perdue

Kansas Sens. Pat Roberts and Jerry Moran joined U.S. Secretary of Agriculture Sonny Perdue to hold a forum Wednesday with Kansas farmers, ranchers and rural advocates in Manhattan, Kan.

Roberts told the group that Congress is fully aware of the serious challenges farm country is facing, both from the weather, with almost a quarter of the state still mired in drought in spite of recent rains, and from a fifth year of low commodity prices and farm income that is down 54% from two years ago.

He promised action on a new farm bill, saying it will on President Donald Trump's desk before the current bill expires Sept. 30. Moran, who sits on the Senate Appropriations Committee, said Congress is committed to making sure that there is funding in Fiscal Year 2019 for conservation, crop insurance, research and rural development programs.

But it was trade issues that brought the most questions and concerns from the farm leaders present at the forum.

Perdue said his administration is committed to negotiating solid trade agreements and finding the resources necessary to fight whatever tariffs China may impose as trade talks are carried out.

"Agriculture is lucky in that we inherited a good career staff of people dedicated to America's farmers," Perdue said. "There is no 'deep state' in the Department of Agriculture, just a bunch hard-working men and women."

EXPRESSING FAITH: U.S. Secretary of Agriculture Sonny Perdue told farmers and commodity leaders at a forum on the Farm Bill and trade issues that he has faith that President Trump's "unique negotiating style" will bear positive results as trade talks with China continue.

Lee Reeves, President of the Kansas Livestock Association said 20% of the production of Kansas stockmen is exported and that additional export markets are essential to keep producers in business.

"The president is very aware of the importance of ag exports," Perdue said. "We are optimistic that we are getting close on NAFTA. We are closer to agreement with Mexico than with Canada. Canada's protection of its domestic dairy industry continues to be a stumbling block."

Perdue said trade meetings with China in Washington in late May were a good start, with China agreeing to increase imports of agricultural products by $8 to $10 billion. But he acknowledged that the agreement isn't a sure thing.

"President Trump has a unique negotiating style and he has been very successful," Perdue said. "But certainty and predictability are not there yet on trade."

There are positive developments, such as an agreement to end the 179% tariff on U.S. sorghum in retaliation for U.S. tariffs on washing machines and solar panels, but more retaliation could be in store as tariffs on steel and aluminum are implemented.

Roberts said that Trump has suggested a program that would compensate farmers for lost trade, offering about $15 in aid for those impacted.

"We have made it clear that our farmers don't want another program or a trade subsidy. They want more markets," he said. "The trade representatives are headed to China in the coming weeks and I have confidence in Bob Lighthizer and Greg Doud to get the job done."

Moran said he has been working to make sure the administration understands that China is not a "captive" buyer for U.S. ag products.

"There's a popular notion among some people that China can't afford not to buy U.S. ag products," he said. "But the reality is there are plenty of options out there for China and for others to obtain farm products."

He cautioned that once U.S. ag customers find alternate suppliers, there is always a danger that they won't come back.

"Putting it simply, trade is the key to farm survival," Moran said. "There is nothing more important than trade. And it is not just ag. I was in Wichita last week for a ceremony commemorating a milestone in the delivery of Boeing 737 fuselages from Spirit Aviation. That airplane is 100% aluminum. Big increases in the price of aluminum is not a good thing for that production."

Moran said he is among a number of leaders who have explained to the president that the best weapon the U.S. has in the competitive struggle with China is membership in the Trans-Pacific Partnership. One of Trump's first actions was withdrawal from the agreement, which took years to negotiate and includes seven other nations.

SHARING CONCERNS: Jay Armstrong, left, with Armstrong Farms, takes advantage of the chance to share his thoughts with U.S. Secretary of Agriculture Sonny Perdue following a forum on the 2018 Farm Bill and trade issues May 30 in Manhattan, Kan.

Both Roberts and Perdue agreed that rejoining the TPP would give the U.S. a badly needed edge in the battle with China for markets, especially in Asia and South America.

Perdue expressed hope that might happen, but he said the administration needs to "rack up some wins" first.

"Basically, I just want to sell stuff," he said. "I think it is just a matter of time for TPP. But we need to get the steel and aluminum tariffs resolved and some wins on China. We need some wins on the board."

Moran said while trade issues dominate the conversation and farmers are concerned about the 2018 Farm Bill, he still has concern about the need to improve infrastructure with new roads, bridges and waterways to help provide relief for rural hospitals and expand technology.

"There's a lot of work ahead of us," he said

Soybean contracts posting lower highs

soybeans

Soybean bulls are keeping a close eye on Brazil, as oil workers have begun a 72-hour strike immediately following a crippling nationwide truck driver stroke. Several sources have reported that the strike has halted production at refineries in six states. As I mentioned yesterday, there's also talk that Argentina is now considering a nationwide strike as workers need significant raises to simply keep up with surging inflation.

Unfortunately, soybean prices here at home continue to post lower highs. The JUL18contracts $10.90 posted back in early-March seems to be strongly in place as the contracts nearby high. We tried to rally in mid-April, but only got back to $10.78 per bushel. The bulls tried again in late-April, but were only able to get back to $10.67. The market tried again in late-May, but only made it just above $10.50 per bushel.

From a technical perspective, it feels like every couple of weeks the bulls try to make another run towards the previous highs but are more quickly running out of momentum. On the downside, there have been two different occasions, once in early-April and once in mid-May that the market tumbled down to sub-$9.95 levels. The JUL18 contract is currently trading at around $10.25 per bushel. In other words, we are about +30 cents from the recent lows and about -65 cents from the early-March highs.

Obviously, a lot still hinges on the Chinese trade renegotiations and the inking of a new NAFTA deal? Beyond the macro space, U.S. weather will soon start to take on a much more prominent role in the headlines. As of right now the weather's really not a big concern, especially with many inside the trade thinking more U.S. acres have been planted than the USDA has given credit.

As a producer, I remain patient. Despite the recent setback in price, the new-cropNOV18 contract is still trading right around the same price I made my last cash sale, which was at $10.30. I wish I could say otherwise, but this also just happens to be my best new-crop cash sale. The NOV18 contract has recently traded to $10.60 on two separate occasions, but each time I have had orders resting at $10.70, just a bit out of reach and perhaps a bit too greedy. I'm hoping I get another shot by late-summer, which has always been my projected time target...

 

 

CHECK OUT ALL THE DAILY INFORMATION IN THE VAN TRUMP REPORT

Watch for target spot in cotton, but be patient

Heather Kelly, UTIA Cotton Target Spot
Target spot on leaf and bracts

Conditions in west Tennessee are setting up as conducive for target spot infestations in cotton. Or maybe not.

Heather Kelley, Extension pathologist at the University of Tennessee Research and Extension Center in Jackson, says several factors need to coincide for target spot to pose a threat to cotton.

“Temperature plays a role,” Kelly said during a break from a recent cotton scout school at the nearby Research and Education Center at Milan, Tenn. “But we have had favorable temperatures in the past without target spot. Temperature is not as big a factor as moisture.”

Moisture in the canopy, she explains, is a big factor, before and after the canopy closes. “The pathogen can infect and develop very quickly” with the right combination of temperature and moisture, she says.

She says last year started off “really hot, like this year is turning out to be, and seemed to set up for target spot. But the continuous canopy wetness we had in 2016 that caused target spot to explode, didn’t occur. In 2017, fields received about the same amount of rain, but they dried out between showers.”

Risk factors

Kelley says cotton producers should be aware of risk factors for target spot, including:

• A history of the disease

• Cotton following cotton

• Narrow row spacing

• Vigorous growth

• High plant populations

• Hot, humid weather

• High nitrogen rates, and

• Irrigation/rain events

She warns against limiting irrigation below what the plant needs to produce yield goals as a means of managing for target spot. “Do not reduce water and limit yield potential,” she says.

Growers should “watch for it. We usually do not see target spot before the canopy closes, around first bloom. Don’t spray until you see lesions. And remember, only 20 percent or less of the time do we see target spot taking away yield. So, 80 percent of the time we see no effect on yield from target spot.”

Fungicide applications may be necessary, she adds, depending on the risk factors, including the weather forecast. If lesions are present with a forecast for more rain, growers may be wise to consider fungicide application.

Be patient

“Consider spray as soon as you see lesions, but, if the weather looks good, with potential for clear days between rains events, or if no rain is in the forecast, wait.”

The most likely time to need a fungicide is from the first week to the sixth week of bloom, Kelly says. “That will vary from field to field and usually runs from the second week in July to the first or second week of August. In Tennessee, we have seen target spot in late July the last few years. The earlier we see lesions, the higher the potential for yield loss.”

Good fungicides are available to treat target spot on cotton, Kelly says. “Headline and Priaxor are at the top of our trials.”

She recommends only one application. “If we time it right, we should need only one fungicide application. If we spray too early, we might need a second. That’s why I say ‘wait until you see lesions.’”

Target spot symptoms may resemble other disease organisms. Kelly offers this suggestion on identification in a blog (https://bit.ly/2LFjA1z) from last summer: “Look for lesions with irregular concentric rings. More concerning than the lesions of target spot is the premature defoliation it causes; both lesions and defoliation start in the lower canopy.”

In the blog she lists these fungicides and rates: Elatus (5-7.3 fl oz/a), Headline (6-12 fl oz/a), Priaxor (4-8 fl oz/a), Quadris — and generic azoxystrobin products — (6-9 fl oz/a), Stratego YLD (5 fl oz/a), and Twinline (7-8.5 fl oz/a).

 Additional information/images of target spot and other foliar diseases of cotton can be found on the mobile friend guide at http://guide.utcrops.com/.

Bangladesh sign of growing world rice supplies

Rice heads
Global rice acres are expected to increase, with Bangladesh leading the way.

Most U.S. rice farmers don’t think about Bangladesh when talk turns to their biggest competitors in the world rice markets. Those conversations usually include India, China, Brazil and, until recently, Thailand.

In 2018-19, Bangladesh is expected to increase plantings by 500,000 hectares (1 hectare equals 2.47 acres) to a near-record 11.77 million hectares. The jump in Bangladesh production is expected to help push world rice production to a new record.

“The total U.S. rice acreage is about 1 million hectares so Bangladesh increased its plantings by almost half the size of the U.S. crop,” said Dr. Nathan Childs, senior rice economist for USDA’s Economic Research Service. “That 11.77 or 11.8 million hectares would be just a fraction off their record area.”

It’s shaping up to be that kind of a year for rice farmers, according to Childs, who gave USDA’s 2018/19 U.S. and Global Market Outlook during a webinar presented by the University of Arkansas System Division of Agriculture. It was one of a series of webinars hosted by Dr. Bobby Coats, professor of agricultural economics and agribusiness at the university.

The increase is all the more striking, Childs said, because last year’s crop in Bangladesh was down significantly due to a combination of severe flooding and drought in different parts of the country’s rice-growing area.

Second largest increase

Bangladesh is expected to have the second largest increase in production (outside of the U.S.) to a total of 34.7 million tons, a jump of 6.3 percent, according to USDA’s World Agricultural Outlook Board, which released its first forecast for the 2018-19 marketing year in early May. The largest increase is expected in Madagascar, which could plant 18.8 percent more rice.

Rice production in the U.S. is expected to be up 14 percent to 6.45 million tons because growers are expected to plant more rice in 2018 following 2017’s unusually cool and wet planting conditions.

“Total U.S. rice harvested area is projected to increase 12.5 percent to 1.08 million hectares,” said Childs. “That’s due to rising long-grain prices at planting and more normal weather in the Mississippi Delta following flooding in 2017 that prevented some planting and caused some planted rice to be abandoned.”

Childs, who has been following the U.S. and world rice crops for USDA for more than 20 years, said larger rice crops are projected for Bangladesh, Burma, Cambodia, Indonesia, Madagascar, Sri Lanka, Tanzania, Thailand, the U.S., Vietnam and the Philippines. (Thailand is expected to export 11 million tons in 2019 after being a non-factor in world rice markets in recent years.)

Smaller crops are projected in 2018-2019 compared to 2017-2018 for Brazil, China, Colombia, Ecuador, Egypt, India, Iraq, South Korea, Pakistan and Venezuela.

Harvested area increase

The projected increase in harvested area – 1.3 million hectares to a record of 162 million hectares – is projected to more than offset smaller harvested areas in China. Colombia, Ecuador, Egypt, Iraq, South Korea and Venezuela. Harvested area is projected flat or nearly flat in Iran, Japan, Laos and North Korea.

“A huge 49 percent drop of 65,000 hectares to 70,000 is projected for Venezuela,” says Childs. “That’s primarily due to panicle blight disease, and the lack of the needed inputs to manage it” because of the country’s economic problems.

Global rice supplies are projected to increase 1.3 percent to a record of 633 million tons, according to Childs. “That’s due to a 5 percent larger carry-in from 2017-2018 and the forecast larger production in 2018-19.”

Global ending stocks are expected to total 144.7 million tons, up 900,000 tons from 2017-18, which is part of a trend, Childs said. Stocks are projected higher for the 11th consecutive year and will be the highest since the 2000-01 record of 146.7 tons.

China accounts for most of the projected increase in global stocks with excess supplies projected at 97.3 million tons, up 3.3 million tons from 2017-18 and just below the 1999-2000 record. All told, China will have two-thirds of the world’s ending rice stocks for 2018-19.

“The 2018-19 global stocks-to-use ratio of 29.6 percent is fractionally below 2017-18 and well below the 2000-01 record,” he said.

Although the U.S. is expected to export more rice in 2018-19, USDA is projecting U.S. all-rice ending stocks will be up 18 percent. Long-grain stocks could be up even more, by 28 percent in the marketing year that runs from August to July.

“We don’t see much change in the farm price of U.S. rice,” says Childs. “U.S. prices could actually be down a little bit because of the supplies of rice in the U.S. and world markets.”

 

 

 

Brazilian truck strike weakened by army, Federal Police

Victor Moriyama/GettyImages Workers play soccer between trucks stopped at Centro de Armazos Gerais de Sao Paulo during the trucker's strike on May 29, 2018 in San Paulo, Brazil.
Workers play soccer between trucks stopped at Centro de Armazos Gerais de Sao Paulo during the trucker's strike on May 29, 2018 in San Paulo, Brazil.

by Tatiana Freitas and Fabiana Batista

Now in its 10th day, the national strike by Brazilian truck drivers has weakened as the army and Federal Police work to unblock roads. Trucks carrying soybeans regained access to Paranagua Port while poultry and pork slaughtering was restored at some plants. Truckers have been protesting against fuel prices that have increased by about 50% from a year ago. Time stamps are for Brasilia unless stated otherwise.

More poultry plants restart operations (5:55 p.m.)

Forty-six plants have resumed operations as road blockades by striking truck drivers were ended by the army and police, Ricardo Santin, a director at industry group ABPA, said in an interview. The transportation of feed to poultry farms is slowly being restored, he added .On Tuesday, 167 poultry, pork plants were halted.

Soy Trucks Arrive at Major Port (5:05 p.m.) 

Trucks arrived at Paranagua in Parana state around 2pm local time, escorted by the Federal Road Police, a press official from the port authority said. That was the first time trucks have entered the port complex since the strike started on May 21. Vehicles with 42,000 metric tons of soybeans are expected to unload in the next 24 hours.

Protein industry may take years to recover: Maggi (2:59 p.m.) 

Poultry producers have lost 1.3 billion reais ($350 million) from the strike so far and it may take as many as 2 1/2 years for them to fully recover, Minister Blairo Maggi tells reporters at sidelines of event in Sao Paulo. Brazil may be forced to import food, he said.

Port protests to be resolved, minister says (2:50 p.m.) 

“Sao Paulo state is acting to unblock Santos port at this moment as it is fundamental in terms of logistics and trade,” Cabinet Minister for Institutional Security Sergio Etchegoyen tells reporters in Brasilia. There are only two road blockages across the country, and other obstructions aren’t related to the strike, he said.

Strike slows coffee harvest, Cepea says (11:45 a.m.)

“Many growers, who had already started to harvest both early beans and younger crops, had to reduce activities this week” because there’s no fuel for workers or machinery in some places, Cepea, the University of Sao Paulo’s research arm, said in a report.

Soybean ship congestion increases at ports (11:36 a.m.) 

The number of soybean vessels waiting to dock at Santos, the largest Latin America port, increased to 24 on Tuesday from 11 a week earlier, according to ship agency Williams. Ships lined up at all Brazilian ports rose to 78 from 50. 

Road blockades continue to prevent soybean, sugar and meat cargoes from reaching export terminals, and Santos can’t receive trucks, a port authority press officer said Wednesday in an email.

Brazil recovery threatened by strike (11:02 a.m.)

Family consumption and lower interest rates supported a faint recovery of the Brazilian economy in the first quarter, even as strikes and political uncertainty weigh on the outlook for the year.

Strike to raise prices, may spur imports: Maggi (10:12 a.m.)

Blockades of roads have halted the transportation of agricultural products and may turn Brazil into a net importer of food, Agriculture Minister Blairo Maggi says in a video shared by his press official.

"My main concern is food prices and quantity at Brazilian homes and supermarkets," he said. "If we won’t be able to release traffic on all roads and resume activities at poultry farms by Thursday, we could lose 1 billion chickens and become a net importer of chicken meat." 

Becoming a net importer of food will increase food prices and make them more volatile, as local prices will be impacted more by currency movements, Maggi said. "As soon as Brazil resumes agricultural production, the better it will be for everyone."

Government to sell corn inventories (8:16 a.m.) 

The government plans to sell corn inventories directly to poultry and pork producers and the animal-feed processing industry. Supplies are estimated at 1 million tons, Jose Maria dos Anjos, trade director at the Secretariat of Brazil Agricultural Policy. Sales will be at Conab’s spot price. Warehouses in Mato Grosso hold more than 80 percent of stockpiles.

--With assistance from David Biller, Marvin G. Perez, Fabiola Moura, Simone Iglesias and Gabriel Shinohara.

To contact the reporters on this story: Tatiana Freitas in São Paulo at tfreitas4@bloomberg.net; Fabiana Batista in Sao Paulo at fbatista6@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net

Patrick McKiernan

© 2018 Bloomberg L.P

Feral swine rooting across Mid-South

Wild pigs were introduced to North America in 1493 when Columbus made his second trip to the "new world".

USDA Wildlife Services is one agency working to reduce populations of feral hogs in areas where farmers are trying to plant row crops.

From helicopters to trapping, they are working collaboratively with other local and state agencies and organizations to curb this seemingly insurmountable problem. 

See: Feral swine program giving farmers a planting window

Navarro rebukes Mnuchin for declaring trade truce

ChipSomodevilla/GettyImages President Trump Signs Section 232 Proclamations On Steel And Aluminum Imports
President Trump delivers remarks with (2nd L-R) Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House National Trade Council Director Peter Navarro.

by Jenny Leonard and Rich Miller 

White House trade adviser Peter Navarro criticized Treasury Secretary Steven Mnuchin for declaring the U.S.-China trade war was on hold, calling the remarks an “unfortunate sound bite” and acknowledging there’s a dispute that needs to be resolved. 

“What we’re having with China is a trade dispute, plain and simple,” Navarro said in an interview broadcast Wednesday with National Public Radio. “We lost the trade war long ago” with deals such as NAFTA and China’s entry into the World Trade Organization, he said.

The remarks from Navarro, a hard-liner on President Donald Trump’s trade team, come just days before U.S. Commerce Secretary Wilbur Ross is scheduled to meet with his counterparts in Beijing to discuss ways to reduce the U.S. trade deficit with China. The White House on Tuesday said the U.S. is moving ahead with plans to impose tariffs on $50 billion of Chinese imports and curb investment in sensitive technology. 

Just over a week ago, Mnuchin said in a televised interview that the prospect of a trade war with China was “on hold.”

A person familiar with the matter pushed back against the idea that Navarro was rebuking Mnuchin, saying the trade adviser hadn’t intended his comments as a reflection on the Treasury secretary. Navarro merely intended to convey that the skirmish with China didn’t rise to the level of trade war, said the person, who spoke on condition of anonymity.

White House Press Secretary Sarah Huckabee Sanders downplayed the Treasury secretary’s comments on Wednesday when asked about Navarro’s remarks.

Mnuchin “didn’t say it was on hold indefinitely,” Sanders said in the daily press briefing in Washington. “The president ultimately makes the decisions on trade, and when he does we announce them. And that’s exactly what’s taking place in this process.”

The renewed threat of tariffs could stop the planned talks between Ross and his Chinese counterparts, the Wall Street Journal reported Wednesday, citing sources in both countries. A team of U.S. officials was in the Chinese capital on Wednesday to prepare for the talks.

Asked about potential Chinese retaliation, especially on American farm goods, Navarro said “we’re ready for anything.”

Persistent rifts over trade policy in the White House have created confusion about the U.S.’s future relations with partners from China to the European Union. Mnuchin and White House economic adviser Larry Kudlow are free-trade supporters regarded as more conciliatory toward Beijing than U.S. Trade Representative Robert Lighthizer and Navarro, the administration’s fiercest China hawk.

Trade Battles 

The U.S. is confronting China as it picks battles on other trade fronts with some of its closest allies. Temporary reprieve from steel and aluminum tariffs for the EU, Canada and Mexico expire on June 1. The U.S. allies have demanded a permanent and unconditional waiver from the levies, which are being imposed on the grounds of national security. 

The U.S. is also racing to agree on a revised North American Free Trade Agreement to give the current Republican-controlled Congress a chance to approve the deal this year. Canadian Prime Minister Justin Trudeau said in an interview on Tuesday that a “win-win-win” agreement is still possible but that he’d rather reach no deal than accept a bad one.

Tariff Surprise

The White House’s unexpected announcement that it would proceed with Chinese tariffs revived worries about a trade war that would upend supply changes and hurt business. 

“Conflicting messages coming from the administration is causing whiplash for American companies,” the Virginia-based Retail Industry Leaders Association, whose members include Walmart Inc., Target Corp. and Best Buy Co., said on Tuesday.

The next round of negotiations could provide more clarity. Ross is due to hold talks in Beijing from June 2-4 to work out the details for China to buy more American agriculture and energy exports and narrow the U.S.’s $375 billion trade gap with China.

The advance team for the visit includes senior officials from the departments of agriculture, energy, commerce and treasury, including the U.S. Trade Representative’s Chief Agricultural Negotiator Gregg Doud, according to an emailed statement.

Ross on Wednesday defended Trump’s unilateral tariff measures as necessary to fix a broken global trade system. 

“Every country’s primary obligation is to protect its own citizens and their livelihood,” he said. “Maybe that’s a populist saying, but it’s one we feel very strongly about.” 

--With assistance from Bryce Baschuk, Josh Wingrove and Jennifer Jacobs.

To contact the reporters on this story: Jenny Leonard in Washington at jleonard67@bloomberg.net; Rich Miller in Washington at rmiller28@bloomberg.net

To contact the editors responsible for this story: Brendan Murray at brmurray@bloomberg.net

Mike Dorning, Joshua Gallu

© 2018 Bloomberg L.P

Max Armstrong's Daily Updates

MORNING Midwest Digest, May 31, 2018

A slain officer was carried down Interstate 40 in Tennessee yesterday. The search for the killer is still happening.

Even if the House passes a farm bill next month, the Senate bill will be different. Those differences will have to be worked out in conference.

Rain fell in Michigan, and from Tennessee to Chicago. It came from the sub-tropical storm. 

Tomorrow is National Donut Day.

EU prepares for Trump tariffs on steel and aluminum

Andrew Harrer/Pool/GettyImages Donald Trump face shot

by Richard Bravo 

The European Union is bracing for President Donald Trump to open another front in his confrontation with the bloc, as the EU’s top negotiator prepares for the U.S. to impose either tariffs or quotas on metals imports from America’s closest allies.

Trump slapped 25% tariffs on imported steel and 10% on aluminum in March, but granted a reprieve to the EU, Canada and Mexico until June 1 for further talks to take place. EU Trade Commissioner Cecilia Malmstrom met with U.S. Commerce Secretary Wilbur Ross in Paris on Wednesday in a last-ditch attempt to reach a compromise.

Fears of a global trade war are mounting as the Trump administration also considers tariffs on U.S. auto imports and duties on $50 billion in Chinese imports. The International Monetary Fund has warned that a wave of protectionist forces are the biggest risk to the global economic outlook. 

Malmstrom has said that she doesn’t think the EU will get a full reprieve from tariffs or quotas. “Hopefully we will be able to have a positive agenda with the U.S. side, with no tariffs or quotas,” she told the EU Parliament on Tuesday, a message she reiterated after her meeting with Ross. “Realistically, however, we do not think we can hope for that.”

Discussions may continue on Thursday, with trade ministers meeting in Paris for a World Trade Organization gathering. Canadian Trade Minister Francois-Philippe Champagne said in an interview on Thursday that any duties on his country would be “unacceptable” and that they would work until the final deadline to find a solution.

“A full exemption -- we are going to seek that until the last minute,” Champagne said in an interview in the French capital, adding that tariffs would create consequences on both sides with respect to consumer prices and the supply chain. “Obviously, we would respond to protect our workers and our industries, like people would expect us to do.” 

U.S officials have been floating three different scenarios over the past four weeks, according to EU diplomats familiar with the negotiations:

Allowing a temporary waiver granted to the EU to expire at midnight tonight, which would mean the imposition of a 25% levy on steel and 10% on aluminum exported to the U.S. The Wall Street Journal reported on Wednesday that this is Trump’s decision. Setting a soft quota level, after which the tariffs would kick in. The latest U.S proposal was for a quota set at 90% of last year’s exports, and was rejected by the EU, which seeks a threshold set at least at 100% of last year’s exports. Setting a hard quota after which European steel and aluminum exports would be completely banned.

If the tariffs do take effect, the EU has said it will lodge a complaint with the WTO and impose retaliatory tariffs on 2.8 billion euros ($3.3 billion) of American imports as soon as June 20. Malmstrom said the details of the U.S. decision will guide the EU’s response.

Appropriate Response

The steel entanglement comes after the U.S. withdrew from the Iran nuclear deal and the Paris climate accord. Tensions are also escalating between the U.S. and China. The White House said on Tuesday it’s moving ahead with tariffs on $50 billion of Chinese imports despite a recent trade truce.

Canada and Mexico have also been pushing for full exemptions. Canadian Foreign Minister Chrystia Freeland on Wednesday said the country would respond “appropriately” to any tariffs. Canada is the biggest supplier of steel and aluminum to the U.S.

Ross criticized the EU decision not to discuss trade matters with the U.S. until the tariff dispute was resolved, or as French President Emmanuel Macron described it: “while there’s a gun pointed at our head.”

“There can be negotiations with or without tariffs in place -- God knows there are plenty of tariffs the EU has in place on us so it’s not that you can’t talk just because there are tariffs,” Ross said. China, which had levies imposed on it in March, “has not used that as an excuse not to negotiate,” Ross said. “It’s only the EU that’s insisting we can’t negotiate if there are tariffs.”

--With assistance from James Mayger, Bryce Baschuk and Caroline Connan.

To contact the reporter on this story: Richard Bravo in Brussels at rbravo5@bloomberg.net

To contact the editors responsible for this story: Alan Crawford at acrawford6@bloomberg.net; Sarah McGregor at smcgregor5@bloomberg.net

Nikos Chrysoloras

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