The Trump administration is set to announce a raft of trade decisions over the next months, ranging from curbs on foreign imports of steel and aluminum to steps to clamp down on China’s alleged theft of intellectual property.

U.S. President Donald Trump has stressed his “America First” agenda in his first year in office and called for fairer, more reciprocal trade. He has blamed globalization for ravaging American manufacturing jobs as companies sought to reduce labor costs by relocating to Mexico and elsewhere.

Imported washing machines, solar panels

In its first major trade decision of the year, the administration slapped steep tariffs on imported washing machines and solar panels, boosting Whirlpool Corp. and dealing a setback to the renewable energy industry.

Monday’s decision imposed a 20 percent tariff on the first 1.2 million imported large residential washers in the first year, and a 50 percent tariff on machines above that number. The tariff declines to 16 percent and 40 percent respectively in the third year.

The move punishes Samsung Electronics, which recently began washer production in South Carolina, and LG Electronics, which is building a plant in Tennessee.

The U.S. Solar Energy Industries Association on Tuesday warned that Trump’s move to slap 30 percent tariffs on imported panels would kill tens of thousands of jobs, raise the cost of going solar and quash billions of dollars of investment.

South Korea could push back by launching a complaint through the Geneva-based World Trade Organization, but that is likely to take years. Seoul could also raise it during current negotiations with the United States on modifying the U.S.-South Korea free-trade agreement, known as KORUS.

Steel

The U.S. Commerce Department sent its recommendations on ways to curb foreign steel imports to the White House on January 11. The report followed Trump’s decision, made several months after he took office, to open a Section 232 investigation (from Section 232 of the Trade Expansion Act of 1962) into whether steel imports threaten U.S. national security.

Trump has 90 days to decide on any potential action. He has promised that any actions will protect steelworkers from imports. Curbing excess steel production in China, which now supplies half of the world’s steel, would be a key goal of any action. Broad tariffs could, however, also affect steelmakers in Europe, Japan, South Korea and Turkey.

It is unclear when the decision on steel imports will be announced.

Aluminum

The Commerce Department has sent Trump the results of its national security investigation into aluminum imports. That Section 232 probe could see broad import restrictions imposed on lightweight metal. The White House has been debating whether to order broad tariffs or quotas on steel and aluminum, pitting administration officials who favor aggressive restrictions against those who favor a more cautious approach to avoid a run-up in prices.

It is unclear when Trump will make his decision.

​Intellectual property

Trump and his trade advisers are currently considering penalizing China under Section 301 of the 1974 trade law for its alleged theft of American intellectual property.

The 301 investigation would allow Trump to impose retaliatory tariffs on Chinese goods or other trade sanctions until China changes its policies.

Trump told Reuters in an interview on January 17 that he was considering imposing a big “fine” against China, but he did not elaborate on his answer.

U.S. businesses say they lose hundreds of billions of dollars in technology and millions of jobs to Chinese firms that have stolen ideas and software or forced them to turn over intellectual property as part of doing business in China.

A White House official told Reuters January 19 that Trump was particularly focused on the 301 investigation because it was “systemic” and covered a large swath of American businesses.

China could retaliate by weighing whether the actions are in line with WTO rules while ratcheting up pressure on U.S. businesses — for example, by buying from a European company such as Airbus instead of Boeing.
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Europe’s economy is on a roll — raising the question of exactly when the European Central Bank will end its extraordinary stimulus efforts. Bank President Mario Draghi will be at pains this week to leave that point open.

No changes in stimulus settings or interest rates are expected at Thursday’s meeting of the bank’s 25-member governing council, which sets monetary policy for the 19 countries that use the euro.

Draghi’s post-meeting news conference, however, will be closely scrutinized for any hints of a change in the timetable for withdrawing a key stimulus component — a massive bond-buying program — later this year.

Here is a fast guide.

Where’s inflation?

Stubbornly low inflation is why Draghi and his ECB colleagues want to keep the stimulus program running.

The bank’s mission is to keep inflation consistently close to but below 2 percent. Usually that means fighting inflation, but in the case of this economic recovery, prices have been unusually slow to respond to a pickup in demand for goods. Annual inflation was just 1.4 percent in December. Excluding oil and food, it was even lower, at 0.9 percent. Meanwhile, the economy is expected to have grown 2.4 percent in 2017; unemployment has fallen from over 12 percent to 8.7 percent.

ECB officials say that eventually growth will lead to higher wages as unemployment falls and labor becomes scarcer. But inflation has taken its time to show up.

Stimulus settings

So Draghi has been urging patience. The bank lowered its bond purchases to 30 billion euros ($37 billion) a month at the start of the year, from 60 billion euros, and has said they will run at least through September — and longer if necessary. The purchases, started in March 2015, pump newly printed money into the economy, which should raise inflation and make credit easier to get.

Much of the speculation in markets has centered on whether the purchases will stop in September, or be continued, perhaps at a lower level. Draghi and the governing council majority have so far resisted stimulus skeptics on the board, such as Germany’s Jens Weidmann, who say it’s time to head for the exit from stimulus.

Promises, promises

A key point to watch is the wording the bank uses to manage expectations of its future actions. Right now, the bank has included wording in its policy statement that it could increase the bond purchases if necessary. Dropping that phrase would be a first step to prepare markets for an end to the stimulus. This week’s meeting might be too early for that tweak, but the wording is being watched in the markets.

The bank has also promised it won’t raise interest rates — its benchmark rate is currently zero — until well after the end of the bond purchases. That puts a first rate increase well into 2019.  

Why you should care

The withdrawal of the stimulus by the ECB and other central banks such as the U.S. Federal Reserve will have wide-ranging effects on the finances of ordinary people.

Higher interest rates will mean more return on savings accounts and an easier time funding private and public pension plans. They could also mean trouble for “zombie companies” that might not have any profits if they had to pay higher rates to borrow. Such bankruptcies would be painful in the short term, but would free investment for more profitable uses.

More interest earnings on conservative holdings such as bonds and time deposits would make riskier assets — like stocks — relatively less attractive, and ease the pressure on investors and savers to rummage for returns in riskier holdings.

Down, euro, down

Market reaction is a key concern for Draghi, particularly when it comes to the euro’s exchange rate. The euro has risen in the past several weeks, to around $1.22, in part because markets are anticipating an end to the stimulus. Monetary stimulus can weaken a currency, so investors are bidding the euro up on speculation that the stimulus might come to an earlier end due to the strong economy.

A stronger euro, however, can hurt Europe’s many exporters and further weaken inflation.

Here’s the take from analyst Florian Hense at Berenberg Bank: “The ECB should and will likely stop asset purchases after September: Recent hawkish comments, including the minutes of the last meeting, point in that direction.

“However, in order to not trigger a further appreciation of the euro, the ECB will likely change its communication only cautiously and gradually — and not in January already.”
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President Donald Trump on Tuesday signed into law a steep tariff on imported solar panels, a move billed as a way to protect American jobs but which the solar industry said would lead to tens of thousands of layoffs.

The following are some questions and answers about the decision:

What impact will the decision have on the solar industry?

Trump has said the tariff will lead to more U.S. manufacturing jobs, by preventing foreign goods that are cheap and often subsidized from undercutting domestic products. He also expects foreign solar panel producers to start manufacturing in the United States.

“You’re going to have people getting jobs again and we’re going to make our own product again. It’s been a long time,” Trump said as he signed the order.

The main solar industry trade group, the Solar Energy Industries Association, has a different view: It predicts the tariff will put 23,000 people out of work in the panel installation business this year by raising product costs and thus reducing demand.

Research firm Wood Mackenzie estimated that over the next five years the tariffs would reduce U.S. solar installation growth by 10 to 15 percent. The United States is the world’s fourth-largest solar market after China, Japan and Germany.

Research firm CFRA analyst Angelo Zino said he expected any added manufacturing jobs would be “minimal” given the 18 months to two years it takes to build and ramp up a new production facility and the industry’s shift toward automation.

Who wanted the tariff?

The main beneficiaries of the tariff include U.S.-based solar manufacturers Suniva and SolarWorld.

Suniva filed for bankruptcy in April, days before it filed the petition for trade relief. The Georgia-based company argued it could not compete with the cheap imports that have caused panel prices to fall more than 30 percent since 2016. It was later joined in the petition by SolarWorld. They asked the Trump administration for the equivalent of a 50 percent tariff.

Suniva is majority-owned by Hong Kong-based Shunfeng International Clean Energy, and SolarWorld is the U.S. arm of Germany’s SolarWorld AG.

Suniva called the tariffs “necessary,” while SolarWorld said it was “hopeful they will be enough.”

Most other U.S. solar companies, including SunPower, which manufactures panels in Asia, and residential installer SunRun Inc. were opposed to the trade barrier — as were offshore manufacturers such as China’s JinkoSolar, which will be among the biggest losers.

Solar manufacturer and developer First Solar supported the tariffs, and is likely to be among the biggest beneficiaries. First Solar makes panels using cadmium telluride that are excluded from the trade case. The company has seen an increase in demand for its unique technology.

Will the tariff lead to a trade war?

China branded the move an “overreaction” that would harm the global trade environment.

“The U.S.’s decision … is an abuse of trade remedy measures, and China expresses strong dissatisfaction regarding this,” said Wang Hejun, the head of the commerce ministry’s Trade Remedy and Investigation Bureau. “China will work with other WTO [World Trade Organization] members to resolutely defend its legitimate interests in response to the erroneous U.S. decision.”

Trump dismissed worries of trade retaliation.

“There won’t be a trade war. It’ll only be stock increases for companies that are in our country,” he said.

How does the tariff fit into Trump’s energy policy?

If the tariff cools growth in the U.S. solar industry, it could help Trump’s effort to support the coal industry — which competes with renewable energy technologies for a share of the nation’s power generation market.

Trump campaigned on a promise to revive the ailing coal mining sector and boost U.S. production of other fossil fuels as a way to create jobs and bolster American influence overseas.

He has also downplayed the threat from global warming — an issue that led past administrations to throw their support behind emissions-free solar and wind energy development — rolling back climate change regulations and pulling the United States from a global pact to combat it.
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Lebanon must cut Iran-backed Hezbollah from the financial sector, a U.S. official on combating illicit finance said Tuesday, two weeks after Washington began a new push to disrupt the militant group’s global financing routes.

On a two-day visit to Lebanon, the U.S. Treasury’s Assistant Secretary for Terrorist Financing Marshall Billingslea “urged Lebanon to take every possible measure to ensure [Hezbollah] is not part of the financial sector.”

Billingslea also “stressed the importance of countering Iranian malign activity in Lebanon,” a statement from the United States embassy in Lebanon said.

The Iran-backed, Shiite Hezbollah is classified as a terrorist group by Washington, but sits in Lebanon’s delicate national unity government.

U.S. officials say Hezbollah is funded not just by Iran but by global networks of people, businesses and money laundering operations.

The U.S. Hezbollah International Financing Prevention Acts of 2015 and 2017 aimed to sever the group’s funding routes and a number of people linked to Hezbollah are on sanctions lists.

The United States has had to balance its targeting of Hezbollah funding routes with the need to maintain Lebanon’s stability. Lebanese banking and political authorities have lobbied Washington to make sure its anti-Hezbollah measures do not destroy the banking system underpinning the economy.

In his meetings with President Michel Aoun, Prime Minister Saad al-Hariri and other banking and political figures, Billingslea said the U.S. government was committed to work with Lebanon to protect its financial system and support a “strong, stable and prosperous Lebanon.”

Billingslea also said Washington would help Lebanon protect its financial system from Islamic State and other militants.

Two weeks ago, the Trump administration set up a team to reinvigorate U.S. investigations into Hezbollah-linked drug trafficking.

Hezbollah leader Sayyed Hassan Nasrallah last week denied any involvement in drug trafficking and said Hezbollah had a very clear religious and moral stance which forbids drugs and drug trading.
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U.S., Canadian and Mexican officials opened a key round of negotiations to modernize NAFTA on Tuesday as President Donald Trump, who has regularly threatened to quit the trade pact, said the talks were going “pretty well.”

Trump, vowing to undo what he portrays as disastrous trade deals, has in recent days expressed different views of the North American Free Trade Agreement, stoking investor worries that one of the world’s largest trading blocs may be disrupted.

With time running out to address U.S. demands for major changes to the 1994 deal, officials met in a Montreal hotel for the sixth and penultimate round of talks, which are to conclude by the end of March to avoid a clash with Mexico’s elections.

“We have come to Montreal with a lot of new ideas, a lot of creative strategies to try to bridge some of the gaps in the negotiations,” Canadian chief negotiator Steve Verheul told reporters, adding that he had “high hopes” of progress.

Trump offers positive comment

Insiders say the Canadian and Mexican governments are prepared to be flexible on a U.S. demand that the amount of North American content in autos be boosted to qualify for duty-free status in NAFTA.

But Ottawa and Mexico City strongly oppose the proposal that autos produced on the continent should have 50 percent U.S. content. Differences also remain over how to address the U.S. push for changes to various dispute resolution mechanisms.

Trump, who has blamed NAFTA for the loss of U.S. jobs, told White House reporters on Tuesday the talks were going “pretty well.”

The Mexican peso immediately pared losses on his comments.

Mexico’s chief negotiator Ken Smith said he hoped progress could be made on less contentious areas such as telecommunications, anti-corruption and sanitary and phytosanitary measures.

Canada unsure about US

Many Canadian officials, however, are downbeat about the talks amid uncertainty over whether Washington really wants to negotiate.

“If you’re unsure where the other side wants to go it is really difficult to know what would please them unless you capitulate, and that’s not going to happen,” one person briefed on Ottawa’s negotiating stance said on condition of anonymity.

With NAFTA’s future up in the air, Canada is taking steps to diversify its trade. Canada currently sends 75 percent of its goods exports to the United States.

Canada joins TPP

Earlier on Tuesday, Canada and 10 other nations agreed to sign a reworked Trans-Pacific Partnership trade pact. The United States pulled out of an earlier version of that deal.

Paul Ashworth, chief North America economist at Canada Economics, said the TPP deal might give Canada “a slightly stronger hand to play in the current NAFTA negotiations.”

Canadian Prime Minister Justin Trudeau is currently attending the World Economic Forum meeting in Switzerland to drum up investment. Next month he will spend five days in India, which Canada sees as potentially a bigger trading partner.
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