Monthly Archives: August 2018

U.S., Mexico reach NAFTA deal, turning up pressure on Canada

The United States and Mexico agreed on Monday to overhaul the North American Free Trade Agreement (NAFTA), putting pressure on Canada to agree to new terms on auto trade and dispute settlement rules to remain part of the three-nation pact.

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Auto stocks soared and financial markets firmed on the expectation that Canada would sign on to the deal by the end of the week and ease the economic uncertainty caused by U.S. President Donald Trump’s repeated threats that he would ditch the 1994 accord.

But details of gains and concessions in the deal were only starting to emerge on Monday, and Trump threatened he still could put tariffs on Canadian-made cars if Canada did not join its neighbors.

“I think with Canada, frankly, the easiest we can do is to tariff their cars coming in. It’s a tremendous amount of money and it’s a very simple negotiation. It could end in one day and we take in a lot of money the following day,” Trump said.

Negotiations between the three trade partners have dragged on for more than a year, putting pressure on the Mexican peso MXN= and the Canadian dollar CAD= both gained against the dollar after Monday’s announcement.

The political stakes are high for all three countries. Trump and Republicans in the U.S. Congress up for reelection in November want to ensure farmers and other voters whose jobs depend on trade with Canada and Mexico that the deal is sealed.

Mexican President Enrique Pena Nieto wants to sign the agreement before leaving office at the end of November, and Canadian Prime Minister Justin Trudeau faces a national election expected by October 2019.

Canada plans to continue to negotiate, but would only sign a new agreement that is good for the country, a spokesman for Canadian Foreign Minister Chrystia Freeland said.

Freeland is expected to travel to Washington for talks on Tuesday, spokesman Adam Austen said.

Mexican Foreign Minister Luis Videgaray told a news conference in Washington that if Canada and the United States do not reach an agreement on NAFTA, “we already know that there will still be a deal between Mexico and the United States.”

Officials said they hope Canada will agree to the terms by Friday, when the White House plans to formally notify Congress that Trump will sign the deal in 90 days. Congress has to approve it.

“There are still issues with Canada but I think they could be resolved very quickly,” a senior trade official told Reuters in an interview.

If talks with Canada are not wrapped up by the end of this week, Trump plans to notify Congress that he has reached a deal with Mexico, but would be open to negotiations with Canada, U.S. Trade Representative Robert Lighthizer told reporters.

Some Republicans in the U.S. Congress called the deal a positive step but said Canada must be part of the new pact to avoid hurting U.S. jobs.

NEW AUTO RULES

The United States, Mexico and Canada do more than 1 trillion dollars in trade between them every year.

Trudeau spoke to Pena Nieto on Sunday and shared their commitment to reaching a successful conclusion of NAFTA “for all three parties” the prime minister’s office said.

The Mexico-U.S. discussions focused on crafting new rules for the automotive industry, which Trump has put at the heart of his drive to rework the pact he has repeatedly described as a “disaster” for American workers.

Matt Blunt, president of the American Automotive Policy Council, which represents General Motors Co (GM.N), Ford Motor Co (F.N) and Fiat Chrysler Automobiles NV (FCHA.MI), said the group was optimistic about the new deal, though it was still reviewing the details.

The deal would require 75 percent of auto content to be made in the NAFTA region, up from the current level of 62.5 percent, a U.S. trade official said. A fact sheet describing the bilateral agreement specified the content would be made in the United States and Mexico.

The Trump administration said the deal improves labor provisions, in part by requiring 40 percent to 45 percent of auto content to be made by workers earning at least $16 per hour – a salary that could remove incentives for automakers to move jobs to Mexico.

The United States relented on its demand for an automatic expiration for the deal, known as a “sunset clause.”

Instead, the United States and Mexico agreed to a 16-year lifespan for the deal, with a review every six years that can extend the pact for 16 years, U.S. Trade Representative Lighthizer said.

Mexico agreed to eliminate dispute settlement panels for certain anti-dumping cases, a move that could complicate talks with Canada, which had insisted on the panels.

Monday’s announcement lifted equity markets in all three countries, with shares in automotive companies standing out on relief that the deal appeared to end the uncertainty that has dogged the sector for months.

General Motors Co (GM.N), Ford Motor Co (F.N), and Fiat Chrysler Automobiles NV (FCAU.N) gained between 3.3 percent and 4.8 percent, while Canadian auto parts makers such as Magna International Inc (MG.TO) gained 4.6 percent.

Taken From: https://www.reuters.com/article/us-trade-nafta/mexico-u-s-nafta-agreement-close-but-item-still-pending-minister-idUSKCN1LC1E7

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U.S., Mexico set to unveil two-way deal on NAFTA

The United States and Mexico will announce a two-way deal on NAFTA this morning, clearing the way for Canada to return to the table to try to reach a final updated agreement in the coming days, according to a source close to the negotiations.

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The development follows months of stalemate and comes just over a year after negotiators from the U.S., Mexico and Canada first sat down to discuss modernizing the 24-year-old trade pact. Despite the progress between the U.S. and Mexico on issues that were widely seen as more integral to the U.S.-Mexico relationship, it remains unclear how long it will take NAFTA negotiators to resolve the remaining issues between the three countries. Canada has not been at the negotiating table for more than two months.

“A big deal looking good with Mexico!” President Donald Trump tweeted this morning.

U.S. trade negotiators briefed congressional staff this morning on the details of the agreement between the U.S. and Mexico.

Mexican Economy Secretary Ildefonso Guajardo said this morning that there’s one U.S.-Mexico issue that remains to be fully resolved before all the talks between the two countries are complete.

But he cautioned that Canada must still go over all the solutions that the U.S. and Mexico reached. Canada is expected to return to the negotiating table as soon as the two countries announce a breakthrough in the bilateral talks.

“A lot of these things imply Canada. Therefore, until we finish with the position of Canada, we will not be able to disclose the elements,” Guajardo said.

A NAFTA breakthrough between the U.S. and Mexico would be welcome news after more than a year of negotiations between the U.S., Mexico and Canada. Last month, negotiators from the U.S. and Mexico made a renewed push to wrap up their two-way issues in the renegotiation, including the rules that govern how automobiles made in the North American region qualify for reduced tariffs under the trade pact.

Taken From: https://subscriber.politicopro.com/trade/whiteboard/2018/08/us-mexico-set-to-unveil-two-way-deal-on-nafta-1810754

NAFTA Renegotiation Should Reject Neoliberalism and Economic Nationalism

A deal between the US and Mexico on a renegotiated North American Free Trade Agreement (NAFTA) may be announced any day now, marking the first revision of the deal since its signing.

 

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A product of the neoliberal “Washington Consensus,” the pact between the US, Canada and Mexico went into effect in 1994 and became a model for many trade agreements that followed. NAFTA has long been in the crosshairs of unions, progressive campaigners, leftists, environmental groups and consumer advocates for its pro-corporate, anti-regulatory policies and outsourcing incentives.

Indeed, NAFTA was made systematically more damaging by every administration since its signing.

But before the ink was dry, on January 1, 1994, the Zapatista guerrilla movement rose in southern Mexico and signaled the start of an anti-NAFTA battle that shook the world. The fight grew into a global justice movement that won the 1999 “Battle in Seattle” against the World Trade Organization (WTO) and prevented an attempted NAFTA expansion through the Free Trade Areas of the Americas.

This global, internationalist “movement of movements” has won many battles since, most recently with last year’s defeat of the Trans-Pacific Partnership (TPP). While Donald Trump formally buried the TPP, the reality is that President Obama, a united corporate lobby and GOP congressional leadership could not get the deal approved the prior year.

The agreement had been made politically impossible by some of the same folks that shut down the WTO in the streets of Seattle.

This is all well and good, and even a cause for inspiration in these bleak times. But it’s necessary to point out the elephant in the room: Opposition to free trade deals like the TPP and NAFTA also helped Donald Trump swing traditionally Democratic states and pave a path to the White House.

The NAFTA Renegotiations

When the 2008 financial crisis hit, it slammed communities that had already been decimated by the waves of outsourcing and wage stagnation that NAFTA had exacerbated. Both Bernie Sanders and Donald Trump tapped into working-class opposition to corporate-rigged “trade” deals in these communities and brought NAFTA back into the political debate.

After a many months delay on a campaign promise to immediately start renegotiations, last August, Trump’s chief trade negotiator, Robert Lighthizer, began working with his Mexican and Canadian counterparts on changes to NAFTA. Those conversations, which came to include a number of progressive demands, will likely come to a conclusion in the next week.

Though Canada has been sitting out talks since May, the US and Mexico are now hoping to lure them back to the table. Mexico’s incoming populist-left government has also had a negotiator listening in for the past few months.

Let’s be clear: No one believes that the administrations of Trump, outgoing Mexican President Enrique Peña Nieto and Canadian Prime Minister Justin Trudeau will deliver a NAFTA deal that fully meets all of the benchmarks endorsed by over 1,000 civil society groups. But elements of long-held demands have already made headway in the policy arena that would have been unthinkable just a year or two ago.

This happened because efforts led by labor and civil society have created a context where such demands must be met to garner the support needed to approve a new agreement in Congress.

What faces us now could be a rare opportunity to stop some of NAFTA’s most serious ongoing harm and make changes to the US trade agreement model, changes which labor and human rights activists have sought for decades.

NAFTA’s Legacy and Potential Future

The corporate-rigged deal was first signed in 1992 by George H. W. Bush, and despite a major national campaign against it by unions and progressive groups, was railroaded through Congress by Bill Clinton a year later. His betrayal of the Democratic Party base helped the GOP seize control of the House in 1994.

As opponents predicted, NAFTA has resulted in almost 1 million American jobs lost, this according to the certifications of just one narrow government program. And more jobs are being outsourced under NAFTA every year.

Taxpayers in Mexico and Canada have also paid hundreds of millions of dollars to multinationals through Investor-State Dispute Settlement(ISDS) attacks on environmental, public health, water, forestry and land use rules and toxic bans.

The stunningly undemocratic ISDS system, which empowers multinational corporations to sue governments for unlimited compensation before tribunals of corporate lawyers for violating their claimed special rights under NAFTA, has been at the heart of labor and civil society groups’ opposition to many free-trade agreements signed since NAFTA.

According to American labor and nongovernmental sources close to the renegotiations, proposed changes to NAFTA include dismantling the ISDS system and the outrageous natural resources “proportional sharing” language that required Canada to export to the United States a set “proportional” share of its timber, water and energy.

The emerging deal also reportedly provides stronger labor standards, including terms that would eliminate the fake “protection” unions in Mexico that conspire with companies to keep wages pitifully low. If a final text includes such changes – and it is enforceable — it could help transform labor rights in Mexico.

President-elect Andrés Manuel López Obrador has indicated he will implement a deal his predecessor Peña Nieto may sign, and has offered support for some of the changes, including improvements in labor standards that could raise wages in Mexico.

Of course, any final deal must be closely inspected by labor and civil society groups to ensure no attacks on affordable medicine access, financial regulation or other consumer issues are buried within it.

These changes, if they come to pass, would halt some of NAFTA’s worst ongoing damage. It would also create a foundation for a new trade paradigm that the corporate lobby despises. That’s why the billionaire Koch brothers and other corporate-backed interest groups like Farmers for Free Trade are running multimillion-dollar PR campaigns directing Americans to support the status-quo and stand behind the current neoliberal trade model.

Is There an Opportunity to Win Meaningful Changes to NAFTA Under Trump?

During his presidential campaign, Trump hijacked progressive trade critique and twisted it into a right-wing populist misdiagnosis of what is wrong.

Mexico and other countries did not cook up these deal to “get us.” Rather, US trade negotiators and a corporate-heavy network of official US trade advisers conspired with their counterparts in Mexico and Canada to impose a set of rules that have wrought real damage throughout North America.

When NAFTA changes are announced, progressive and leftist groups must be prepared to effectively promote enactment of a deal we support or stop a deal we oppose, and frame any acceptable outcome as delivering on our longstanding demands. This is not only a critical policy question, but also a political imperative.

If the deal does not measure up, we must be prepared to communicate to those Trump appealed to with his appropriation of progressive and radical trade critiques that his deal is more of the same rigged rules that he claims to oppose.

The trade and globalization policy debate in the United States — and indeed, globally — is at an unprecedented turning point. This has not occurred by chance. The damage caused to millions of people by the status quo trade model has made “trade” issues ripe for political exploitation.

NAFTA and the model it hatched are more vulnerable today than at any point. It is critical in this moment to elevate real alternatives that counter both neoliberalism and Trump’s nationalist alternative.

Taken From: https://truthout.org/articles/nafta-renegotiation-should-reject-neoliberalism-and-economic-nationalism/

In the renegotiation of the North American Free Trade Agreement, Citizens must be heard

Since its origins we know about the North American Free Trade Agreement (NAFTA), we have monitored its impacts and made alternative proposals. 

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About the current renegotiation twelve months ago we warned of the risk of hastening it and falling into the strategy and corporate and political interests of the respective governments, and proposed to postpone it until there was a new government in Mexico and after the process of renewal of the Congress in the United States , to avoid falling between pressures and electoral interests. In the case of Mexico, we have argued that the government of Enrique Peña Nieto has lacked legitimacy and representativeness to negotiate on our behalf. It is the new elected government,.

On the first of July, most Mexicans and Mexicans voted for a real change. The renegotiation of NAFTA is one of the key issues related to recovering national sovereignty and increasing the possibilities of well-being for the population. The renegotiation must overcome the orientation of the current NAFTA.

The NAFTA is not a simple agreement on the circulation of goods, it is a treaty that will establish legal obligations as well as theory and economic practice to continue limiting the powers of the national states to regulate the economy based on a national project and to leave as until now the dynamics of the economy and society to the law of supply and demand, under the logic of maximizing private gain in prejudice of social welfare.

The new government must thoroughly reorient the meaning of the negotiations in order to preserve the fundamental interests of a national State committed to national development, independent and sovereign, where social rights, justice, freedom and democracy are indispensable elements of those that its population enjoys and are guaranteed in a trinational treaty. Similarly, it is essential to eliminate the legally binding provisions that subordinate our sovereignty and self-determination to the interests of transnational corporations, the government of the United States and the extra-national courts in which they are enforced.

We welcomed the readiness of the new Mexican government to get involved in the NAFTA negotiations, but it never ceases to amaze us a series of declarations and actions that little or almost nothing distinguish it from the government that ends. Of particular concern are four elements:

  1. That the negotiations remain oriented by the same mercantilist parameter and limit the capacity of the States to promote a national development project.
  2. That the negotiating team appointed by Enrique Peña Nieto continue to hurry and keep secret the negotiations to comply with the ninety days of the minimum legal term available to the current United States Congress to approve a “fast track” or “Fast Track” in principle, “before their mid-term elections in November 2018 are held. Accelerating the negotiations only benefits Donald Trump’s electoral strategy to use an agreement at the convenience of the NAFTA renegotiation or not.
  3. That the negotiators have adhered to the strategy defined by the Donald Trump government to negotiate bilaterally with the Mexican government, since it is the one that shows the greatest willingness to yield to the conditions imposed in favor of US interests.
  4. That governments and parliaments ignore and are not committed to making and resolving disputes and contradictions between the model of “free trade” treaties and other multilateral treaties, including the commitments adopted in the Charter of the United Nations, of human rights and the environment that have been adopted by at least two of the three governments and that therefore have a legally binding nature. Treaties that, according to international law, contain provisions to prevail for reasons of precedence or for disputes between treaties, over agreements of a commercial nature.

On August 3, Dr. Jesus Seade Kuri, appointed by the President-Elect, Mr. Andrés Manuel López Obrador as chief negotiator of NAFTA, stated: “I am cautiously optimistic (of the progress made and of reaching an agreement in the coming weeks). . I think it can be done, but there can also be problems.We have to see. ” Similarly, Dr. Seade has expressed his satisfaction with the negotiation proposals of the current government stating that “technically they are the most suitable”, the problem is not technical, what is technically correct depends on the proposed objectives, the type of development that is search and model of insertion in international trade in favor of national interests and social justice.

The negotiations until now have been totally closed, they have only consulted and allowed the participation of the national and transnational business elite. The new government must open a broad discussion with all sectors of society at this stage of the negotiation and of course on the negotiated texts before sending it to the Senate for legislative approval.

We have not heard or mentioned any of the many constructive proposals that citizen organizations, especially the Mexico Convergence Better Without Free Trade Agreements, or the Trinational Coalition of Citizen Organizations (Canada, US, Mexico), have made public and that are oriented to negotiate an agreement of economic complementation and cooperation and not of competition and extreme exploitation between unequal. An agreement that safeguards above all the protection and promotion of labor and human rights, social security, food self-sufficiency, education and public health, protection of the environment, as well as considering asymmetries in development, the unequal commercial exchange and the controls on the speculative capital, negotiating the compensatory and control mechanisms to solve them.

It is of elementary political sensitivity to listen and to know the civic voices that also know about this great geostrategic theme. We make a firm and respectful call to the President Elect Andrés Manuel López Obrador, to his political team of government and to the elected Senators , to carry out an urgent work meeting in which we will again deliver our platform of proposals, to talk and agree on the necessary refocusing of the renegotiation of the NAFTA, as well as on the indispensable strategy of information and consultation to the different social and economic sectors that during 24 years have been affected by the provisions of the current NAFTA.

 

Taken From: http://derechoshumanos.org.mx/en-la-renegociacion-del-tratado-de-libre-comercio-de-america-del-norte-se-debe-escuchar-a-la-ciudadania

Trump administration nearing deal with Mexico on revised NAFTA — but issues with Canada remain

The Trump administration is close to striking a deal with Mexico on a revamped North American Free Trade Agreement, analysts said, but thorny issues are yet to be resolved with Canada, the third party in the trilateral pact.

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Reaching an agreement with Mexico would mark a breakthrough for the administration after a year of roller-coaster talks and tension with its longtime North American trading partners. President Trump has frequently threatened to withdraw from NAFTA, linked the renegotiations to his call for a wall along the U.S.-Mexican border and slapped tariffs on Mexican and Canadian steel to apply pressure to make concessions.

 

But both Mexico and the U.S. have strong incentives to push through a deal quickly. Mexico wants to lock in an agreement before its new leftist president takes office, and the White House is keen on achieving a win on trade ahead of the midterm elections.

Canada, meanwhile, has shown less urgency to complete a revision of the 24-year-old pact, but is expected to return to the bargaining table once the U.S. and Mexico settle their differences.

And then the question will be “whether Canada is finally willing to reengage in the process, sign off on what has been agreed and quickly resolve any key outstanding issues of concern to Canada,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Trump’s trade negotiators this week have been meeting with senior Mexican officials in Washington, and sources familiar with the discussions say the two sides have largely agreed to new rules on auto trade — a top priority for the White House — that could boost investment in the U.S. and curb a flight of domestic production and jobs to Mexico.

In exchange, the United States trade representative, Robert Lighthizer, appears to be showing flexibility on an earlier demand for an automatic five-year termination of NAFTA and a proposal to make it easier for the U.S. to press anti-dumping claims against seasonal produce like tomatoes from Mexico.

 

Multilateral trade negotiations typically include bilateral talks between nations, but the administration’s strategy to close a deal first with Mexico — without parallel discussions with Canadian officials — is unusual and could backfire.

“I think the Trump administration is playing a risky game if you have a final deal with Mexico and you present it [to Canada] as a fait accompli,” said Daniel Ujczo, an international trade lawyer who specializes in Canada-U.S. affairs at the law firm Dickinson Wright.

 

It’s all the more risky because of the short time frame in which Mexico and the U.S. are looking to seal a trilateral agreement.

U.S. congressional rules on trade require that there be a 90-day period between the administration’s notification of a deal and the actual signing of an agreement. Mexico’s new president, Andrés Manuel López Obrador, was elected in July and takes the oath of office Dec. 1. That means a NAFTA agreement would need to be announced by the end of August to allow for the 90 days to pass and for the current Mexican president, Enrique Peña Nieto, to sign the pact before López Obrador takes office.

But that leaves only about two weeks for Lighthizer and his team to reach an accord with their Canadian counterparts. And by most accounts, that will be tough to do.

Even if Canada signs on by month’s end and there’s a three-way preliminary agreement, in the U.S., that would only begin a lengthy process that includes a period of public review and economic assessment by the U.S. International Trade Commission. A revised NAFTA wouldn’t be voted on by lawmakers until next year at the earliest, when a new Congress is seated.

 

Canada isn’t likely to have a major issue on the new auto rules, but is expected to go to the mat on at least two U.S. demands. Trump administration officials want to pry open Canada’s restricted dairy market and do away with an existing NAFTA provision that allows Canada to challenge U.S. anti-dumping claims through an independent panel.

U.S.-Canada negotiations will have to overcome the recent deterioration in bilateral relations following Trump’s refusal to give Canada an exemption from steel and aluminum tariffs, and harsh criticisms directed at Canadian Prime Minister Justin Trudeau by Trump and his trade advisor, Peter Navarro.

 

Trudeau faces considerable domestic political pressure to stand up to Trump — unpopular in Canada — and his strong-arm tactics to extract trade concessions. At the same time, Lighthizer and his negotiating team have shown they are not going to take a deal that maintains the status quo, said Stephen Orava, a trade lawyer at King & Spalding in Washington.

 

Regardless of whether one agrees with Trump’s negotiating tactics, Orava said, if the administration can land a good agreement on a new NAFTA, “it will validate their approach to U.S. trade policy is effective and generating results and worthwhile.”

Analysts who have been closely monitoring the talks say that U.S. and Mexican trade officials are working out details and that a deal still could unravel. No issue has occupied as much time as NAFTA’s auto rules. Cars account for the biggest trade among the three countries, and Trump and other critics blame NAFTA for the U.S. trade deficit with Mexico and the loss of domestic manufacturing jobs.

NAFTA’s current rules specify that at least 62.5% of the content of cars come from North America to qualify for zero tariffs; anything lower than that threshold subjects a vehicle to a 2.5% duty for cars and 25% for trucks and sport utility vehicles.

 

The understanding with Mexico would raise the regional-content level to 70% or higher and set a similar rule of origin for steel and aluminum in vehicles. The new rules also would include language aimed at having more cars and parts produced by workers who make wages well above the average low rates in Mexico. The hope is that more jobs would stay in the U.S. and that European and Japanese automakers would source more parts in the U.S. to avoid the tariffs.

 

Lawyer Ujczo said those changes and a broader deal on NAFTA will play very well to Trump’s base. “It would be political gold going into the midterms,” he said.

Taken From: http://www.latimes.com/business/la-fi-nafta-canada-mexico-20180816-story.html#

Trump doubles steel and aluminum tariffs on Turkey

Turkish lira now worth about 15 cents US, less than half what it was worth a year ago

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Photo by ELEVATE on Pexels.com

U.S. President Donald Trump doubled steel and aluminum tariffs against Turkey to 20 and 50 per cent on Friday, deepening the rift between the two NATO allies, and sending the country’s currency into a tailspin.

“I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar!” Trump wrote in an early morning post on Twitter. “Aluminum will now be 20 per cent and Steel 50 per cent. Our relations with Turkey are not good at this time!”

The United States slapped sanctions on two Turkish officials earlier this month over a detained American pastor who is being tried on espionage and terror-related charges.

Turkey vowed retaliation “without delay” and warned the move would further harm relations between the two allies.

The Turkish lira has been in freefall of late, down 30 per cent so far in 2018, before

sliding another 13 per cent on Friday after Trump’s tweet. For most of last year, the

Turkish lira hovered between 25 and 30 cents US. On Friday, it was changing hands at

about 15 cents. A decade ago, the two were near par.

One of the country’s biggest economic problems is that  the inflation rate is sitting at 16

per cent — more than three times what the central bank is forecasting it would be, said

Bipan Rai, a foreign exchange strategist with CIBC.

“The next move is very important to watch,” Rai said. “The most market friendly move

would be to raise interest rates by a significant amount to stem the pain on the currency

and to deal with the inflation spike.”

 

While the risk to Canada remains low, Rai says if the situation gets worse Turkey could

cause pain for Europe’s economy, because many European banks are heavily exposed to

the country’s debt.

 

Trump Doubles Tariffs On Steel, Aluminum From Turkey

President Trump ordered a doubling of U.S. tariffs on steel and aluminum imports from Turkey Friday, escalating a diplomatic spat with a key NATO ally.

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Photo by Pixabay on Pexels.com

In a tweet, Trump cited the decline in Turkish currency as justification for increasing tariffs to 50 percent on Turkish steel and 20 percent on Turkish aluminum.

“Our relations with Turkey are not good at this time!” Trump tweeted.

Last week, the U.S. sanctioned Turkey’s justice and interior ministers to protest what the administration calls the “unfair and unjust detention” of an American pastor.

While increased tariffs send a diplomatic signal, they are not likely to have a major economic effect in the U.S. According to the Peterson Institute for International Economics, Turkey supplied just 4.2 percent of America’s imported steel and less than 1 percent of imported aluminum last year.

The Turkish lira briefly dropped to a record low on Friday, amid concern over the economic policies of President Recep Tayyip Erdogan, as well as the diplomatic row with the U.S.

Erdogan reportedly was defiant, telling worshipers after Friday prayers that Turkey “will not lose the economic war.”

The White House also cited currency movements in China last week when Trump called for a possible increase in tariff rates on Chinese imports.

Taken From: https://www.npr.org/2018/08/10/637445436/trump-doubles-tariffs-on-steel-aluminum-from-turkey

 

The US-Turkey trade spat, explained

A battle over an American pastor is putting strain on Turkey’s economic troubles.

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Turkey slapped hefty tariffs on US cars, alcohol, tobacco, and other products on Wednesday — the latest blow in an escalating economic and diplomatic fight with the United States.

Ankara’s retaliatory trade measures come after US President Donald Trump said Friday he would impose additional tariffs on Turkish aluminum and steel. And this trade spat with the US is exacerbating a brewing financial crisis in Turkey.

Turkey’s currency, the lira, plunged to a record low against the dollar on Tuesday, though it recovered a bit on Wednesday after Turkish president Recep Tayyip Erdogan announced the tariffs on US goods, and after Qatar announced that it would invest $15 billion in Turkey’s economy.

Tensions between the US and Turkey spiked recently due to a disagreement over the fate of North Carolina Pastor Andrew Brunson, a man whom Trump has referred to as a “great Christian.” Turkey imprisoned Brunson in October 2016, claiming he had ties to a groupthat Erdogan blames for the failed coup earlier that year.

When Turkey failed to release Brunson in July, the Trump administration sanctioned two top officials in the Turkish government. And when Erdogan still didn’t budge, Trump doubled existing steel and aluminum tariffs.

Erdogan has remained defiant in the face of US pressure, promising to boycott iPhones and other foreign products and now adding massive tariffs on US products — 120 percent on cars and 140 percent on alcohol. And Trump, in his typical style, has shown no sign that he’s willing to back off.

But the risks are far greater for Turkey in this showdown — especially since Erdogan’s problems are much bigger than this feud with the US.

Erdogan’s increasingly authoritarian government and his economic mismanagementhave fueled Turkey’s worsening economic situation. A crisis was on the horizon before Trump even got involved.

Turkey’s economic crisis was a long time coming. Now it’s here.

Erdogan won reelection in June 2018, consolidating his power and cementing his control of the Turkish state. But even amid that victory, there were clear signs of severe economic troubles to come.

The Turkish president was largely insulated from the economic woes during his election, in part because he’s fairly popular in Turkey and because he and his AKP party presidedover strong economic growth in the previous decade. Erdogan, a populist leader, has pursued growth at all costs — which has involved a lot of borrowing and spending, including on infrastructure and massive construction projects.

A lot of that borrowing was done in dollars, and Turkey’s economy relied heavily on foreign investment. As the lira dips in value, it becomes harder for Turkish companies to pay back those loans, Amanda Sloat of the Brookings Institution explained on NPR on Wednesday.

Erdogan’s economic policies did fuel growth, so much so that the Turkish economy began to overheat, which caused inflation to increase. Most economists would say the solution to this would be to raise interest rates. But Erdogan has expanded his power over Turkey’s central bank, giving him more control over the country’s monetary policy — and Erdogan possesses a bizarre hatred of interest rates. (He once referred to them as “the mother and father of all evil.”)

Erdogan’s heterodox views and grip on power have added to foreign investors’ concerns about the state of Turkey’s economy, which means investors are bailing on the lira, fueling the currency’s depreciation and increasing Turkish companies’ debt.

But Trump’s move to impose additional tariffs on Turkey seems to have pushed the Turkish economy to the brink.

“It’s not like the United States caused this,” said Michael Klein, an international economics professor at the Fletcher School at Tufts and executive director at Econofact. “But there’s probably some element of the trade spat [signaling to] investors and Turkish residents that things were not going to get better.”

“Once this starts,” Klein continued, “it takes on a life of its own.”

What’s the deal with this American pastor — and how does he play into the current crisis?

Andrew Brunson is an American evangelical pastor who has been in detained in Turkey for nearly two years on charges that he’s tied to the Gülen movement, which the Turkish government considers a terrorist group. Erdogan blames the Gülen movement and its founder, Turkish cleric Fethullah Gülen, for inciting a coup against him in July 2016.

Gülen has lived in Pennsylvania since 1999, but Erdogan wants him returned to Turkey. He’s likely trying to use Brunson as leverage to get the US government to do so.

Meanwhile, Trump, along with Vice President Mike Pence, seem to have personally taken up the pastor’s cause. In late July, Trump announced that the US would impose sanctionson two of Turkey’s top officials in response to Brunson’s detainment.

The sanctions were more symbolic than anything else. But Trump escalated the situation last Friday when he raised tariffs on Turkey, imposing a 20 percent tax on aluminum and 50 percent tariff on steel.

On August 10, Trump tweeted about the tariffs and declared that the lira “slides rapidly downward against our very strong Dollar!” and indeed, the country’s currency immediately plunged

Erdogan, for his part, hasn’t wavered — as his latest round of tariffs proves. The Turkish president appears to be banking on the idea that Turkey is too vital a partner for the United States to lose.

“At a time when evil continues to lurk around the world, unilateral actions against Turkey by the United States, our ally of decades, will only serve to undermine American interests and security,” Erdogan wrote in a New York Times op-ed this weekend. “Before it is too late, Washington must give up the misguided notion that our relationship can be asymmetrical and come to terms with the fact that Turkey has alternatives.”

Turkey is indeed a key strategic partner and NATO ally, and has made recent moves toward Russia in the wake of US tensions. But Erdogan is not dealing with a typical US administration — he’s dealing with Trump, who’s proven to be unpredictable and often not amenable to the appeals of America’s allies.

Indeed, National Security Adviser John Bolton met with Turkey’s ambassador on Monday over the dispute and warned that the US wouldn’t budge until Brunson was releasedTa. And in the battle of two hardheaded leaders, Trump has a clear edge — his policies are likely to do more damage to Turkey than the other way around.

Aaron Stein, a Turkey expert with the Atlantic Council, a think tank in Washington, DC, said that the US’s actions have been relatively minor so far. But there’s no guarantee that they’ll stay that way. “They were teetering,” Stein said of Turkey’s economic crisis. “Trump just sort of blew on the candle.”

 after Trump ramped up the trade feud.

Taken From: https://www.vox.com/world/2018/8/15/17687928/turkey-united-states-tariffs-lira-andrew-brunson

Turkey slaps more tariffs on US goods, escalating trade tensions

Turkey slapped another round of steep tariffs on U.S. goods as the two countries escalate their trade battle and push the relationship to a breaking point.

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Turkey slapped another round of steep tariffs on U.S. goods as the two countries escalate their trade battle and push the relationship to a breaking point.

Ankara’s latest move follows President Trump‘s announcement last week that he will double tariffs on imports of steel and aluminum from Turkey until it releases U.S. pastor Andrew Brunson, who was arrested in 2016.

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Turkey said it would not be strong-armed into releasing Brunson, whose second appeal for release was rejected on Wednesday.

In response to Trump’s tariffs, Turkish officials said they will impose a 50 percent tax on U.S. rice, 140 percent on spirits, 60 percent on tobacco and 120 percent on cars while increasing duties on a variety of other goods.

“In response to deliberated and continued trade tensions, Turkey has again raised tariffs on key U.S. imports,” Turkish Trade Minister Ruhsar Pekcan said in a statement.

“Trade wars help no one, but Turkey will do what is necessary to protect our industries and economy from assault,” Pekcan said.

Turkey had already retaliated against Trump’s first round of tariffs on steel and aluminum imports that were imposed on the European Union in late May, ending a two-month exemption.

Ankara’s first batch of tariffs hit $1.8 billion in U.S. products.

“Recent developments in the U.S.-Turkey relationship threaten both countries’ economic interests and put at risk an alliance that has proven its value over decades,” said Myron Brilliant, U.S. Chamber of Commerce executive vice president and head of international affairs, in a message to the U.S. Chamber’s U.S.-Turkey Business Council.

“Escalating the use of Section 232 tariffs on imports from Turkey poses serious risks for the United States,” Brilliant said.

“For months, the U.S. Chamber has warned that alienating our allies in a tit-for-tat trade war would harm the U.S. economy and undermine American global leadership, and evidence of that harm to U.S. workers, farmers, and businesses is mounting.”

The announcement follows Turkish President Recep Tayyip Erdoğan’s call for a boycott of U.S. electronics, including Apple’s iPhones to counter Trump’s actions to ramp up pressure on Turkey to release Brunson.

On Wednesday, Qatar pledged $15 billion to help Turkey through its economic and currency crisis.

The country’s currency, the lira, has fallen sharply against the U.S. dollar in recent weeks but rebounded after the aid announcement.

Taken from: thehill.com/policy/finance/402001-turkey-slaps-more-tariffs-on-us-goods-escalating-trade-tensions

 

Turkey escalates trade dispute with US by raising tariffs

Turkey has said it will increase tariffs on imports of a range of US products, escalating a diplomatic and trade dispute that has roiled global markets and helped trigger a currency crisis.

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Extra tariffs will be imposed on imports of products such as rice, cars, alcohol, coal and cosmetics, according to an announcement on the Official Gazette.

Fuat Oktay, Turkey’s Vice President, said on Twitter that the tariffs on certain products were increased “within the framework of the principle of reciprocity in retaliation for the conscious economic attacks by the United States”.

Despite Ankara ratcheting up tensions with the Trump administration, the crisis-hit lira continued to rally following its collapse to record lows. After a brief dip in Asian trading, the lira rebounded strongly for a second consecutive day on Wednesday, climbing a further 7.1pc. However, the lira still remains 38pc down against the dollar in 2018.

The tariffs announcement came as Asian shares fell in morning trade on Wednesday, with concerns about Turkey’s financial crisis weighing on investor sentiment. European markets remained subdued while the FTSE 100 was flat after four days of declines.

Markets have “regained their cool towards Turkey” but the crisis won’t be “swept under the carpet”, LCG’s Jasper Lawler warned.

“Not only is it unlikely that hostilities between Turkey and the US will simmer down

quickly, but fundamentals are stacked against emerging markets right now as they

struggle in a rising US interest rates climate.”

Taken from: https: //www.telegraph.co.uk/business/2018/08/15/turkey-escalates-trade-dispute-us-raising-tariffs/