This week (July 30-August 3)

Final comments regarding Section 301 tariffs. Public comments are due to be submitted to USTR regarding the proposed 25% tariffs on $16 billion in Chinese imports.

Last week (July 23-27)

U.S.-EU Trade Discussions. President Trump met with EU President Juncker July 25th at the White House, where the leaders announced their intent to enter into trade negotiations, an apparent de-escalation of trade hostilities. The President indicated that the trade agreement would be focused on reducing tariffs on non-auto industrial goods to zero, and reducing other nontariff trade barriers. While the negotiations are ongoing, the U.S. would refrain from imposing further tariffs (i.e. no auto tariffs) while the EU committed to increased soybean and liquefied natural gas imports. EU President Juncker said: "The major progress today is that our American friends agreed not to increase tariffs on cars and other products during the negotiation, which is a major concession by the Americans I have to say." The U.S. will, however, maintain its steel and aluminum tariffs on the EU for the time being, although Juncker said that the U.S. would "reassess" them. Separately, Commerce Secretary Ross indicated that his department's section 232 investigation into autos and auto parts will continue and that the national security investigation is still on track for a pre-midterm election release. In Senate Appropriations Committee testimony July 26th, USTR Lighthizer cautioned that the U.S.-EU trade package agreement would need to be a "balanced package", including a focus on agriculture (which promises to vastly complicate the negotiations).

USTR hearing on China tariffs. USTR held public hearings July 24-25 to discuss its proposed 25% tariffs on $16 billion of Chinese imports (USTR has already imposed 25% tariffs on imports of $34 billion). USTR is expected to finalize the tariff list in early August. In addition, USTR plans a late-August hearing on the possibility of imposing 10% tariffs on a further $200 billion of Chinese imports (responding, per the President's direction, to Chinese tariff retaliation to the 25% U.S. tariffs). House Ways and Means Committee Chairman Kevin Brady (R-TX), along with 20 of his Republican Committee members, wrote July 26 to President Trump, encouraging the President to meet face to face with the Chinese president to resolve the U.S.-China trade tensions: "We are confident that if you personally engage with President Xi, you would reinvigorate the negotiations and develop meaningful solutions that will establish free, fair and lasting trade between the United States and China … "

U.S. government support for farmers hit by tariffs. The Department of Agriculture announced July 24 its authorization for a "short-term" $12 billion package to aid U.S. farmers hurt by foreign governments' retaliatory tariffs. The aid package will include a combination of direct payments to producers of certain crops (including soybeans), U.S. government purchases of "unexpected surpluses" of certain products and assistance in developing new export markets. USDA is pushing to have the programs operational prior to Labor Day. Some Congressional Republicans criticized the announcement, with Senator Ben Sasse (R-NE) saying "This trade war is cutting the legs out from under farmers and the White House's 'plan' is to spend $12 billion on gold crutches."

NAFTA 2.0 Discussions. USTR Lighthizer met July 26 with his Mexican counterpart, Economy Minister Guajardo (from the outgoing Nieto administration), to kick start the "NAFTA 2.0" negotiations. After the talks, both men expressed guarded optimism that the new NAFTA agreement could be finalized in August, while acknowledging that significant obstacles will need to be overcome. One such stumbling block is the Trump administration's view that the revised NAFTA agreement contain a 5-year sunset clause, a position rejected by Mexico, Canada and the U.S. business community. In recent weeks, President Trump and senior members of his trade team have contemplated proceeding with a bilateral trade deal with only Mexico prior to concluding a separate bilateral with Canada. Mexican and Canadian trade lead negotiators met July 25 and reiterated their countries' shared commitment to maintaining NAFTA as a trilateral structure.

Drawback TFTEA Regulations Released. The Departments of Homeland Security and Treasury, in conjunction with U.S. Customs and Border Protection, issued a notice of proposed rulemaking for Modernized Drawback, as directed by the Trade Facilitation and Trade Enforcement Act of 2015 (TFTEA). The proposed guidance institutes a number of changes to the drawback program, including the "prohibition on the filing of a substitution drawback claim for internal revenue excise tax paid on imported merchandise in situations where no excise tax was paid upon the substituted merchandise; or the substituted merchandise is the subject of a different claim for refund or drawback of tax under any provision of the Internal Revenue Code." Comments on the notice of proposed rulemaking will be due 45 days after the date of publication in the Federal Register.

Ways and Means hearing on steel/aluminum tariff exclusion process. The Ways and Means Trade Subcommittee held a hearing July 24 on the Commerce Department's section 232 steel and aluminum tariff exclusion process. The Department has received about 27,000 product exclusion requests but as of the hearing date had only ruled on roughly 600, denying roughly two-thirds of the requests. Trade Subcommittee Chairman Dave Reichert (R-WA) at the hearing called on the Commerce Department to institute significant changes to make the "unnecessarily cumbersome" process work more effectively.

Congressional negotiators reach deal on CFIUS reform. House Financial Services Chairman Jeb Hensarling (R-TX) announced July 23 that House and Senate negotiators had reached an agreement of a CFIUS (Committee on Foreign Investment in the United States) reform bill that would be included in the National Defense Authorization Act, H.R. 5515. The CFIUS reforms hew generally to the Senate version of the Foreign Investment Risk Review Modernization Act — greatly expanding the foreign investments that would be subject to CFIUS review — and also include House language on export control reauthorization.

Senate passes Miscellaneous Tariff Bill. On July 26, the Senate passed by voice vote H.R. 4318, the Miscellaneous Tariff Bill Act of 2018, legislation that temporarily waives tariffs on roughly 1,800 imported products. The House passed its version of the MTB legislation earlier this year. The Senate-passed bill will now be sent to the House for expected final passage.

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