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#1 – MNUCHIN: FRAMEWORK WITH CHINA PUTS “TRADE WAR ON HOLD”

          On Saturday the U.S. and China released a joint statement touting the framework of a deal that would, in Secretary Mnuchin’s words, “Put the trade war on hold.” Here is the meat of the statement

          There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

          Mnuchin and White House economic advisor Larry Kudlow then made the rounds on the Sunday shows. Here is Mnuchin describing the framework to Chris Wallace on Fox News Sunday:

          What we know about the framework:

          • First off, White House economic adviser Larry Kudlow said on ABC the framework is not a deal:

          "There's no agreement for a deal. We never anticipated one. There's a communique between the two great countries, that's all. And in that communique, you can see where we're going next."

          The Chinese balked at agreeing to a specific target for tariff reduction. The U.S. had been demanding a $200 billion deficit target.

          • However, according to Secretary Mnuchin, the U.S. will see an increase of between 35 percent and 40 percent in agricultural exports to China this year and will see a doubling of energy purchases over the course of the next three to five years.

          • There was no definitive mention on whether easing U.S. restrictions on Chinese telecom ZTE was part of the deal.

          • As a next step, Commerce Secretary Wilbur Ross will be sent to China to explore where China can make significant import purchasing expansions. Sectors are expected to include energy, agriculture, and manufacturing.

          • More from the NYT, WSJ, POLITICO

#2 - NAFTA: BEYOND THE DEADLINE BUT NOT QUITE DEAD

While a 301 deal seems to be in the offing, the NAFTA picture is significantly more opaque. After blowing by Speaker Ryan’s Thursday May 17th deadline to notify Congress of a deal, all three sides still seem far away on the big sticking points.

About that deadline: Paul Ryan backed away from his deadline this week saying: “My guess is there is probably some wiggle room at the ITC for what it takes for their part of the process but not an indefinite amount and that means time is really of the essence.” What Ryan is saying here is that the 105 day period that the U.S. International Trade Committee has to come up with a report on the economic impacts of NAFTA 2.0. can be shortened, as the Obama Administration worked to do with TPP. If the 105 days can be reduced, Congress could still consider an agreement in the lame duck.

The bottom line: Politics will outweigh the timeline every time. What Ryan is doing is working to protect his members – most of whom don’t want to consider an agreement this year, while also balancing the President's desire to get a deal. It’s still highly unlikely that a deal would be considered this calendar year. Secretary Mnuchin even acknowledged Sunday that the Administration could tolerate a vote happening in the next Congress.

In the words of the NAFTA leads themselves: Here is what the key decision-makers in each NAFTA country said late last week about the current state-of-play (hint - the U.S. is by far the most pessimistic in their public messaging):

U.S. Trade Representative Robert Lighthizer: “The NAFTA countries are nowhere near close to a deal. There are gaping differences on intellectual property, agricultural market access, de minimis levels, energy, labor, rules of origin, geographical indications, and much more. We of course will continue to engage in negotiations, and I look forward to working with my counterparts to secure the best possible deal for American farmers, ranchers, workers, and businesses.

Mexico’s Economy Minister Ildefonso Guajardo: “There are lots of issues to be resolved, but they’re issues of ‘yes or no’ and don’t need technical sophistication. It’s an issue of having the political will.”

Canadian Prime Minister Justin Trudeau: “To be honest, we are down to a point where there is a good deal on the table. It’s right down to the last conversations. ... I’m feeling positive about this, but it won’t be done until it’s done.

Sticking points left on the table (from the Canadian viewpoint).

#3 - A TTIP REVIVAL TO SOLVE STEEL AND ALUMINUM FIGHT WITH THE E.U.?

• Last week, Reuters took a look at the divide among E.U. member countries on how best to deal with the U.S. imposed June 1 deadline to come up with an agreement to avoid steel and aluminum tariffs. On one side, the European Commission and France are urging against being bullied into making any concessions. On the other side, Germany - the E.U.’s biggest exporter to the U.S - is looking for flexibility to come to an agreement.

• Interestingly, the article points out that the European Commission, at the urging of Germany, has raised the idea of reviving elements of the Transatlantic Trade and Investment Partnership (TTIP) as the basis for negotiating a deal, but only after the E.U. is given an exemption.

• On Thursday of last week, POLITICO reported that Germany seemed to have won the debate, securing a commitment among all 28 EU leaders to offer a “TTIP lite” trade deal if they get a permanent exemption from the steel and aluminum tariffs. However, the POLITICO story notes it is far from certain that “TTIP lite” will be enough to secure a deal with the U.S.

#4 – CAMPBELL SOUP BEING HIT HARD BY STEEL AND ALUMINUM TARIFFS

• For all of big business' protestations over recent tariffs, there had yet to be a big name company that has taken a significant hit. That may have changed last week, when Campbell Soup rolled out significant third-quarter losses, their stock shares plummeted, and CEO Denise Morrison left the company effective immediately.

• On an analyst call reviewing the third-quarter showing Campbell’s COO acknowledged that “we expect double-digit increases on steel and aluminum. A lot of that is driven or all of it’s driven by the impact of anticipated tariffs.

• More here from Fox Business.

#5 - JAPAN PLANNING RETALIATION ON STEEL AND ALUMINUM TARIFFS

Japan announced last week that they are considering over $400 million in retaliatory tariffs in response to U.S. steel and aluminum tariffs. To date, Japan had been working behind the scenes on an exemption, rather than joining the E.U. and China in making retaliatory moves. More from NHK here.

Prepared by Matt McAlvanah (matt@monumentpolicy.com) and the Monument Trade Team

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