Mexico's foreign minister said Sunday the country would not accept a US proposal for steel and aluminum production under the new trade deal, saying it would leave Mexico at a disadvantage.
During a meeting with senators to discuss details of negotiations for the United States-Mexico-Canada treaty (USMCA), Foreign Minister Marcelo Ebrard said the US proposed that 70 percent of steel for automobile production come from the North American region.
The proposal would put Mexico "at a very great disadvantage," said Ebrard, because cars produced in Mexico also use components made in Brazil, Japan and Germany.
Ebrard said the Mexican delegation will ask at the next meeting of treaty representatives that the provision come into effect "more than 5 years" after the start of the trade pact, rather than immediately.
Mexico will also not accept "any term" for aluminum provisions, Ebrard said, because they do not have the resources to produce aluminum.
Mexico is one of the world's largest automobile exporters due to multiple brands -- including General Motors, Nissan, Fiat-Chrysler and Volkswagen -- building facilities in the country.
Ebrard's comments come just a few days after after Mexican President Andres Manuel Lopez Obrador said he would not accept a US proposal for supervisors to oversee the implementation of Mexico's labor reforms under the USMCA.
Mexico is the only country so far to ratify the new deal, negotiated at US President Donald Trump's behest to replace the 25-year-old North American Free Trade Agreement (NAFTA), which he considers "a disaster" for the United States.
In a bid to comply with its commitments under the new deal, which was signed in November 2018, Mexico has raised its minimum wage and passed labor reforms to give unions more power and workers more say in running them.
But US labor groups and opposition Democrats in the House of Representatives have voiced skepticism over the Mexican government's ability to enforce the new rules.
That has led to a drawn-out ratification process in the United States, where the trade deal now risks getting mixed up in Trump's ongoing impeachment drama and electoral politics heading into his 2020 re-election campaign.
Canada has said it will ratify the deal in tandem with the US.
Agence France-Presse
RIO DE JANEIRO — US President Donald Trump on Monday announced plans to reimpose tariffs on steel and aluminum from Brazil and Argentina, hitting back at what he called their "unfair" policies.
The move appeared to surprise his Brazilian counterpart, Jair Bolsonaro, who considers himself an ideological ally of the Republican leader. Industry leaders in both countries cried foul.
"Brazil and Argentina have been presiding over a massive devaluation of their currencies," which is hurting American farmers, Trump said on Twitter.
"Effective immediately, I will restore the Tariffs on all Steel & Aluminum that is shipped into the US from those countries."
Trump last year announced global tariffs of 25 percent on steel and 10 percent on aluminum but later approved exemptions for some countries, including Argentina and Brazil -- after they agreed to quotas.
Bolsonaro sought to play down the issue, saying he would appeal to Trump for more understanding of Brazil's position and boasting he has an "open channel" with the US leader if needed.
Later, in a radio interview, Bolsonaro said: "I hope he understands and doesn't penalize us in this matter."
The Brazilian leader added he was confident he would receive a favorable hearing from the US president.
"I am almost convinced that he will hear us," he said.
'PERPLEXING' DECISION
Brazil's Steel Institute said it was perplexed by Trump's decision.
"There is no initiative by the government to artificially devalue the Real and the decision to tax Brazilian steel as a way to compensate American farmers is a retaliation against Brazil, which is inconsistent with the partnership relationship between the 2 countries," it said.
The decision "ends up hurting the American steelmaking industry itself, which needs semi-finished products exported by Brazil in order to operate its mills," the institute added.
Brazil is the second-largest supplier of steel to the US market behind Canada.
And Brazil and Argentina have benefited from the US trade war with China, as they have stepped in to replace American exports of soybeans and other agricultural goods to the Asian giant.
Bolsonaro earlier this month met with China's President Xi Jinping in Brasilia and said the world's second-largest economy was "becoming more and more part of Brazil's future."
Speaking to reporters on the White House lawn before departing for the NATO summit in London, Trump said Brazil had "devalued their currency very substantially by 10 percent."
He said he had given Argentina "a big break" on tariffs, "but now I'm taking that break off. Because it is very unfair to our manufacturers and very unfair to our farmers."
"Our steel companies will be very happy and our farmers will be very happy with what I did," Trump added.
ECONOMIC IMPACT
Brazil has teetered on the brink of recession this year and Argentina is again enmeshed in an economic crisis, which has led to the currencies of both countries weakening against the US dollar.
A weaker currency tends to make exports more competitive, while a stronger US dollar makes foreign goods cheaper for American consumers.
But as the global economy slows, the US dollar tends to strengthen as it becomes a safe haven for nervous investors around the world.
Jose Urtubey, spokesman for Argentina's powerful UIA industrial lobby, said producers in the country will be harmed immediately by the tariffs.
With Argentina's "lack of competitiveness" as a producer, the fact that the United States had the lowest steel and aluminum tariffs was "beneficial," Urtubey said.
The head of Argentina's only aluminum producer, Javier Mandanes Quintanilla of the Aluar Group, viewed the tariff plan with trepidation.
"This is a measure that affects us very strongly," he told La Nacion.
The US imported nearly 169,000 tons of steel from Argentina last year, representing more than $220 million in trade.
Bolsonaro's right-wing government has promised to revive Brazil's flagging economy with a massive stimulus plan, as well as pension and tax reforms, and the central bank has cut the key interest rate more than a dozen times since late 2016.
Trump views those moves as an effort to gain at the expense of the United States.
In his tweets, Trump also called on the Federal Reserve to "likewise act" so other nations no longer "take advantage of our strong dollar by further devaluing their currencies."
Amid a slowing global economy and the impact of Trump's wide ranging trade offensive, mostly directed against China, the Fed has cut the benchmark interest rates three times this year.
But it has signaled it will stand back before deciding on any further moves.
Despite widespread complaints about the impact of the tariffs on US businesses and consumers, as well as the hit to farmers who have been the target of retaliation from trading partners, Trump claimed in his tweet on Monday that Washington has taken in "massive amounts of money" from the tariffs.
American steel has continued to suffer, with overall employment edging downward and production halted at blast furnaces last month.
Agence France-Presse
NEW YORK - Higher costs for oil, industrial metals and other materials have emerged as a headwind during US earnings season, amplifying inflation worries at the same time the labor market is tightening.
Companies from across the US economy cited the drag from supply costs in conference calls, in some cases reporting lower first-quarter profits or cutting their outlook.
Arconic, a spin-off from Alcoa that focuses on aviation and auto clients, slashed its outlook due to a "steep increase" in aluminum prices, said chief financial officer Ken Giacobbe.
Prices of the metal have risen further after US announcements of tariffs on imported aluminum and sanctions on Russian aluminum company Rusal.
American Airlines Chief Executive Doug Parker rued that oil prices had risen "very quickly" and the company cut its forecast range for full-year profits.
Executives at Kraft Heinz also reported cost pressures for freight, packaging and oil, although the elevated prices have not affected forecasts, while Mondelez International, another food giant, also confirmed its profit outlook despite higher cocoa costs.
'RISK IS BUILDING'
Worries about inflation have been a preoccupation of policymakers and money managers all year because of the fear a sudden jump in prices would prompt the Federal Reserve to accelerate interest rate increases, potentially shocking the global economy.
The Federal Reserve this week acknowledged that inflation had moved closer to its target of 2 percent. The statement, while not expressing alarm at pricing trends, kept the central bank on track to keep lifting interest rates this year.
Jim Corridore, an analyst at CFRA Research who covers industrial companies, said inflation was "not something we're overly concerned about."
Companies managed to turn in solid profits due to higher overall sales and the lift from US tax cuts.
"At this point it's not any more concerning than we expected it to be but it's certainly something you have to keep an eye on," Corridore added.
Briefing.com analyst Patrick O'Hare said "the risk of a pickup in inflation pressures is building," in part because of rising labor costs.
On Friday, the US Labor Department reported that wages increased only modestly in April even as unemployment hit a 17-year low of 3.9 percent. Still economists believe wage inflation could soon pick up, perhaps by a lot.
"Ultimately, these companies that are calling out rising input costs have a choice: They can either eat those costs at the expense of their profit margins or they can choose to pass those costs onto their customers," O'Hare said.
"If they pass them along, then their customers choose to pass them along to their customers and so on, and so you get more generalized price inflation."
Raw material price increases are trending well above expectations at the industrial conglomerate 3M, especially for oil-linked materials and transportation and logistics.
But the company expects those trends to be more than offset by strong demand across its markets, including in consumer goods and home care, allowing it to raise prices.
"For the year, we're still expecting our stronger price growth to more than offset the raw materials," said chief financial officer Nicholas Gangestad.
MORE INFLATION AHEAD?
But companies are also monitoring commodity prices to see if prices continue to rise. A report last month from the World Bank concluded that commodity prices were set to grow "more than expected" in 2018, pointing to increases across oil, metals and grains.
In a May 1 investor note, Goldman Sachs also highlighted commodities as being in a "bull tilt" in part because of low inventories after a long period of under-investment. But the report also noted that many investors were "skeptical" of the outlook, in part out of fear of buying at the top of the commodity cycle.
Parker of American Airlines said the company's response would partly depend on what happened in the oil market, saying the carrier would lift ticket prices if it concludes high fuel prices are here to stay.
"As the cost of production goes up, the cost of the product generally follows," Parker said. If fuel prices stay high, "I would expect you would see higher fares to consumers over time."
Ford has estimated that materials costs will be $1.5 billion over last year's, which had already seen a jump.
"It will be 2 years of pretty sharp increases," said Chief Financial Officer Bob Shanks, adding that the estimate did not include tariffs on metals announced by the Trump administration in March.
Ford believes the risk of tariffs "has essentially already been priced in by the market," Shanks said.
source: news.abs-cbn.com
