The White House's latest trade tiff

Delivered every Monday by 10 a.m., Weekly Trade examines the latest news in global trade politics and policy.

Mar 07, 2022 View in browser   By Steven Overly With help from Ximena Bustillo and Gavin Bade QUICK FIX — Disagreements over limiting U.S. investments in China are the latest White House dispute over how to handle the trade relationship with Beijing. — The Biden administration said over the weekend that talks with trading partners were underway to ban Russian oil imports. It's a move that would deliver a significant blow to Moscow, while also risking economic fallout around the globe. — USTR must soon review the Trump-era tariffs on Chinese goods to determine whether they've been effective. It will be another chance for industry groups to make their displeasure with the trade penalties known. It's Monday, March 7. Welcome to Weekly Trade. Your host is headed to Peru on Friday, with stops planned in Cusco, Arequipa and Lima. Last call for any and all travel tips! Hit me up via email or Twitter. Send us your news: soverly@politico.com, gbade@politico.com and dpalmer@politico.com. Driving The Day ADMIN DIVIDED OVER CHINA INVESTMENT CONTROLS: National security officials, led by national security adviser Jake Sullivan, have been advocating for months for President Joe Biden to issue an executive order that would prohibit many American investments in Chinese technology firms and startups, POLITICO's Gavin Bade reports. But the Treasury and Commerce departments have pushed back, arguing it would spur commercial tensions with Beijing and put American banks at a disadvantage to financial firms from Asia and Europe that would continue accessing the world's second largest economy. Officials at odds: The disagreement is just the latest for an administration increasingly unable to agree on a policy on China and economic engagement in Asia. But trade veterans say this particular debate has roots in the Trump administration, when former Treasury Secretary Steven Mnuchin pumped the brakes on similar investment limits. "The average American investor has no idea that their own money is financing the [Chinese government's] military machine and genocide-enabling surveillance state through a deceptive web of hundreds of malign Chinese companies and thousands of their subsidiaries," said Keith Krach, a former undersecretary of State who pushed for government restrictions on investments in China during the Trump administration. Targeting critical tech: Though no executive orders have been finalized, one of the industry officials with knowledge of administration discussions said that eventual action will likely cover American banks, mutual funds and other financial institutions investing in Chinese semiconductors, artificial intelligence, facial recognition and other surveillance areas. It would likely derive its authority from the International Emergency Economic Powers Act, which gives the president broad authority to limit trade in economic emergencies, and could also include export controls to limit the shipment of the technologies themselves, in addition to funding flows. A U.S. BAN ON RUSSIAN OIL IMPORTS IS LOOMING: The Biden administration is inching closer to a ban on Russian oil imports as the conflict in Ukraine grows more intense. "We are now talking to our European partners and allies to look in a coordinated way at the prospect of banning the import of Russian oil, while making sure that there is still an appropriate supply of oil on world markets," Secretary of State Antony Blinken said Sunday on CNN's "State of the Union." "That's a very active discussion as we speak." Lawmakers on both sides of the aisle have been pushing for the U.S. to take aim at Russia's most important sector, but the White House was resistant to the idea as recently as late last week. Calls to act have grown more urgent since then, including a plea Ukrainian President Volodymyr Zelenskyy made to lawmakers on Saturday. Economic fallout: The economic impact of such a ban has been a sticking point for the White House, which fears a spike in gasoline prices at a time when record inflation is already putting pressure on American pocketbooks. As my POLITICO colleagues previously reported , the U.S. purchases a relatively small percentage of its crude oil from Russia, but the price of U.S. oil is heavily influenced by the global market. If Russian oil is effectively taken off the market, global prices are poised to climb. That could have effects even beyond the cost of filling up at the pump. Rising energy prices could further disrupt supply chains and escalate shipping costs, both of which have hampered the global economic recovery from the coronavirus pandemic. House work : In a letter to colleagues on Sunday, House Speaker Nancy Pelosi said her chamber is working on legislation that would ban Russian oil and energy products. The bill would also repeal trade relations with Russia and Belarus, deny Russia's access to the World Trade Organization and empower Biden to raise tariffs on Russia goods, she wrote. In the meantime : The Commerce Department on Friday issued two new regulations to further restrict exports of commodities, software and technology to Russia's oil refining sector and 91 entities that support Russian military activities, POLITICO's Doug Palmer reported. And companies are pulling out : Streaming service Netflix became the latest American company to curtail its operations in Russia amid Vladimir Putin's escalating aggression in Ukraine. The company said Sunday that it would suspend operations there, where it launched in 2016 and has 1 million subscribers. Variety first reported the news. Meanwhile, Chinese-owned video sharing app TikTok announced via Twitter on Sunday it would no longer allow live streaming or content uploads from Russia. The company's decision follows the creation of a "fake news" law that threatens to penalize media outlets that the Kremlin deems to be spreading misinformation. On Friday, Russian authorities shut off access to Facebook.   HAPPENING TUESDAY, INTERNATIONAL WOMEN'S DAY, AN IMPORTANT CONVERSATION ON THE WOMEN IN AFGHANISTAN: Join Women Rule editor Elizabeth Ralph for a panel discussion on the future for Afghan women. Guests include Hawa Haidari, a member of the Female Tactical Platoon; Cindy McCain, U.S. ambassador to the United Nations Agencies for Food and Agriculture; Roya Rahmani, Afghanistan's first female ambassador to the U.S.; and Sen. Jeanne Shaheen (D-N.H.). Learn how female Afghan veterans are planning their futures, what the women still in Afghanistan face, and what the U.S. can do to help. REGISTER HERE.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You'll also receive daily policy news and other intelligence you need to act on the day's biggest stories. TRUMP-ERA CHINA TARIFFS SET FOR REVIEW : The first round of tariffs that former President Donald Trump slapped on Chinese imports will be four years old in July, which Bloomberg notes means they must soon undergo a congressionally mandated review. The Section 301 tariffs will expire four years from the time they are imposed unless the Office of the U.S. Trade Representative has analyzed their effectiveness. That evaluation has to happen within 60 days of their potential expiration. What that means : The Biden administration has passively kept Trump's tariffs in place while initiating discussions with Beijing over its failure to meet purchase commitments included in the Phase One trade deal. The review process means the Biden administration will have to actively consider whether the tariffs are delivering as expected and ought to continue. It also gives industry groups and other interested parties a fresh opportunity to pressure USTR into rolling back the trade penalties, or at least expanding its plans to offer exclusions. Companies have argued the tariffs hike up costs for consumers at a time when the administration is looking for ways to contain inflation. TAI PRESSES LABOR CONCERNS WITH BAHRAIN: U.S. Trade Representative Katherine Tai told Bahrain's head of industry and commerce, Zayed Al-Zayani, that she wants to complete consultations that were initiated under the labor chapter of the countries' free trade agreement, according to a summary of their Friday meeting. U.S. concerns with labor rights in Bahrain date back more than a decade. The Bahraini government's crackdown on workers following a general strike in 2011 sparked complaints from the AFL-CIO and other labor groups. Two years later, the Obama administration requested labor consultations under the free trade agreement. USTR's readout of the meeting did not indicate whether Al-Zayani was open to those talks, only saying that the pair "pledged to continue working together on these important issues and other shared priorities." INTERNATIONAL STATE OF WHEAT: The Russian invasion has left many Ukrainian farmers in what's dubbed the "breadbasket of the world" to abandon their operations in search of safety, the Associated Press reports. That's raising concerns across the globe over the wheat supply that many in Europe, Asia and Africa rely upon. Wheat prices have surged 55 percent since a week before the invasion, even though immediate supply chain disruptions have yet to be seen. International Grains Council Director Arnaud Petit told the AP that countries who look to Ukraine for affordable wheat exports could start to see shortages in July. Elsewhere in the world: China could face one of the lowest wheat yields in history, per Reuters , largely caused by abnormally high rainfall last year that delayed a significant portion of planting. And in the U.S., The Wall Street Journal reports that wheat prices are trading at their highest levels since March 2008. cost of wheat has been THE CASE AGAINST RESHORING SUPPLY CHAINS: World Bank economists issued a report late last week declaring that the moves by high-income countries to domesticate their supply chains in the wake of the coronavirus pandemic could contribute to a rise in poverty worldwide. Global supply chains have helped to lift people in middle- and low-income countries out of poverty in recent decades by integrating them into global trade, the economists write. Further integration into the global economy, along with fortifying supply chains against economic shocks and climate change, would benefit both developing and developed nations alike, they argue. "While there is no sign yet that reshoring is happening on a large scale, the economic modeling in the report found that policies that are supportive of, not hostile to, trade could prove critical to strengthening the recovery from the pandemic and supporting greater diversification," the report's authors wrote in a blog post.   DON'T MISS POLITICO'S INAUGURAL HEALTH CARE SUMMIT ON 3/31: Join POLITICO for a discussion with health care providers, policymakers, federal regulators, patient representatives, and industry leaders to better understand the latest policy and industry solutions in place as we enter year three of the pandemic. Panelists will discuss the latest proposals to overcome long-standing health care challenges in the U.S., such as expanding access to care, affordability, and prescription drug prices. REGISTER HERE.     International Overnight — American mask makers are finding it hard to compete with foreign rivals, The New York Times reports. — China is setting a "robust" target for economic growth despite global headwinds, per The Wall Street Journal. — EU countries on Friday began a process that could impose higher tariffs on Russian goods, POLITICO Europe's Barbara Moens and Sarah Anne Aarup write. — Chinese President Xi Jinping said China cannot rely on foreign producers for its food security, according to Bloomberg. — Toshiba warns that the invasion of Ukraine could hinder access to materials needed for semiconductors, Bloomberg reports. THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and soverly@politico.com. Follow us @POLITICOPro and @Morning_Trade.   Follow us on Twitter John Yearwood @john_yearwood Doug Palmer @tradereporter Gavin Bade @GavinBade Steven Overly @StevenOverly   Follow us

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