North Korea | NAFTA 2.0 | KORUS | U.S.-China relations | Dicamba | Inflation and Fed viewpoints | Hurricane Maria | Markets
— North Korea and U.S. options. The U.S. says it has “four or five” options for resolving the North Korea standoff, National Security Adviser H.R. McMaster said, as tensions between the two nations continue to mount. White House spokeswoman Sarah Sanders confirmed that the U.S. had not actually declared war on Kim Jong Un’s regime after North Korea’s foreign minister said that President Donald Trump’s recent comments constituted such a declaration, impacting markets in the process. Meanwhile, North Korea appears to have boosted defenses on its east coast, South Korea’s Yonhap news agency said
— NAFTA 2.0 talks update. The chief U.S. NAFTA negotiator said talks were progressing at a rapid pace, despite a lack of final U.S. proposals in several contentious areas. “We’ve been working very hard, so I don’t see a problem,” John Melle, assistant U.S. trade representative for the Western Hemisphere, said. “We’re moving across the board, so it’s very ambitious.” On Sunday, Canada’s chief NAFTA negotiator Steve Verheul said he did not expect the U.S. to make any proposals in Ottawa on sensitive areas. The Ottawa-based round continues through Wednesday, and the three countries have four more rounds scheduled this year in the hopes of reaching a deal by December.
Canadian Foreign Minister Chrystia Freeland, asked about the lack of U.S. proposals, said that “it is very typical — standard practice — in any trade negotiation to work on the less-contentious issues to begin with... These may not be the most sexy issues, but they are the issues that really matter to Canadian business people,” she said. “In particular, we’re making progress on a number of bread-and-butter trade issues which matter to Canadian businesses and that we have heard about a lot during our consultations,” Freeland said. “These are issues like electronic forms at the border, simplified origin declarations and regulatory harmonization. Constructive work in this area will cut red tape at the border and make life easier for our businesses.”
— South Korean minister links KORUS to peaceful relations. South Korean Foreign Minister Kang Kyung-wha defended the South Korea-U.S. (KORUS) free trade agreement as a cornerstone of the relationship between the two countries that goes far beyond economic ties. “Overall, the KORUS FTA has been a win-win deal and a driving growth for greater prosperity in both countries,” she said during an event at the Center for Strategic and International Studies on Monday afternoon. “It is the material key, if I may use that term, way beyond an economic tool that locks in our peaceful and prosperous future together.”
Senior trade officials from the two countries will meet for a second time next week to discuss ways to improve the five-year-old trade agreement. President Donald Trump has threatened to scrap the deal. “The U.S. has a deficit in goods traded but a surplus in services and Korean investments in the U.S. have grown many fold during the past five years since the agreement went into effect,” Kang said.
— China official: U.S.-China shared economic interests outweigh differences. Chinese Premier Li Keqiang said while meeting with Commerce Secretary Wilbur Ross in Beijing Monday that China and the United States’ shared economic interests far outweigh their differences, Xinhua reported. “As each other’s largest trading partner, the main trend of China-U.S. economic and trade ties is cooperation,” Li said while meeting with visiting U.S. Secretary of Commerce Wilbur Ross. China will work with the U.S. in the spirit of mutual respect and win-win cooperation to expand cargo and service trade and resolve frictions and differences through dialogue and consultation, Li said. The premier said China’s market will be more and more open and its business environment will get better and better. “We welcome more U.S. enterprises to invest in China,” he said.
“China hopes the U.S. gives fair treatment to Chinese investment and relaxes restrictions on exports of high-tech products to China so that bilateral economic and trade ties grow in dynamic equilibrium,” the premier said. A sound and stable China-U.S. relationship serves the interests of the two countries and meets the aspirations of the international community, Li said.
Ross said U.S.-China relations are getting closer and enjoy a bright future, adding that the U.S. welcomes China’s steady and rapid opening-up and will improve communication with China for greater trade and investment partnership as well as people-to-people exchanges.
— Soybean group pushes for dicamba solution. Some 2,242 complaints of off-target damage from dicamba affecting 3.1 million acres of soybeans in 21 of the 30 soybean-growing states across the U.S. have been reported. The American Soybean Association (ASA ) said soybean growers need pesticides like dicamba to fight glyphosate-resistant weeds, but the damage to neighboring fields caused by dicamba isn’t acceptable, ASA President Ron Moore said in a statement Monday (link). To find a solution, the association is working with the herbicide’s makers and several universities across the Midwest that are looking at the issue.
“It is absolutely true that farmers need and want new technologies to help fight resistant weeds, and we are going to support the marketing of those new technologies and new formulations,” Moore said. “That need is not blind, however, and we need to ensure that these products can be used by farmers in varied climates and growing regions safely.”
No ban. While Moore used strong language, and talked about his association’s “duty to ensure that we are successfully coexisting with other crops, so we take these reports very seriously,” he did not call for a seasonal ban of the herbicide, like the one that’s being proposed in Arkansas. The state plant board on Friday signed off on a measure that would prohibit its use between April 15 and Oct. 31.
— Inflation viewpoints differ at the Fed. A pair of Fed officials offered diverging takes on the central bank’s inflation “mystery” on Monday. New York Fed President Bill Dudley expressed confidence that fading one-off effects and a weaker dollar would help inflation trend back to 2%, and warrants the gradual withdrawal of monetary stimulus. However, Chicago Fed President Charles Evans expressed concern that the shortfall in price pressures may be more structural than temporary. The debate continues today, with Fed Governor Lael Brainard and Chair Janet Yellen set to give speeches while Cleveland Fed President Loretta Mester moderates a panel. Minneapolis Fed President Neel Kashkari will also host a town hall meeting in North Dakota.
— Hurricane Maria has caused up to $85 billion in insured losses, according to catastrophe modeling firm AIR Worldwide. “Texas & Florida are doing great but Puerto Rico, which was already suffering from broken infrastructure & massive debt, is in deep trouble,” President Trump wrote on Twitter. “Much of the Island was destroyed, with billions of dollars owed to Wall Street and the banks which, sadly, must be dealt with.”
— Markets. Oil is back in a bull market. A barrel of West Texas Intermediate surged 3.1% to $52.22 on Monday, more than 20% above their most recent low, with Turkey’s threat to cut off oil pipes from the Kurdistan region the latest reason for rising crude prices. Projections for stronger global demand coupled with a decline in investment have some predicting a supply squeeze next year.
U.S. equities closed lower yesterday — a decline today would give it its first four-day decline since June 20-23. Asia stocks this morning were slightly lower to unchanged. European equities opened slightly higher. The 10-year Treasury yield was at 2.220 percent and gold was $1,306.72 an ounce.
Target Corp. is raising its minimum wage as the retailer competes to fill low-wage jobs in a tighter labor market.
The number of U.S. mergers and acquisitions has grown this year but deal values have slipped 15%.
