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Trump's Economic, Tax & Spending Plans

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"It Sucks" - Senate Passes $1.3 Trillion Omnibus Spending Bill


by Tyler Durden
Fri, 03/23/2018 - 07:00


Despite Rand Paul and a handful of other conservative Senators's best efforts to kill it, the upper chamber easily passed the long-awaited $1.3 trillion omnibus spending bill early Friday morning - sending a bill that would lock in federal funding for the rest of the fiscal year, which ends Sept. 30, to President Trump's desk.

The final 65-32 vote resulted from a week of all-night bargaining sessions and repeated delays before the text of the 2,000+ page bill was released Wednesday morning.



Paul and other conservatives complained that the budget would've been adamantly rejected by Republicans if Obama was still in the White House. Republicans touted an $80 billion increase in military spending - which Trump touted as the largest increase in military spending ever - while Democrats highlighted an additional $63 billion in domestic spending, per Bloomberg.

Senator John Kennedy, a Louisiana Republican who opposed the bill, also hinted that he too might try to force a shutdown by delaying the vote after criticizing the vote's "price tag".

"It sucks," Kennedy said of the spending measure. "No thought whatsoever to adding over a trillion dollars in debt."

In a move that infuriated his fellow Senators, Sen. Jim Risch of Idaho almost sunk the bill after learning that it included language to name an Idaho forest for Cecil Andrus, the former Democratic governor and Carter administration Interior Secretary who died last year. Andrus and Risch were longtime political rivals, per the Wall Street Journal.

The unceasing squabbling over the bill frustrated many lawmakers, including Bob Corker, who loudly complained about the repeated delays to the vote, per Politico.

"This is ridiculous. This is juvenile," fumed Sen. Bob Corker, who asked McConnell for an explanation of why the chamber was in at midnight. "What has occurred over the last 11 hours that keeps us here voting on a bill that we all know is going to pass?"

The $1.6 billion funding for border security is far less than the Trump administration had demanded. Less than half of that money will be used to build about 33 miles of fencing and levees along Texas' border with Mexico. The White House had initially demanded $25 billion. meanwhile, Democrats won several major concession - particularly regarding immigration enforcement inside the US. The bill provides for minimal increases in funding for enforcement officers.

Democrats and Republicans also struck a compromise on control, rolling in the bipartisan "Fix NICS" legislation that will bolster reporting by federal agencies to the database for gun-buyer background checks. It also explicitly allows the Centers for Disease Control and Prevention to research the causes of gun violence.

The bill also includes $21 billion for infrastructure projects and an additional $4 billion to combat opioid addiction.

One of the biggest obstacles to reaching the agreement was the status of funding for a Hudson River tunnel between New York and New Jersey. Advocates, mainly Democrats and Republicans representing the two states, argued it is one of the most important infrastructure projects in the U.S. But Trump has insisted on removing money for the project, known as Gateway, from the spending plan.

In a decision that is sure to anger commuters in a region that comprises one-fifth of the country's GDP, Trump successfully killed funding for the "Gateway" project - that is, the construction of a new tunnel underneath the Hudson River that connects New York City and New Jersey. Democratic leader Chuck Schumer - who represents New York - assured angry voters that the two states would be able to access funding equal to about half of the $900 million initially requested through Amtrak and grants that don't require approval from the Department of Transportation.

Another $75 million was allocated to train teachers and school officials to respond to attacks. It will also pay for metal detectors and other equipment, while creating anonymous systems for reporting possible threats to schools.

Funding to combat Russian interference in the upcoming midterm elections was included in the spending package, as was $600 million to build a rural broadband network, per WSJ.

As conservatives railed against the budget bill, Majority Leader Mitch McConnell described the bill as "legislation that neither side sees as perfect, but which contains a host of significant victories and important achievements on behalf of the American people." Among them, he said, are a 15% increase in military spending and funding to combat an opioid epidemic as well as a down payment toward Mr. Trump’s border wall. The National Institutes of Health and Head Start - a popular child-care program - also received more spending.
The deal is the first installment of an informal two-year spending agreement worked out between McConnell, Schumer and Trump that will lift federal spending above curbs set in 2011.

President Trump's budget director Mick Mulvaney assured reporters that the president will sign the bill - and he has all day to do so.
But while the odds that the bill will be signed into law are extremely high, conservative lawmakers are still trying to convince Trump to reject it, forcing a shutdown that would grant them more leverage in trying to force concessions from both moderate Republicans and Democrats.

https://www.zerohedge.com/news/2018-03-23/senate-passes-13-trillion-omnibus-spending-bill
 

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Trump's new tax law means top 20 per cent of Americans earning at least $150,000 'will pay 87 per cent of total income tax' in 2018

  • The GOP-led tax overhaul will mean wealthier Americans pay more income tax
  • In 2017, the top 20 per cent paid 84 per cent of total income tax in the US
  • This year, they will pay 87 per cent of total income tax


Read more: http://www.dailymail.co.uk/news/article-5588059/Trumps-new-tax-law-means-earners-pay-share-income-tax.html#ixzz5Byc1x5T6
Follow us: @MailOnline on Twitter | DailyMail on Facebook
 

andial

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Trump's new tax law means top 20 per cent of Americans earning at least $150,000 'will pay 87 per cent of total income tax' in 2018

  • The GOP-led tax overhaul will mean wealthier Americans pay more income tax
  • In 2017, the top 20 per cent paid 84 per cent of total income tax in the US
  • This year, they will pay 87 per cent of total income tax


Read more: http://www.dailymail.co.uk/news/article-5588059/Trumps-new-tax-law-means-earners-pay-share-income-tax.html#ixzz5Byc1x5T6
Follow us: @MailOnline on Twitter | DailyMail on Facebook
Most people making that kind of money these days are employed by the government in some way or work for a public company or are in banking or law so no big deal they deserve to get fleeced.
 

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Analysis: Trump goes full ‘MAGA’ on the economy in year two

The Washington Post
Heather Long
3 hrs ago



There’s a distinct shift unfolding in President Trump’s economic policy in his second year: He is moving from prioritizing a pro-business agenda of tax cuts and deregulation to a populist agenda of trade barriers and immigration restrictions. Put another way, he is deviating from the mainstream Republican agenda.

For those who have known Trump for decades, this is not a surprise. He has long argued that China — and other nations — were beating up on the United States on trade and that these countries needed to be dealt with. “People are tired of watching other people ripping off the United States,” he told CNN's Larry King in 1987. Three decades later, Trump made renegotiating trade deals and curtailing immigration central tenets of his campaign, much to the cheers of blue-collar voters who supported him.

But for the Wall Street Republican set, Trump's protectionist turn is an unwelcome one, and it's ushering in a period of great uncertainty for markets and companies. There was a belief — or at least a hope — among some business leaders that Trump wouldn't do anything to threaten the uptick in economic growth that's underway, but now they're not so sure.

“If we do get into a trade war, even a small one, it will hamper growth. And you can see that in the stock market, people don’t like it,” said economist Art Laffer, an informal adviser to Trump who helped sell the president's tax plan last year.

Business leaders don’t know how to read this new phase of “MAGAnomics,” and they don’t have the same sway over Trump’s inner circle of advisers as they did when former Goldman Sachs executive Gary Cohn and staff secretary Rob Porter, a more traditional Republican, had Trump’s ear.

Trump's new inner circle of economic advisers often contradict one another, adding to the confusion. On Friday, Treasury Secretary Steven Mnuchin said there's “potential” for a trade war, while new National Economic Council Director Larry Kudlow kept stressing that talks were underway and that the standoff was likely to end without tariffs going into effect.

Corporate executives, who only weeks ago thought they had successfully contained Trump's impulses on immigration and trade, are now unsure what is coming next or what it will do to the economy. One look at the U.S. stock market tells the story: After surging nearly 19 percent last year, the Standard & Poor's 500-stock index is in the red so far this year as investors fear a trade war between the world's two biggest economies. The Dow Jones industrial average has fallen into a “correction.

“The one thing Trump's been consistent on for four decades is he does not believe in free trade. At heart, he is a protectionist,” said Joe Brusuelas, chief economist at accounting firm RSM.

Business leaders had hoped Trump's fixation on the rising stock market would keep him away from protectionism, which spooks investors. They praised Trump for passing a “once in a generation” overhaul of the tax code in December and cheered his regulatory rollback, comparing Trump to President Ronald Reagan, but Trump kept insisting that trade had to be part of his agenda.

“The Trump administration is best characterized as the 'populist right,' " said Michael Strain, director of economic policy studies at the right-leaning American Enterprise Institute.

Part of the surprise at Trump's populist turn this year is that so much is going right in the U.S. economy. Few in the business world thought Trump would do anything to jeopardize that.

Growth over the last three quarters of 2017 topped 3 percent — a threshold administration officials had touted repeatedly as their goal — and the economy continues to add jobs at a steady pace. Small business and consumer optimism are at the highest levels in years, and manufacturing jobs are surging. Since Trump took office, the economy has added 263,000 manufacturing jobs, a welcome boost after the industry saw job losses in 2016.

Chad Moutray, chief economist at the National Association of Manufacturers, credits tax cuts, regulatory reform and the rebounding global economy for the latest jump in manufacturing jobs.

While many economists and business leaders are urging Trump not to disrupt the upswing, the president and his top advisers argue that any short-term pain from a trade spat or changes to immigration will be worth it because it will lead to far larger gains down the road.

“We want to sell more goods around the world. This is a terrific opportunity for U.S. companies if they are treated fairly,” Mnuchin said Friday on CNBC.
There's consensus across the political spectrum that something needs to be done with China, but tariffs make many uneasy, especially in the GOP. The risks are high if the strategy fails. While China has more to lose economically in a trade war with the United States, China's President Xi Jinping does not face re-election, shielding him from the type of public and corporate pressures Trump faces.

The U.S. is also running a large deficit, especially after the tax cuts and hefty spending bill that just passed Congress. Trump won't be able to do much more stimulus, if any, and he will need investors around the world to keep buying U.S. debt.

For now, the bulk of the tariffs are just threats. China and the United States are talking, and the two nations have at least a month — and probably longer — to come to an agreement to avoid a worst-case scenario that could have damaging impacts on both economies. But in a single week, Trump went from threatening tariffs on $50 billion of Chinese imports to threatening tariffs on $150 billion of imports. China responded by saying it was ready to put import taxes on nearly 40 percent of U.S. products sent to China.

The odds are still good that the trade tiff ends with China giving Trump some small to moderate concessions before the full-blown tariffs take effect. Laffer, who speaks with the president and his top economic advisers, said Trump told him the tariff threats were just a bargaining tactic.
“I don’t think we should lose sleep over the tariffs. They are bad economic policy, and both sides have got far too much to lose to build this trade skirmish into an all-out trade war,” said David Kelly, chief global strategist at J.P. Morgan Asset Management.

But the biggest risks to the U.S. economy right now are inflation, a stock market freakout and a corporate or consumer pullback on spending. Enacting tariffs would make all three of the risks greater.

In a trade war, U.S. consumers would probably see higher prices on TVs, shoes and other “made in China” items at stores, the stock market would continue to sink, and businesses might decide that they don't want to make as many new investments after all, because they don't know what the tariff situation is likely to be in the coming months.

Republicans certainly want to avoid any damage to the economy ahead of the midterm elections, but if the GOP loses heavily in November, Trump might return to protectionism. He would struggle to get anything else done with a Democratic Congress, and trade is an area where he can act quickly — and mostly on his own.

“With respect to the Trump administration, its political success will rise and fall with the economy,” Kudlow said Friday.


http://www.msn.com/en-us/news/politics/analysis-trump-goes-full-‘maga’-on-the-economy-in-year-two/ar-AAvAWSG?ocid=ientp
 

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Trump's tax cut not for everyone: 1 million Californians will owe $12 billion more next year

Read more here: http://www.sacbee.com/news/politics-government/capitol-alert/article209015539.html#storylink=cpy
Lol - karma

They’re the Californians who will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.

Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.
 

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Lol - karma

They’re the Californians who will lose a collective $12 billion because the new law caps a deduction they have been able to take for paying their state and local taxes, according to a new analysis by the Franchise Tax Board.

Very wealthy Californians earning more than $1 million a year will pay the lion’s share of that money, with 43,000 of them paying a combined $9 billion.
Our district critter told an audience that the proposed tax cuts were bad. Doubt he had an explanation but I am pretty sure if he cried about that deduction he wouldn't get much sympathy. Hopefully people are seeing all the hype for what it is. Anybody hear much out of the Dems these days? Sure seems quiet.
 

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Trump delays steel tariff hike against EU and other allies for 30 days, easing fears of a trade war

  • White House postponed the tariff hike just hours before it was set to take effect
  • EU, Canada and Mexico will have until June 1 to negotiate exemptions
  • Trump imposed tariffs of 25% on steel imports and a 10% on aluminum in March


Read more: http://www.dailymail.co.uk/news/article-5676559/Trump-delays-steel-tariff-hike-against-EU-allies-30-days-easing-fears-trade-war.html#ixzz5EFmJ06Nz
Follow us: @MailOnline on Twitter | DailyMail on Facebook
 

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https://finance.yahoo.com/news/apple-just-fueled-everyone-apos-134750037.html

Apple just fueled everyone's biggest fear about how companies are going to use their extra tax reform cash (AAPL)

Joe Ciolli
,
Business Insider•May 2, 2018


Tim Cook
Reuters

  • Apple announced it will buy back another $100 billion of its own stock on Tuesday, as part of its quarterly earnings report.
  • When the GOP tax law was passed, there were fears that companies would use the extra cash to enrich shareholders, rather than employees — and this would seem to fuel those concerns.
  • Apple's chief financial officer, Luca Maestri, defended the buyback on an earnings call Tuesday evening, saying the company's stock is undervalued and arguing it has enough cash to satisfy multiple corporate needs.
When President Donald Trump's massive tax plan was announced, experts immediately feared the worst about how companies would spend the additional cash they'd soon have for deployment.
They figured corporations would choose to enrich shareholders through buybacksand dividends, rather than reinvest in their own businesses or create jobs.
And their fears were valid. Back in 2004, the last time a tax holiday occurred, companies used a whopping 80% of their proceeds on share repurchases. This time around, Bank of America Merrill Lynch expects just 50% of it to be used for buybacks — but the jury is still out.
Apple didn't help matters much on Tuesday, when it said it'll buy back an additional $100 billion in stock — an eye-popping number that marks the biggest increase on record for a company already known for their history of massive repurchases.
Sure, the announcement boosted Apple's stock immediately — it was 3% higher in early trading on Wednesday — but it also fueled concerns that companies are spending their tax reform windfall with shareholders in mind, rather than employees.
Apple's chief financial officer, Luca Maestri, didn't seem particularly concerned on the company's earnings call on Tuesday. He rationalized the buyback authorization by saying Apple's stock is still undervalued, and said the firm is still sinking money back into its business.
Basically, the argument is that Apple has enough cash to handily do both. And since it recently expressed a desire to get its net cash balance down to zero, perhaps its recent behavior makes a bit more sense.
"Our balance sheet and our cash flow generation are strong and that allows us to invest significantly in our product roadmap and still return a very meaningful amount of capital to our shareholders," said Maestri on the call.
Looking outside of Apple, UBS finds that corporate reinvestment — as measured by capital expenditures — has surged 39% so far this earnings season. That's outpaced net share buybacks (16%) and dividends paid (11%) by more than double, and is the fastest rate since 2011, according to the firm's data.
That should put investor minds at ease somewhat as they study the use of tax reform proceeds. There appears to be enough cash floating around to meet multiple needs at once — and it would seem Apple is trying to do just that.

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it also fueled concerns that companies are spending their tax reform windfall with shareholders in mind, rather than employees.
It's their Right to spend it how they want to
...and I would contend that many, if not all, of Apples employees own stock of some type too. So stuff that makes "the evil stockholders" more money, also make the employees more money too. I bet they all have at the least, a 401k.
 

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Trumps next target, the great tech tax dodge


-- Published: Wednesday, 2 May 2018

As a general rule, the most successful man in life is the man who has the best information

Donald Trump’s enmity towards Amazon and its founder Jeff Bezos, the richest man on Earth, has indeed been going on for a long time, and it’s easy to frame the tiff as two billionaires marking their territory like two pit bulls in a fight ring. After all, Trump is a billionaire capitalist too, and it’s not as though he hasn’t done his fair share of tax dodging.

But the success of Amazon and other giant tech companies - Facebook, Twitter, Google, Apple and Microsoft come to mind - does run up against Trump’s vision of America, where jobs are created or brought back to the United States, corporate taxes are kept low and companies pay them, and trade deals are fairly negotiated that do not put US firms at a disadvantage. It’s all part of “Making America Great Again”. Amazon represents the new economy where commerce is done online, the business is global, and tens of thousands of employees work for Amazon outside of the US.

While Trump has aimed his economic bullets at China, mostly, threatening $150 billion worth of tariffs, and his closest trading partners Canada and Mexico through the renegotiation of NAFTA, he has also brought Facebook and Amazon into the spotlight, the latter through his very public feud with Bezos, and the former due to Facebook’s Cambridge Analytica scandal.


With every negative tweet Amazon loses billions. Since Axios first reported Trump is “obsessed” with the company on March 28, Amazon has lost $60 billion in market value. The tech-heavy Nasdaq has also been hammered, dragged down by heavyweights Amazon and Facebook, (although it’s rebounded since the beginning of April) but also over the perception that Trump is envisioning more regulation on the sector.

“He’s wondered aloud if there may be any way to go after Amazon with antitrust or competition law,” according to a source who’s spoken to the President. Whether or not that happens, there is absolutely no doubt that Trump has a point in his criticism of large tech companies for paying little to no taxes. This article is about the “great tech tax dodge” that Amazon, Facebook, Google, Apple and others have been practising for years. The colossal amount of money that has stayed out of the government’s hands is a libertarian’s dream, but it’s also money that could have been put against the $20 trillion US debt, and that had to be covered by other companies and individuals who are paying their fair share, so that the US government could pay its expenses. If this article makes you hopping mad, it should.

Trump vs Bezos

Briefly, let’s recap what Trump says about Amazon, and separate some of the truth from fiction. The fight began in 2015 when Trump accused Bezos of using the Washington Post, the newspaper he owns, as a tax shelter for Amazon - even though the Post is owned by Bezos, not Amazon. But that hasn’t stopped Trump from calling the Washington Post a “lobbying tool for Amazon” through anti-Trump Administration coverage that fits with politicians who are sympathetic to Amazon and are unlikely to go after its tax policy.

Amazon is a tech behemoth that is also a retail industry disruptor. It employs some 566,000 people worldwide, 341,400 more than it did at the end of 2016. Nearly two-thirds of US households have an Amazon Prime account. Online sales now account for 11.7% of total retail sales, according to Forbes, while major retailers like Sears and Macy’s have closed hundreds of stores. Axios points out that Trump is a man of the 1950s, whose wealthy friends tell him Amazon is destroying their businesses - such as shopping malls and bricks and mortar stores:

“Trump told Axios last year he doesn’t mind Facebook because it helps him reach his audience. He’s an old-school businessman who sees the world in terms of tangible assets: real estate, physical mail delivery, Main Street, grocery stores. It reminds me of the story Jim [VandeHei] wrote a while back about Trump’s fixation with 1950s life. Amazon takes direct aim at some of the core components of mid-century business.”

More practically, Trump takes issue with Amazon using the US Postal Service to deliver its packages, claiming Amazon pays less than it should, as well as skirts paying state taxes. It’s been shown that in fact Amazon pays the same low rates as other bulk shippers and collects sales tax in every state that charges it. But that’s not the real issue here. The real issue is how much tax Amazon and other tech companies have avoided paying. It is truly mind-boggling.

Trump carried his apparent hatred of Bezos and Amazon into the election campaign, using the company as a whipping boy to drum up support for tax reform. This also included lowering the corporate tax rate - before the tax bill was passed in December US corporate taxes were among the highest in the world - which fit into Trump’s vision of repatriating profits long held overseas by companies like Amazon and finally making them pay what they owe. Lower-taxed companies would be more profitable and therefore create more jobs in America, his thinking went, although that hasn’t actually happened.

Repatriation 2.0

The Republican tax overhaul lowered corporate taxes from 35 to 21%, and also changed the rules around the repatriation of corporate profits from the estimated $2.6 trillion in profits multinationals hold overseas. Bringing them back to America (“repatriation”) would mean getting taxed at 35% so most large companies deferred them, meaning they were kept offshore tax-free. Under the new law, these profits get mandatorily taxed, one time, at either 15.5% for cash holdings or 8% for illiquid investments. For example Apple under the new legislation is allowed to repatriate $252 billion in foreign cash, and will pay just $39.1 billion, or 15.5% in taxes, not 35%.

While Reuters points out that companies can manipulate their cash positions so they pay the lower rate, thus saving billions in taxes, the main point is that unless new laws are passed to avoid the tax dodges practised by the big tech companies and other large American firms, the IRS will continue to lose out “bigly”, to use a Trumpism.

And the IRS isn’t the only loser from this repatriation game. When repatriation was done by President George W. Bush back in 2004, the idea was the same (Ie. to spark an investment boom with all that cash plowed back into US companies) but it was regarded as an abject failure because up to 92% of the profits went into share buybacks - which as we have written about recently, benefit company executives, not individual shareholders. Why? Because repurchasing shares means money is not being spent on the company itself, such as buying new equipment or expanding, while also inflating earnings per share by reducing the share count. Buybacks also make it easier for executives to hit targets, and receive bonuses, by reducing the number of shares.

Tax evasion: by the numbers

You probably figured that most big companies hire large accounting firms to help them minimize their tax burden, and you’d be right. But the problem goes much deeper than this. Did you know that almost a quarter of large profitable US corporations in 2012 paid no tax at all? That’s right. Zilch.

Those that did, paid well below the 35% corporate tax rate - on average, 14% between 2008 and 2012 according to the Government Accountability Office (GAO).

“There is something profoundly wrong in America when one out of five profitable corporations pay nothing in federal income taxes,” Democratic presidential candidate Bernie Sanders, who asked for the numbers, said. “We need real tax reform to ensure that the most profitable corporations in America pay their fair share in taxes. That means closing corporate tax loopholes to raise the revenue necessary to rebuild America and create millions of jobs.” Tax reform. Probably the only thing that Trump and Sanders agree on. Read on for Sanders’ Top 10 Corporate Tax Avoiders.

The GAO explains the discrepancy as due to tax deductions for losses companies had in previous years that they carried forward. Or making profits offshore that they haven’t yet brought back to the US. But there’s something much more nefarious going on, as we shall soon see. But first, another few numbers.

The IRS estimates that tax evasion cost the federal government $458 billion a year between 2008 and 2010; the tax collectors think only $52 billion of that will ever be recovered.

Another report from Oxfam found that the country’s 50 largest corporations have stashed over a trillion dollars offshore (the total is actually $2.6 trillion, as mentioned above), in over 1,500 subsidiaries in tax havens like the British Virgin Islands and the Caymans, costing the US government about $111 billion annually. In case you were wondering, this practice isn’t illegal.

Just take Apple as an example. The Panama Papers investigation found the iPhone maker had accumulated $252 billion in offshore profits. Out of $41 billion Apple made in non-US profits, it paid taxes of just $2 billion, or 4.8%. Worldwide, multinationals withhold an estimated $500 billion from public coffers, The Guardian reported.

Sixty years ago corporations paid a third of federal government revenue; today, they pay about one-tenth. According to Americans for Tax Fairness, the average American family paid more taxes in one year than General Electric and dozens of companies paid in five.

How they do it

One of the most common is known as “tax inversion”, explained in this video. Here the large company buys a smaller company in another country. The larger company then takes the smaller company’s citizenship. This allows the larger company to take advantage of the foreign country’s lower tax rate without actually moving operations. The larger company also doesn’t pay the US tax rate on profits it earns overseas, until it repatriates them.

Three other tactics for avoiding taxes are:

· The US firm channels its profits through a subsidiary and then makes the subsidiary “disappear” by checking a box on an IRS form.

· The company sells the right to patents and licenses to an offshore subsidiary, in a tax haven, at a low price. The subsidiary then licenses back to the US parent at a steep price, allowing it to sell its products in the US. This makes it appear the company is making profits in the tax haven rather than the US. This is Amazon and Google’s preferred means of tax evasion (see below).

· Banks and firms with large financial units move US profits offshore using the “active financing exception” which makes it easier for multinationals to expand overseas. They avoid tax by creating “captive” foreign financing and insurance subsidiaries.

Big US tech companies have become experts in using some or all of these methods in different and complex variations.

Amazon

Jeff Bezos’ distaste for paying taxes goes as far back as 1995 when he was deciding where to set up his new e-commerce business. The story goes that his first choice was an Indian reservation near San Francisco where the taxes would have been considerably lower than anywhere else, but California vetoed the plan.

Bezos didn’t give up, and found the best way to be a tax evader was to get out of the US. Not literally, but by setting up his global headquarters in Luxembourg, of all places. There are reportedly 1,400 Amazon employees in the tiny landlocked European nation, compared to over 40,000 in Seattle.

The relationship with Luxembourg gets even juicier when one discovers that Jean-Claude Juncker, the former Luxembourg Prime Minister, and the current head of the European Commission (the executive branch of the EU) helped Amazon to locate there and met with several Amazon tax officials to set up the company’s European tax structure - allegations which Juncker of course denies.

Newsweek reports the tax structure was organized through “a labyrinth of subsidiaries designed to shift profits into Luxembourg” called Project Goldcrest:

“Project Goldcrest, which is still in place, uses a series of complex intercompany contracts to transfer intangible assets—vital software, trademarks and other intellectual property (IP)—to one of Amazon’s Luxembourg companies, Amazon Europe Holding Technologies. A separate subsidiary, Amazon EU Sarl, then pays AEHT huge sums every year in royalty fees, reducing the amount of taxable income within the company.

In return for controlling the European licensing rights, AEHT makes payments to one of Amazon’s U.S. companies. U.S. authorities believe these payments are too low, which is why the case has gone to court. Amazon has largely avoided federal taxation by managing its books to avoid reporting any meaningful profits over the past 20 years. In the last quarter of 2015, for example, Amazon paid just $73 million in taxes on $35.7 billion in revenues.” Newsweek

The European Union accused Luxembourg of giving illegal tax breaks to Amazon and ordered the country to recover $295 million in back taxes. The IRS then took Amazon to court, but lost in a landmark case in 2017 - meaning that Amazon avoided having to pay $1.5 billion in taxes.

The IRS said “Amazon overestimated the value of ‘intangible’ assets, such as software and trademarks, it had transferred to a Luxembourg unit, Amazon Europe Holding Technologies SCS” according to Fortune.

Amazon reportedly made $5.6 billion last year and paid nothing in federal taxes. The e-commerce giant, whose CEO’s net worth is $105 billion, is projecting a $789 million windfall from the Republicans’ tax bill. Meanwhile a January report found more than 10% of Amazon employees in Ohio rely on food stamps to buy groceries.

Amazon also pads its profits by allowing customers to avoid state sales taxes and share the savings according to Business Insider.

Other countries in which Amazon does business have also lost out on billions in tax revenue. The Mirror reported in 2016 that five of the world’s biggest tech companies avoided paying over a billion British pounds in taxes. Amazon, Apple, eBay, Facebook and Google reported revenues of just £2.6 million but the UK sales of the five firms were closer to £18 billlion - a discrepancy that meant the five paid just £45 million in corporation tax - a rate of 0.25%.

A February Esquire article on Silicon Valley’s “tax-avoiding, job-killing, soul-sucking machine” notes “The Big Four” tech giants - Amazon, Apple, Facebook and Google - have a combined market cap of $2.8 trillion (the same GDP as France) and represent a quarter of the S&P 500 Top 50.

With a market value of $591 billion Amazon is worth more than Walmart, Costco, T. J. Maxx, Target, Ross, Best Buy, Ulta, Kohl’s, Nordstrom, Macy’s, Bed Bath & Beyond, Saks/Lord & Taylor, Dillard’s, JCPenney, and Sears combined, writes author Scott Galloway. Facebook and Google (now Alphabet) are together worth $1.3 trillion.

Between 2007 and 2015, Galloway calculates Amazon paid 13% of its profits in taxes, Apple 17%, Google 16%, and Facebook 4%. Recall the corporate tax rate until 2018 was 35% and the average tax rate for the S&P 500 was 27%.

Google/ Alphabet

What do Ireland, Holland and Bermuda have in common? Nothing, apart from the fact that the three countries are linked into a complicated scheme for California-based Google to take advantage of loopholes that help it avoid paying US taxes. In 2003, the year before it went public, the world’s most well-known search engine started moving the parts in place. It first transferred all its intellectual property to an entity it set up called Google Ireland Holdings. Why Ireland? Because the home of leprechauns, shamrocks, some pretty good whiskey and U2 has a lower tax rate than the US and allows Google Ireland Holdings to be incorporated there but “managed” in Bermuda, which has no corporate tax. Another Irish subsidiary, Google Ireland Limited, was created and granted a license to use the technology owned by Google Ireland Holdings. Google Ireland Limited is the company that licenses Google’s technology to other countries, for which it is paid royalties. And in the final step, Google Ireland Limited moves its profits to Bermuda.

A report in The New York Times states that in 2015 $15.5 billion in profits went to Google Ireland Holdings in Bermuda, despite having no employees there. That equates to each inhabitant of the island making the company $240,000. The tax shell game saved Alphabet, Google’s parent company, $3.6 billion in taxes.

NYT also drops this gem: nearly two-third of all profits made by US multinationals are reported in six countries where the tax is either zero or very low: the Netherlands, Bermuda, Luxembourg, Ireland, Singapore and Switzerland.

With me so far? Now it gets complicated. Adding another layer of tax avoidance known as the “Double Irish”, which sounds a lot like a hardball, a pair of Irish companies are formed to turn intellectual property payments into tax-deductible royalty payments. Google then forms a subsidiary in Ireland and signs the European intellectual property rights to the new company. The subsidiary in return gets to market the products in Europe - meaning all the European income is taxable in Ireland rather than the US. However no tax is paid in Ireland at this point, because the Irish subsidiary moves its headquarters to Bermuda. A second Irish subsidiary is disregarded for US tax purposes by ticking a box on the IRS form (see bullet point one above). The first Irish company then licenses products to the second Irish company, which receives royalties. The result is a 12.5% tax rate in Ireland versus 35% in the US (now 21%). The tax can be reduced further because the royalties going to the Bermuda company are tax-deductible. According to SEC filings, Alphabet’s tax rate outside the US was 6.4% in 2015.

With a “Dutch Sandwich”, the arrangement starts with a Double Irish, and adds a third subsidiary in the Netherlands, which according to Forbes, is Google’s model. Facebook and Google are thought to use similar tax structures, with Facebook reportedly flipping over $700 million to the Cayman Islands as part of a “Double Irish”.

Facebook

Facebook has been in the news a lot lately over privacy concerns relating to the hijacking of personal data by a political firm, but it is less known that the world’s largest social media platform is also one of the most successful tax dodgers. Think about that next time you “like” something. Along with offshore tax shelters, Facebook avoids paying US tax through a loophole whereby highly paid employees receive stock options rather than a salary. When companies do this, they get big tax deductions. For example, an executive is given the option to buy a million shares at 5 cents apiece, and later cashes them when they’re at $20 a share. The difference can be deducted by the company as a tax break, as explained by Mother Jones. The companies can “store” these tax breaks, allowing them to avoid paying taxes for years. The chart below shows how much tax 12 companies saved through this loophole:


Mother Jones bashes a counter-argument that the executive who cashes in his options has to pay income tax at a higher (individual) rate versus the corporate rate, because under the loophole the company is allowed to effectively write off the employee’s salary:

“If Facebook buys Zuckerberg a lottery ticket for a buck, and then he wins a million dollars, should the company be able the write off that million? That’s absurd, but that gives you a sense of what’s going on here,” the publication quotes Matt Gardner, executive director of the Institute on Taxation and Economic Policy.

Facebook is also playing tax games in the UK with its British arm. The Guardian notes in 2014 the company’s UK employees received over £210,000 in pay and bonuses, while Facebook UK paid just £4,327 in corporation tax. Facebook also inexplicably reported a loss that same year of £28.5m, enabling it to pay under £5,000 in taxes, despite shelling out over £35m to its 362 staff in a share bonus scheme.

Apple

Who doesn’t love Apple, with its user-friendly operating system, easy compatibility between devices, and shiny lightweight phones? You, once you learn about how America’s favorite handheld company manages to dodge billions in corporate taxes.

Earlier I mentioned that Apple under the new tax code will pay $39.1 billion in taxes at the new 15.5% rate for repatriated foreign cash totalling $252 billion. At the previous 35% rate it would’ve paid $78.6 billion in taxes - enabling Apple to avoid nearly $40 billion in taxes. Hardly something worth cheering about. Fortune also notes that between them, Microsoft, Facebook, Apple and Alphabet spent $16.3 million in the third quarter lobbying the federal government for a one-time, 15.5% “tax holiday” for their repatriated overseas profits. Even more galling is that Apple announced that its planning to create 20,000 new jobs as a result of the tax changes. But as Fortune columnist Josh Hoxie, director of the Project on Opportunity and Taxation, opines, the last time firms were allowed to repatriate cash held overseas, in 2004, the top 15 repatriating firms actually cut their US workforce by 21,000 jobs.

Apple is also no dummy when it comes to offshore tax loopholes. According to the Paradise Papers, in 2014 Apple learned that Irish tax authorities were going to close loopholes it had used to funnel overseas profits sheltered from US tax. The tech giant therefore simply moved its tax shelter to Jersey, the English Channel island, which does not tax corporate income. US Senators were apparently incensed by the move, including Republican Senator John McCain, who said:

“Apple claims to be the largest US corporate taxpayer, but by sheer size and scale it is also among America’s largest tax avoiders … [It] should not be shifting its profits overseas to avoid the payment of US tax, purposefully depriving the American people of revenue.”

Well said, John.

Conclusion

US technology companies have rewarded shareholders and been a major force behind the stock market bull over the past few years, so it’s easy to look the other way if you’re one of the ones sharing their profits. But the success of tech comes at a price, and it’s a price being paid by US taxpayers who are owed a hell of a lot more than they’re getting from these corporate tax avoiders – some who it should also be noted, are making huge profits off of the backs of their users, who either willingly or without their knowledge, are surrendering their private information to advertisers who are free to pester them with pop-up ads and videos that follow people around like a bad smell.

It’s time to get serious about corporate tax evasion. The simplest solution would be to tax multinationals on where they actually do businesses, not where they artificially, and opaquely, shift their profits. Like to Bermuda, the Cayman Islands or Jersey. But nothing will happen unless officials at the highest level of the US government force them to change their tax, or more appropriately, anti-tax policies. Enter President Trump. Love him or hate him, Trump may be the guy to take the tech giants to the wall. And make them finally pay what they owe. Are you pissed off, have you got the great tech tax dodge on your radar screen?

If not, perhaps you should.

Richard (Rick) Mills
aheadoftheherd.com

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Trade Rows Spell Gain, and Pain, for U.S. Grain Exporters
May 2, 2018 by Reuters


Photo: By ImagineStock / Shutterstock



By Karl Plume and P.J. Huffstutter CHICAGO, May 2 (Reuters) – Global grain marketers have seized upon trade tensions between the United States and several of its top export markets, including China, to turn around struggling trading units following one of the toughest years ever for the industry.

After five years of bumper harvests worldwide that depressed crop prices, trading margins are on the rebound. For Archer Daniels Midland Co, market volatility from the trade disputes, as well as a drought in South America, helped its trading unit report the best first-quarter performance in four years on Tuesday.

ADM and its rivals make money buying, selling, storing and processing crops. With networks of elevators, mills and processing plants around the world, the companies can capitalize on shortages in some geographies and surpluses in others.

Taking advantage of market gyrations could be a salve for ADM and its rivals Bunge Ltd and Cargill Inc, as they cope with the risks to exports posed by the wave of trade protectionism, analysts said.

“Longer-term, open and free trade is important for the global grain companies, but the near term uncertainty that the trade issues are causing are creating merchandising opportunities,” said Farha Aslam, food and agribusiness analyst with Stephens Inc.

The company’s trading unit represents a fraction of ADM’s overall business. Following a recent restructure, its origination unit, which includes its trading business, earned $45 million in the first quarter of 2018, representing about 6 percent of the group’s operating profit for the quarter.
ADM Chief Executive Juan Luciano remained cautious on the future.

“We continue to closely monitor trade developments both in terms of NAFTA, as well as U.S.-China developments that seem to evolve almost on a daily basis,” Luciano said during an earnings day conference call, referring to negotiations over revising the North American Free Trade Agreement.

Growing trade disputes are disrupting the agricultural supply chain worldwide, from corn buyers in Mexico shifting purchases to Brazil, to ships carrying U.S. sorghum exports turning around after China slapped on hefty tariffs.

Overall, the United States exported $138 billion in agricultural products in 2017, according to U.S. Census data.

ADM rival Bunge reported its first quarter results on Wednesday. It did not give details on its trading unit, other than to say that it saw “higher results” in global trading and distribution due to increased margins. A change in the fortunes of its trading unit could help it fend off potential suitors. Bunge has been the subject of takeover talk from Glencore and ADM.

Bunge’s trading operation is a part of the larger agribusiness unit that also includes oilseeds and grain processing. In its fourth quarter results, it said margins for grains trading were “under pressure.”

Just a year ago, ADM was cutting costs and consolidating operations as it struggled with poor earnings. It now expects “significantly improved” results for its wider grain trading operations in the second half, boosted by dry weather affecting crops in Brazil and Argentina, it said on Tuesday.

(Reporting by Karl Plume and P.J. Huffstutter in Chicago, Editing by David Gaffen, Rosalba O’Brien and David Gregorio)

(c) Copyright Thomson Reuters 2018.

http://gcaptain.com/trade-rows-spell-gain-and-pain-for-u-s-grain-exporters/
 

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Ship Carrying U.S. Sorghum to China Changes Course to South Korea
May 3, 2018 by Reuters



MV Peak Pegasus (United World). File Photo: MarineTraffic.com



BEIJING, May 3 (Reuters) – A vessel carrying 58,503 tonnes of sorghum from the United States switched its destination from China to South Korea early on Thursday, according to Thomson Reuters Eikon ship tracking data.

The Peak Pegasus loaded U.S. sorghum from trader ADM’s Corpus Christi grain elevator in Texas and departed on April 3 for Nansha in southern China, according to U.S. Department of Agriculture data.

It is now due to arrive in Gunsan in South Korea on May 10, according to the data.

The cargo is one of almost two dozen bought by China but now stranded after Beijing said it would impose a hefty deposit on U.S. shipments of the grain in an anti-dumping probe.

Importers now facing losses of millions of dollars on their cargoes are trying to resell the grain to buyers elsewhere but are being forced to offer steep discounts.

Four cargoes have been resold to Saudi Arabia and Japan, and another is heading to Spain. If the ‘Peak Pegasus’ unloads in South Korea, it would be first of the Chinese cargoes to be resold in that country.

Several vessels are still at anchor off the Chinese coast however, shipping data shows, while others are still en route to China, previously the world’s top buyer of sorghum.

Some Chinese sorghum importers have asked Beijing to waive the 178.6-percent anti-dumping deposit on U.S. imports already at sea.

U.S. agricultural commodities trader Archer Daniels Midland Co, one of the top exporters of the grain, said on Tuesday it will take a $30 million hit to its trading profit in the second quarter due to disruption to its sorghum sales.

(Reporting by Dominique Patton; editing by Richard Pullin)

(c) Copyright Thomson Reuters 2018.

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US-China Trade Talks End Without A Deal After Trump Hikes Deficit Cut Demand


by Tyler Durden
Fri, 05/04/2018 - 06:14


Moments ago, the US trade delegation led by Treasury Sec. Steven Mnuchin, and which included Commerce Sec. Wilbur Ross, US Trade Rep. Robert Lighthizer, and White House trade adviser Peter Navarro, left China after two days of U.S.-China trade discussions ended on Friday without a concrete deal, only an agreement to keep on talking.

On Friday afternoon, China’s official Xinhua News Agency reported that both sides reached a consensus on some trade issues, without providing details. More importantly, they acknowledged major disagreements on some matters and will continue communicating to work toward making more progress.


US Treasury secretary Steven Mnuchin (centre) and US Commerce Secretary Wilbur Ross (second from right) walk through a hotel lobby as they head to Diaoyutai state guest house to meet Chinese officials in Beijing


The biggest surprise, according to the FT, is that heading into the talks the US delegation asked China to cut the bilateral trade deficit by $200BN by 2020, reduce tariffs and cut subsidies for emerging industries, according to a document seen by the Financial Times.

The surprise is that the revised $200BN target is already double the $100BN amount that President Trump demanded just two months ago be wiped from last year’s $337BN US deficit in goods and services. According to the document, the US aimed to cut the deficit by $100bn in the year beginning June 1, and by a further $100bn between June 2019 and May 2020.

Some more details on the list of US demands from the WSJ:

  • The first U.S. request was for China to reduce the bilateral trade deficit by at least $200 billion by the end of 2020. The U.S.-China bilateral deficit in goods was $375 billion last year. President Donald Trump has repeatedly said he wants China to slash the figure by $100 billion a year.
  • The U.S. also demanded that China immediately stop providing subsidies and other assistance for advanced technologies outlined in the government’s Made in China 2025 plan. The initiative aims for China to dominate future frontiers of manufacturing and industry, from robotics and aviation to new-energy vehicles.
  • The U.S. also asked China to cut tariffs on “all products in non-critical sectors” to levels that are no higher than the levels that the U.S. applies to imports, according to the document.
  • In addition, the U.S. also asked China to guarantee that it won’t hit back at the U.S. for any actions taken in the disputes over intellectual property. It also asked that China withdraw its challenges in this area at the World Trade Organization.
  • Chinese officials believed the proposal was “unfair”

By early afternoon Friday neither side had flagged plans to give a briefing on the discussions, and the American team departed shortly after.
According to Bloomberg, earlier in the day Mnuchin said that the U.S. and China had been having a “very good conversation,” without elaborating. While China hasn’t indicated any detail on what it may be prepared to agree to, a senior official sounded a defiant tone ahead of the meeting, and the state news agency warned against “unreasonable demands”, a stark difference to the CNN rumor released on Thursday that the deals would be successful, and which sent the market soaring.

Foreign ministry spokeswoman Hua Chunying said at a Friday afternoon briefing there’s no specific information on the talks.

To be sure, the U.S. tempered expectations of a major breakthrough from the discussions, which were expected to focus on concerns over China’s state-driven economy, forced technology transfers and America’s widening trade deficit with China. Underscoring the friction, the US trade report released Thursday showed the trade gap with China surged by 16 percent to more than $91 billion in the first quarter of this year.

Quoted by Bloomberg, an unnamed senior Chinese government official said before the talks the government won’t accept U.S. preconditions for negotiations such as abandoning its long-term advanced manufacturing ambitions or narrowing the trade gap by $100 billion. We can only imagine what they said when they learned the latest demand was a $200 billion deficit cut.

During the second day of discussions, across town at Beijing’s Great Hall of the People, President Xi Jinping indicated China will continue to embrace globalism, saying it wants to actively take part in world governance. Those who reject the world will be rejected by the world, he said in a speech commemorating the 200th anniversary of Karl Marx’s birth.​

The disappointing outcome will probably not come as a big surprise as analysts weren’t very optimistic about the potential outcomes beyond the two countries possibly delaying on the threat of tit-for-tat tariffs.

“Our expectations are low. The U.S. negotiating position is unclear -- indeed it’s not even clear if the U.S. representatives have a unified view on what they want to achieve,” Tom Orlik, chief economist at Bloomberg Economics in Beijing, wrote in a report. “The Chinese side has already made concessions and won’t rush to make more. The past few weeks have shown that markets can be roiled by tariff chatter, so that’s certainly a possibility in the next couple of days.”​
If anything, the meetings were an opportunity for the two sides to exchange their views face to face after the official channel for U.S.-China high-level economic talks were suspended last year.

In response to the news, the yuan declined in the late afternoon, reversing earlier gains, and the USDCNH jumped from 6.3450 to 6.365 as news of the failure to reach an agreement spread. "The market has been disappointed as the China-U.S. trade talks failed to make a breakthrough" said Ken Cheung, Asian FX strategist at Mizuho Bank, adding that "this outcome increases the possibility for China to curb further yuan appreciation, given concerns over the negative impact from a trade conflict on the nation’s economic growth."



Having surged on the rumor of a favorable trade talk outcome yesterday, US stocks are unchanged today after the talks ended without any tangible success.

https://www.zerohedge.com/news/2018...ut-deal-after-trump-raises-deficit-cut-demand
 

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'China has become very spoiled with trade wins!' Trump delegation departs Beijing after demanding $200BILLION reduction in trade deficit

  • Delegation led by Treasury Secretary Steve Mnuchin left Beijing on Friday
  • They presented Chinese counterparts with a four-page list of trade demands
  • Includes reducing the trade deficit $200billion by 2020, from $375billion
  • Also demands stronger protection of trade secrets and end to IP theft


Read more: http://www.dailymail.co.uk/news/article-5693489/Trump-delegation-departs-China-demanding-200BILLION-reduction-trade-deficit.html#ixzz5EcbMfkRx
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Murphy moves to save your property tax break from Trump. But will it stick?
Updated May 4, 2018 at 4:48 PM; Posted May 4, 2018 at 1:34 PM




By Samantha Marcus and Brent Johnson

NJ Advance Media for NJ.com

Gov. Phil Murphy just took action to save your federal property tax break from President Donald Trump's new tax law.

The Democratic governor signed a law Friday that gives New Jersey taxpayers a shot at getting around the Republican tax overhaul, which sets limits on how much they can deduct in state and local taxes.

The law Murphy, a frequent Trump critic, signed will soon allow New Jersey's towns, counties and school districts to set up charitable funds that taxpayers can contribute to instead of paying property taxes directly.

Homeowners can then deduct those charitable contributions from their federal income taxes, uncapped.

"We know that President Trump and the leadership in Congress cooked this up to benefit the states that were with him, instead of treating everyone fairly, and give a windfall to the wealthiest individuals in the biggest companies," Murphy said before signing the law at East Rutherford's town hall.

"It is divisive, it is wrong, and we will continue to fight," the governor added.

How Murphy's plan works

Both Democrat-controlled houses of the New Jersey Legislature passed the workaround (S1893/A3499) last month.

Garden State Democrats have been pushing it since Trump, a Republican, signed the federal tax overhaul in December.

That's because Trump's overhaul caps how much state and local taxes you can deduct to only $10,000.

New Jersey has the highest property taxes in the country, averaging $8,690 last year. The state and local tax deduction helped take the edge off.
Though 61.5 percent of New Jersey households will see a tax decrease under the federal law, that's a smaller percentage than 45 other states, according to the Tax Policy Center, a joint venture of the progressive Urban Institute and Brookings Institution.

And more than 1 in 10 New Jersey households will see their taxes rise, more than any other state, according to the group.

Murphy said Friday that Trump's cap is "a de facto tax hike on countless New Jersey households."

In East Rutherford, the governor noted, the average household loses more than $3,000 in state and local tax deductions under Trump's law.
But there's no guarantee the Internal Revenue Service will allow these deductions. The Trump administration is opposed to the workaround, saying the state and local tax deduction is an unfair subsidy for high-tax states.

Republican state lawmakers skeptical of the scheme have warned that New Jerseyans could wind up facing fines and penalties if the IRS rejects it.

But U.S. Rep. Josh Gottheimer, D-5th Dist., told NJ Advance Media he's received assurances from the IRS's acting director that the agency gives some leeway while new kinks are worked out.

"They don't penalize individual taxpayers for interpretation based on new law," Gottheimer said, adding taxpayers should understand that "ultimately, there could be a fight over this."

The matter might very well wind up in the courts, and Gottheimer said he is ready and anticipates the state is prepared to put up a fight.
"Do you sit there and pay more? Or do you try to do everything possible to pay less?" he asked. "We as towns and taxpayers should do everything possible to get our property taxes down."

Murphy said Friday that that sort of charitable giving isn't without precedent, and "it is is our deeply held opinion that if the IRS were to reconsider or review our situation, they would have to reconsider or review the other 33 state precedents that are out there."

Murphy's office released an early list of towns that want to opt in, including Bloomingdale, Haledon, Madison, Morristown, Parsippany-Troy Hills, Prospect Park and West Milford.

Gottheimer said he plans to hold a call with mayors in his district and state officials next week to help them along in implementing the funds.

U.S. Sen. Robert Menendez, D-N.J., praised Murphy for signing the law, saying New Jerseyans already send more to the federal government that they get back.

"Today we fight back against a tax policy that treats New Jersey like America's piggy bank," Menendez said at Friday's event.

U.S. Rep. Bill Pascrell, D-9th Dist., said this issue is not about party allegiance.

"If we don't come together, we're gonna be shafted," said Pacrell, who was also at the event.

Murphy also has proposed to raise the state's own cap on the deduction taxpayers can take from their state income taxes for property taxes from $10,000 to $15,000 as part of his first budget.

NJ Advance Media staff writer Jonathan D. Salant contributed to this report.

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US Farmers Choke On Trade War With China

by Tyler Durden
Sat, 05/05/2018 - 09:10


In April we told you about how some of the "unintended consequences" of Trump's steel tariffs, such as an Illinois farmer who put the brakes on a $71,000 grain mill, but had to hold off on the purchase because the seller raised the price 5% to account for the rising price of steel, or Iowa grain mill producer Sukup Manufacturing, which had to hike their prices for grain storage bins.

The Wall Street Journal now reports that the US-China "trade spat" is now affecting US exporters of soybeans, pork and other commodities.

Since early April, when China announced tariffs on some U.S. agricultural goods and threatened to target others, Chinese importers have canceled purchases of corn and cut orders for pork while dramatically reducing new soybean purchases, according to U.S. Department of Agriculture data. Chinese importers’ new orders of sorghum, a grain used in animal feed, have dwindled while cancellations increased.​
The chill in agricultural trade is sending jitters through the U.S. Farm Belt, which for years has dispatched farmers on trade missions to cultivate the Chinese market. -WSJ
As the summer persists and if nothing’s been resolved, it will start showing up as a pretty big hole in U.S. exports,” warned Soren Schroder, CEO of Bunge Ltd., one of the world’s largest soybean processors and traders.

Last Thursday, a ship bound for China carrying over 58,000 tons of American sorghum was diverted to South Korea after Beijing said it would levy a hefty deposit on U.S. shipments of the grain amid an anti-dumping probe.




Importers now facing losses of millions of dollars on their cargoes are trying to resell the grain to buyers elsewhere but are being forced to offer steep discounts.​
Four cargoes have been resold to Saudi Arabia and Japan, and another is heading to Spain. If the ‘Peak Pegasus’ unloads in South Korea, it would be first of the Chinese cargoes to be resold in that country. -Reuters

No date has been set in stone for the various tariffs China has threatened to impose, however senior US officials including Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer are meeting with Chinese officials in Beijing this week for negotiations. That said, even if they reach an agreement, the uncertainty created by the threatened tariffs has already done quite a lot of damage in the commodities sector.




China spent around $20 billion annually on US agricultural products in 2017 - and their growing apetite for pork and other meats requires huge quantities of feed grain, such as the aforementioned diverted sorghum. China-based importers are holding off on new soybean orders from the US, including their usual advance purchase of this fall's crops, as nobody wants to take the risk that a shipment will be slapped with a giant tariff by the time it is delivered. As such, China is buying more beans from South American suppliers, according to Bunge's Schroder.



Chinese buyers ordered about 255,000 metric tons of U.S. soybeans during the week ended April 5, according to the USDA, but new sales over the rest of the month came to about 11,000 metric tons, a sharp decline. Meanwhile, purchasers canceled nearly 76,000 metric tons’ worth of orders over the month. -WSJ

If [the Chinese] market closes, it could be devastating for local communities across the Midwest,” said Senator Chuck Grassley (R-IA) in a statement.

Despite the fact that US soybeans are around $15 a ton cheaper than beans from Brazil, a 25% tariff would cost Chinese importers around $100 a ton according to St. Louis-based trader Ken Morrison.

Ed Breen, chief executive of crop-seed supplier DowDuPont Inc., said Thursday that if China steps back from U.S. soybean purchases, growing markets like Mexico, Indonesia, Vietnam and Turkey would fill the void. -WSJ

Following China's tariff on US pork products on April 2, the USDA reported the largest weekly drop in net pork sales to the country since October 2016, and sales have declined further since then.




Given expanding pork supplies—boneless hams in cold storage hit a record 86 million pounds earlier this year—and another big slaughterhouse set to open later this year, the industry has been aiming to sell more to China, not less. -WSJ

“With the trade negotiations, a lot of unknowns with our future demand is clearly not a positive to the pork market at this stage,” said Jason Roose, VP of U.S. Commodities Inc., a livestock and grain advisory firm based in Des Moines, Iowa.

Given China's growing need for agricultural imports, some believe that China won't be able to avoid US crops for long. That said, the biggest danger in this trade war is US farmers and agricultural companies developing a reputation for unreliability - prompting other countries to maximize their own crop production, according to research firm AgResource Co's President, Dan Basse.

“Our biggest concern is the message this sends to the world,” said Mr. Basse, adding that “Brazil still has an abundance of land to bring into production, and farm profits there would rise to the chagrin of the U.S. farmer."​

Trump might be wise to note that the very US farmers suffering the unintended consequences of the trade spat with China are the very same folks from he promised not to neglect.


https://www.zerohedge.com/news/2018-05-04/us-farmers-choke-trade-war-china
 

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'Be cool, it will all work out!' Trump insists the US and China are working well on trade despite years of 'one-sided negotiations in favor of Beijing', after announcing he would help save telecom giant ZTE

  • President Trump tweeted that he is collaborating with Chinese president Xi Jinping to save telecom giant ZTE on Sunday
  • Last week ZTE announced that its major operations had 'ceased' after being slapped with an American technology sale ban
  • The ban on US sales to the firm arose from its skirting of US export controls
  • Congress has long seen ZTE and other Chinese telecommunications firms as a possible threat to national cybersecurity


Read more: http://www.dailymail.co.uk/news/article-5723971/Trump-says-working-Xi-save-telecom-giant-ZTE.html#ixzz5FQAsnG2X
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'Be cool, it will all work out!' Trump insists the US and China are working well on trade despite years of 'one-sided negotiations in favor of Beijing', after announcing he would help save telecom giant ZTE

  • President Trump tweeted that he is collaborating with Chinese president Xi Jinping to save telecom giant ZTE on Sunday
  • Last week ZTE announced that its major operations had 'ceased' after being slapped with an American technology sale ban
  • The ban on US sales to the firm arose from its skirting of US export controls
  • Congress has long seen ZTE and other Chinese telecommunications firms as a possible threat to national cybersecurity


Read more: http://www.dailymail.co.uk/news/article-5723971/Trump-says-working-Xi-save-telecom-giant-ZTE.html#ixzz5FQAsnG2X
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Hmmm...meet the new boss, same as the old boss???
 

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What's Trump's Real Trade Target: China Or Europe?

by Tyler Durden
Wed, 05/16/2018 - 02:00


Authored by Mike Shedlock via MishTalk,

Do Trump's endless trade volleys and sanctions have a clear target? Consider the possibility it's the EU, not China.

Out of the blue, and with open rebuke form Democrats and Republicans, Trump reversed sanctions on China.

This was peculiar in and of itself, but his rationale raised more than a few eyebrows.

All of a sudden. Trump is concerned about "too many jobs lost in China"!

One can rationalize this is about Rotting Cherries, Spoiled Pork, and Car Inspections, but could it be there is more than meets the eye?

Iran Sanctions
Bloomberg reports Iran’s Door to the West Is Slamming Shut, and That Leaves China.

China is “already the winner,’’ said Dina Esfandiary, a fellow at the Centre for Science and Security Studies at King’s College in London, and co-author of the forthcoming ‘Triple Axis: Iran’s Relations With Russia and China’.

Turning East



EU Disharmony
CNBC says Trump’s Iran sanctions will aggravate the French-German discord on EU reforms.

5,000 German Corporations Hit By Trump Policy

One can rationalize this all away, but a translation from Spiegel Online underscores the key idea: Trump's Policies Hit Nearly 5,000 German Companies.

Sanctions on Europe. Not Iran
Eurointelligence fills in some blanks.
Over the last three days it gradually dawned on the Germans that Donald Trump's sanctions against Iran are in reality sanctions against Europe, and Germany in particular. The combination of third-party sanctions and changes to US tax laws has led to a situation where a large number of German companies now have an overwhelming interest to shift their business to the US, according to Spiegel Online.​


FAZ notes that the helplessness of the German government is becoming increasingly evident, both economically and politically. The paper notes that even Angela Merkel is casting doubt on whether it is possible to maintain the Iran nuclear agreement after Trump's decision.​

Goodbye Europe
The cover of Der Spiegel this week this week, "Goodbye Europe" says it all.




Intent or Collateral Damage?
China responded to Trump tariffs by inspecting fruit to the point it rotted, pork until it spoiled, and Ford autos in such a manner that it required disassembly. Trump changed tactics.

It's easy to make a case that the only thing Trump understands is force.

It's also possible Trump is totally clueless and he is ruled only by spur of the moment decisions.

Finally, one can make a case that Trump's true intent all along was to bust up EU solidarity and everything else is just a sideshow.

It's easy to make that case even though Occam's Razor suggests the alternatives are more likely.

Regardless, the EU's roll over and play dead response to the sanctions is a sure loser for the EU and a sure winner for China.

Ball in Play
EU, the ball is in your court.

Last week Merkel stated it's time for “Europe to take its destiny into its own hands.”

OK - Do it!

Staring at the ball as it rolls over you does not win point


https://www.zerohedge.com/news/2018-05-15/whats-trumps-real-trade-target-china-or-europe
 

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The US And Europe To Go Separate Ways Pursuing Divergent Goals


by Tyler Durden
Wed, 05/16/2018 - 03:30


Authored by Peter Korzun via The Strategic Culture Foundation,

The US withdrawal from the Iran deal (JCPOA) has not buried it. That agreement is still very much alive. Even the US’s closest allies have refused to follow suit. The Iranian foreign minister is going on a trip just to save it. Tehran has the backing of all the signatories to the JCPOA, except America. That list includes Russia, China, and the EU, which keeps on trying to find an arrangement.



What the US did manage was to deal a heavy blow to trans-Atlantic solidarity. Washington set a six-month deadline for European companies doing business in Iran to get out. They’ll have to either terminate their operations or face heavy penalties. This means that the US has now become the main threat to Europe’s economy.

German Chancellor Angela Merkel slammed President Trump for his decision to pull out. The unofficial leader of Europe believes it “damages trust” in the global order. She is not alone. The UK and France have also admitted that they regret Trump’s move. French Finance Minister Bruno Le Maire stated that European powers should not be Washington’s "vassals."

On May 11, the German chancellor discussed the situation with the Russian president in a phone conversation. There’ll be more talks on May 18 when Angela Merkel visits the Russian resort city of Sochi. In defiance of the US, Germany became the first EU country to begin the construction of its portion of the Nord Stream 2 gas project on May 3. It did so even before Sweden and Finland had agreed to permit the pipeline to pass through their territorial waters. The US is adamant in its opposition to Nord Stream 2. Washington does not shy away from twisting the arms of any allies who dare to see Russia’s stable and cheap energy supplies as an alternative to America’s more expensive liquefied gas that must be transported by sea.

The US-European relationship has been clouded by Washington’s plans to introduce tariffs on steel and aluminium imports from the EU. The German chancellor has pointed out on a number of occasions that the US and EU have been clashing more frequently, which indicates that a wider schism is opening up within the Western alliance.

European leaders will discuss the US withdrawal from the Iran deal, as well as trade policy, at an EU summit that will be held June 28-29 in Bulgaria, at which the US is expected to face “a united European front.” Meanwhile, the EU is prepared to introduce countermeasures in response to the US-imposed punitive restrictions against European companies doing business with Iran. The idea has been floated of adopting an EU-wide blocking statute to nullify any US sanctions. A trade war is just around the corner. Can security interests coincide when economic ones differ so much? Not a chance.

The German chancellor believes that US global influence is on the wane and the time is ripe for Europe to stop relying on America’s military protection. Instead, it should “take its destiny into its own hands.” Some conflicts, such as a potential clash between Israel and Iran over Syria, may occur. Hostilities in the Middle East could trigger more streams of refugees into the Old Continent, but that’s a European headache. Why should Washington care?

Last month, Paris launched an initiative to set up a European intervention force in June that would operate independently of the EU’s current efforts. That would make it possible to include Great Britain, along with Germany, the Netherlands, and Denmark. So far too much of the EU initiatives has consisted of hot air. Significant strides have been made on paper but with too few results achieved in purely practical terms. Some EU tactical rapid-reaction units exist but they have never been deployed.

This time, Britain was quick to support the French initiative. In December, the EU created PESCO but it’s not clear if the UK would be a part of it after pulling out from the EU. London is seeking a security treaty with the bloc by 2019 — the Brexit deadline.

Meanwhile, EU High Representative Mogherini has announced her intention to submit for consideration by mid-June the new European Peace Facility that will streamline the EU's funding of defence and military operations. Seventeen joint European defense-program projects are being pursued within the framework of PESCO.

The US openly humiliated Europe by making a unilateral decision on such an important security issue as the Iran deal and threatening its closest allies with trade sanctions. Europeans are being told which energy projects are best for them. And prior to that, Washington made a unilateral decision to withdraw from the Paris climate agreement.

Sooner or later anyone’s patience wears thin. Today Europe is being pushed toward countering the “America First” message with a “Europe First” policy. Angela Merkel has the right to adopt her own “Germany First” approach. It looks like the European locomotive is shifting tracks to head off in that new direction. Despite all the nice words about common values and so on, these two entities are gradually diverging to go their separate ways.

https://www.zerohedge.com/news/2018-05-15/us-and-europe-go-separate-ways-pursuing-divergent-goals
 

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Trump Gives Merkel An Ultimatum: Drop Russian Gas Pipeline Or Trade War Begins

by Tyler Durden
Thu, 05/17/2018 - 15:33



It became clear just how important it is to the US for Russia's Nord Stream 2 gas pipeline project to fail two months ago when, as we described in "US Threatens Sanctions For European Firms Participating In Russian Gas Pipeline Project", the U.S. State Department warned European corporations that they will likely face penalties and sanctions if they participate in the construction of Russia's Nord Stream 2 on the grounds that "the project undermines energy security in Europe", when in reality Russia has for decades been a quasi-monopolist on European energy supplies and thus has unprecedented leverage over European politics, at least behind the scenes.




As many people know, we oppose the Nord Stream 2 project, the US government does,” State Department spokeswoman, Heather Nauert said during a late March press briefing adding that "the Nord Stream 2 project would undermine Europe's overall energy security and stability. It would provide Russia [with] another tool to pressure European countries, especially countries such as Ukraine." And speaking of Ukraine, recall that in 2014, shortly after the US State Department facilitated the presidential coup in Ukraine, Joe Biden's son Hunter joined the board of directors of Burisma, Ukraine's largest oil and gas company. Surely that was merely a coincidence.

Nauert also said that Washington may introduce punitive measures against participants in the pipeline project - which could be implemented using a provision in the Countering America's Adversaries Through Sanctions Act (CAATSA).

Fast forward to today, when the dreadfully named CAATSA act just made a repeat appearance; around the time Europe made it clear it would openly defy Trump's Iran sanctions, the WSJ reported that Trump told Merkel that if she wants to avoid a trans-Atlantic trade war, the price would be to pull the break on Nord Stream 2, according to German, U.S. and European sources.

The officials said Mr. Trump told German Chancellor Angela Merkel in April that Germany should drop support for Nord Stream 2, an offshore pipeline that would bring gas directly from Russia via the Baltic Sea. This would be in exchange for the U.S. starting talks with the European Union on a new trade deal.

While it had long been suspected that Trump would push hard to dismantle Nord Stream 2 just so US nat gas exporters could grab a slice of the European market pie, the aggressive push comes as a surprise, and as the WSJ notes, "the White House pressure reflects its hard ball tactics on trade, moves that have contributed to rising tensions between Europe and the U.S. and raised fears in export-dependent Germany of a tit-for-tat on tariffs that could engulf its car industry."





The Nord Stream II (or NS2) project was started in 2015 is a joint venture between Russia's Gazprom and European partners, including German Uniper, Austria's OMV, France's Engie, Wintershall and the British-Dutch multinational Royal Dutch Shell. The pipeline is set to run from Russia to Germany under the Baltic Sea - doubling the existing pipeline's capacity of 55 cubic meters per year, and is therefore critical for Europe's future energy needs.

NS2 is the second phase of an existing pipeline that already channels smaller amount of gas from Russia to Germany. Construction for the second phase started this week in Germany, after investors committed €5 billion ($5.9 billion) to the venture.

Trump has publicly criticized the Nord Stream 2 pipeline, saying at a meeting with Baltic State leaders at the White House this year that “Germany hooks up a pipeline into Russia, where Germany is going to be paying billions of dollars for energy into Russia…That’s not right.”

“Donald Trump is a deal maker...there is a deal to be made if someone (in Germany) stood up and said ‘Help us protect our auto industry a little bit more, because we’re great at it and we’re going to help you on Nord Stream 2’,” said one U.S. official, who was present at the April meeting between Ms. Merkel and Mr. Trump.

Raising the pressure further, Sandra Oudkirk, a senior U.S. diplomat, told journalists in Berlin on Thursday that as a Russian energy project the pipeline could face U.S. sanctions, putting any company participating in it at risk.

* * *

The Kremlin shot back immediately as spokesman Dmitry Peskov called the U.S. efforts “a crude effort to hinder an international energy project that has an important role in energy security.”

“The Americans are simply trying crudely to promote their own gas producers,” he said.

He is, of course, right, even if the official explanation is that Washington opposes the pipeline because it would make Ukraine—currently the main transit route for Russian gas headed west—and other U.S. allies in the EU more vulnerable to Russian pressure. German officials also say the U.S. is eager to displace Russia as a provider of gas to Europe, hence confirming with the Russian said.

Of course, in the end it's all a question of leverage, and who has more, and right now Trump believes that by threatening European auto exports hostage, he has all of it.

* * *

Still, that Trump thinks he can interject after three years of trade negotiations with an abrupt demand while providing no alternatives, is rather stunning, but understandable. As Alex Gorka of the Strategic Culture Foundation wrote, on March 15, a bipartisan group of 39 senators led by John Barrasso (R-WY) sent a letter to the Treasury Department.

They oppose NS2 and are calling on the administration to bury it. Why? They don’t want Russia to be in a position to influence Europe, which would be “detrimental,” as they put it. And, as Gorka wrote, their preferred tool to implement this obstructionist policy is the use of sanctions, precisely what we are seeing currently.

To be sure, 39 out of 100 is a number no president can ignore as powerful pressure emanating from US corporations and lobbies was being applied on the administration. Even before the senators wrote their letter, Kurt Volker, the US envoy to Ukraine, had claimed that NS2 was a purely political, not commercial, project.

As we said in March, "No doubt other steps to ratchet up the pressure on Europe will follow." Little did we know that less than 2 months later, the US and Europe would be embroiled in a bruising trade war in which the fate of NS2 is suddenly the key variable.

* * *

So will Trump win, and will US LNG replace Russian exports?

While Merkel hasn’t yet dropped her support for the pipeline, she said on Thursday the EU had agreed at a summit Wednesday night to offer the U.S. “closer cooperation” in the field of gas in exchange for a permanent exemption from the steel and aluminum tariffs, suggesting that Nord Stream 2 may soon be a trade war casualty.

Should Europe fold, it should expect a surge in energy inflation: Liquefied gas from the U.S. needs to be shipped over the Atlantic and would be considerably more expensive than Russian gas delivered via pipelines. A senior EU official working on energy regulation said Russian gas would be at least 20% cheaper.

"Trump’s strategy seems to be to force us to buy their more expensive gas, but as long as LNG is not competitive, Europe will not agree to some sort of racket and pay extortionate prices," an EU official said.

Which, amusingly, is precisely what Trump's brute trade overture is: an global racket.

Germany’s pipeline plan has long been controversial with Ukraine, as well as several EU countries on the bloc’s eastern edge who fear it gives Russian President Vladimir Putin power over gas deliveries—which Berlin has so far largely ignored.

Trump has been pushing for better access for U.S. companies to an EU market he has criticized as over-protected. Barring an EU offer to address Mr. Trump’s grievances, the U.S. will hit Europe with punitive steel and aluminum tariffs on June 1. The EU has promised retaliatory tariffs.

* * *

So now that the ball is in Merkel's court, how will she respond? On Friday, the German chancellor is traveling to Russia on Friday to meet Vladimir Putin in hopes of brokering a compromise that would satisfy the U.S. and her European partners.

She will ask Mr. Putin for a deal that would preserve the lucrative transit trade—Ukraine gets a fee for letting Russian gas through its territory on the way to eastern Europe—even after Nord Stream 2 comes online in 2019, a German official said.​

Meanwhile, German government officials say that since all the permits for Nord Stream 2 have been issued, the WSJ notes that there is no legal way to stop the project, which is run by Gazprom , the Russian energy giant, under financing agreements with international companies such as Engie, OMV, Shell, Uniper and Wintershall.

https://www.zerohedge.com/news/2018...drop-russian-gas-pipeline-or-trade-war-begins
 

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It's all thanks to you! NATO secretary general tells Trump his leadership on defense spending has made all the difference for the alliance as the president says lagging countries will 'be dealt with'

  • Trump hammered America's allies as a candidate and in the early days of his presidency to pay up, saying the U.S. had carried Europe for far too long
  • Stoltenberg thanked him during talks at the White House Thursday that the push to get nations to contribute the recommended 2 percent of GDP
  • 'I would like to thank you for your leadership,' he said. 'It is impacting allies, because all allies are now increasing defense spending'
  • Trump said he has 'confidence' that Stoltenberg will set the rest straight
  • 'We need fairness. We need to be reciprocal. Countries have to be reciprocal in what we're doing,' he said


Read more: http://www.dailymail.co.uk/news/article-5742453/NATO-secretary-general-thanks-Trump-leadership-defense-spending-years-decline.html#ixzz5Fnr2nN5P
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What's behind Trump's push to save China's ZTE?
RT America



Published on May 17, 2018
What's behind President Trump's surprising move to save Chinese telecom giant ZTE? Barack Obama's former Deputy Labor Secretary Chris Lu joins Larry with analysis. Then, the political panel weighs in on what happens in the North Korea summit saga.
 

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"We Won’t Make Unilateral Concessions": China Denies It Offered To Slash U.S. Trade Gap By $200BN


by Tyler Durden
Fri, 05/18/2018 - 06:18


Overnight, experts and pundits were stumped by the biggest geopolitical news from Thursday: how could China possibly - or feasibly - agree to a $200 billion cut in the US-China trade deficit, even if merely to placate President Trump. Speaking to Bloomberg, Victor Shih, a China politics and finance professor at the University of California in San Diego said earlier that he finds an agreement to cut the U.S. deficit by $200 billion "difficult to contemplate."

"Even with a drastic reallocation of Chinese imports of energy, raw materials and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion," he said. "A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain."

On Friday morning we got the answer: the entire story was nothing more than the latest fake news concocted by a "US official" and then promptly spun by the US media without actual confirmation by China.

And so, the mystery of just how China would shrink its $200 billion trade deficit with the US died on Friday morning, when China gave the answer: it wouldn't, after Beijing denied it had offered the deficit-cutting package, just hours after it dropped an anti-dumping probe into U.S. sorghum imports in a conciliatory gesture as top officials meet in Washington.

“This rumor is not true. This I can confirm to you,” Chinese foreign ministry spokesman Lu Kang politely told a news briefing saying "the question is about some US officials who said China will cut the deficit. As I understand, the relevant consultations are ongoing and they are constructive,” he said, adding that he could not elaborate on the specifics of the negotiations.

Commentary posted in an article on WeChat accounts run by Xinhua News Agency and People’s Daily overseas edition was less restrained, and said that the offer to cut China's trade surplus with the U.S. is "nonexistent" and that reports that China accepted the U.S. demand to narrow the trade gap are “purely a misreading."

The article said that China will "never negotiate under the conditions set by the U.S." and added that "two sides made progress in areas such as the U.S. allowing more exports of technology products including semiconductors, as well as lifting restrictions on energy exports" but stressed that "China won’t make unilateral concessions."

The article also underscored that just hours before President Donald Trump met Vice Premier Liu He, the two sides were at loggerheads on key issues, and concluded that negotiations are ongoing and called on China to "fight for the best, and prepare for the worst.” It added that “tomorrow is a crucial day” without elaborating.


As a reminder, a $200 billion reduction in the trade gap with China by 2020 was on a list of demands the Trump administration made earlier this month as Treasury Secretary Steven Mnuchin led a delegation to Beijing. That mission left with little common ground with China and reports emerging of infighting among the U.S. officials. The U.S. merchandise trade deficit with China hit a record $375 billion last year. The Trump administration has threatened to impose tariffs on as much as $150 billion of Chinese imports to the U.S. as tensions over trade have escalated.

Trump expressed doubt before his meeting with Liu that China and the U.S. would come to an agreement to avoid a damaging trade war.
“Will that be successful? I tend to doubt it,” Trump said during a press briefing on Thursday with NATO Secretary-General Jens Stoltenberg.

“The reason I doubt it is because China’s become very spoiled.”

* * *

What wasn't fake news, is that earlier on Friday, China did offer a conciliatory olive branch when it announced that it would end its sorghum anti-dumping and anti-subsidy investigation, which had effectively halted a trade worth over $1 billion last year. The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth about $1.1 billion, accounting for the bulk of Chinese imports of the grain used in animal feed and Chinese liquor.

"The imposition of anti-dumping and anti-subsidy measures on imports of sorghum originating from the United States would have a widespread impact on consumer living costs, and does not accord with the public interest," the Commerce Ministry said in a statement.

In April, China forced U.S. sorghum exporters to put up a 178.6% deposit on the value of sorghum shipments to the country after launching an investigation in February following Trump’s imposition of steep tariffs on imports of solar panels and washing machines.

“China has taught a lesson to the United States and showed how it can hurt U.S. exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the U.S. doesn’t have much sorghum left to export. The next U.S. sorghum crop will be harvested in August,” Houe said.

https://www.zerohedge.com/news/2018-05-18/china-denies-it-offered-slash-us-trade-deficit-200-billion
 

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China Resists Trump Deficit Demand, Agrees To Buy More US Goods


by Tyler Durden
Sat, 05/19/2018 - 10:33


After much anticipation that following Trump's ZTE gamble, China may relent in the ongoing trade war - stoked in no small part by Larry Kudlow's false statement that Beijing had offered to reduce the US trade deficit by "at least $200 billion" - on Friday the U.S. and China wrapped up the second day of trade talks, and while Beijing made a vague, unenforceable commitment to buy more U.S. goods and services, it resisted Trump's core demand that it cut by more than half the $375BN bilateral trade deficit.

According to the WSJ, while the Chinese were wary of committing to specific purchases - even though Kudlow also said China would buy more farm products, energy and financial services - they continue to look for a way to ease trade tensions between the two nations even if it means with token promises and gestures.

That said, there was one tangible achievement: late on Thursday, Beijing ended an antidumping probe into imported U.S. sorghum - used for feeding livestock and brewing alcohol - which had shut down U.S. sales to China. As a reminder, a month ago, on April 17, China slapped a 179% tariff on US sorghum just hours after the US banned exports to China's telecom giant, ZTE. China’s Commerce Ministry said earlier that punitive measures on purchases of the crop would “affect the cost of living for consumers” in China. On Friday, China’s Commerce Ministry said it would return the deposits in full while announcing the end to the probe, essentially removing the penalties on U.S. sorghum producers.

The decision however has wider implications: it is a direct tit-for-tat in the ongoing discussion over the fate of ZTE sanctions, and as the WSJ wrote previously, the two sides have been negotiating a deal for the U.S. to ease sanctions on China's blacklisted company. In exchange, China would end recent restrictions and tariffs on U.S. agricultural products.

Currently the Commerce Department forbids U.S. companies from supplying parts to ZTE. Mr. Kudlow said that the U.S. was considering easing the punishments. Alternative sanctions could include changing senior management and board members, Mr. Kudlow told Fox Business Network. Such changes “would be very harsh,” he said.​

As such, all that was achieved this week was for China to overturn a policy it implemented a month ago in response to an enforcement action that Trump similarly enacted in mid-April.

At the same time, one of Washington’s central demands - that China reduce its merchandise trade surplus with the U.S. of $375 billion by at least $200 billion by the end of 2020 - remains unaddressed, even though economists in both nations say that the trade deficit is affected by investment and savings patterns in both nations, not trade policy, and as such it isn't feasible to be changed with the stroke of a pen absent dire economic consequences. Beijing has rejected U.S. demands in the past and has continued to hold firm, said the people briefed on the talks.


As previously noted, on Friday commentary posted bu Xinhua News Agency said that the "offer" to cut China's trade surplus with the U.S. was fake news and was "nonexistent" and that reports that China accepted the U.S. demand to narrow the trade gap are “purely a misreading." also known as fake news.

The article said that China will "never negotiate under the conditions set by the U.S." and added that "two sides made progress in areas such as the U.S. allowing more exports of technology products including semiconductors, as well as lifting restrictions on energy exports" but stressed that "China won’t make unilateral concessions."​

As a result, while both sides have quietly agreed to drop the demand that the deficit be slashed, the new demand the US has pivoted into is for Beijing to buy more US goods and services, which is great except for the problem that there is no way to enforce it.

The U.S. Agriculture Department recently asked agriculture companies to come up with a list of products whose production could be ramped up rapidly for export to China, said a person following the talks. At the same time, China put together a list of high-tech products that are barred by U.S. export controls for sale to China but are allowed by other nations. Beijing argues that if the U.S. would ease the export controls on these items, it would purchase more from the U.S., the person briefed on the matters said.​

Even so, some U.S. officials believe, the additional Chinese purchases would only total $50 billion to $60 billion in the next year or two, far short of the U.S. goal.

* * *

Meanwhile, as trade discussions continue, the escalating trade war is starting to bite as growing tensions start hurting businesses in both countries. U.S. goods, from sorghum and soybeans to cars, have faced growing hurdles when entering China, while a U.S. order banning American companies from selling components to ZTE threatens to cripple the telecommunication-equipment producer and other state- owned Chinese companies, potentially resulting in the one thing Beijing fears the most: rising unemployment.

The WSJ also had some more details on the member of the Chinese delefation, including the country's Vice Premier Liu He, who has been rapidly rising in China's power ranks and is seen as China's shadow power broker to the world, and who impressed Washington officials, said Kudlow, calling Liu a “smart guy, a market guy,” in a brief interview with White House reporters.

He said Mr. Liu met with President Trump on Thursday in the Oval Office and gave “an excellent presentation” involving reductions in Chinese tariffs and other measures. Mr. Trump became “much more optimistic than I have ever seen,” said Mr. Kudlow on Fox Business Network​

Ultimately, the fate of the trade war is up to Trump, and the tone he adopts: early this week, Trump said he would try to make sure ZTE got back in business, which has since led to a number of conciliatory gestures from Beijing. China’s antitrust regulators had delayed for months U.S. private-equity firm Bain Capital’s $18 billion deal for Toshiba Corp.’s memory-chip unit, but on Thursday the Japanese firm said regulators had allowed the deal to proceed. Chinese regulators also promised early this week to restart their review of U.S. chip maker Qualcomm Inc.’s bid for NXP Semiconductors NV, sending the price of NXP stock soaring and preventing a round of (metaphoric) suicides among the US hedge fund community where NXP is one of the largest M&A arbs around.

In return for relief on ZTE, China - which is one of the world's biggest importers of US farm products - would agree to hold back penalties on a variety of U.S. agricultural products it announced in early April as retaliation for U.S. tariffs on Chinese steel and aluminum exports.

Finally, with the recent "elimination" of Peter Navarro from Trump's inner circle of advisors, it appears that the trade war with China - which erupted right after Navarro's unexpected promotion in the Trump administration, and resignation of Gary Cohn - is about to return to its prior, dormant state as the status quo wins again and US trade relations with Beijing - for better or worse - remain virtually unchanged.

https://www.zerohedge.com/news/2018...trump-deficit-demand-agrees-buy-more-us-goods
 

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China Retreats from U.S. Sorghum Probe Amid Global Market Chaos
May 18, 2018 by Reuters



By Zigzag Mountain Art / Shutterstock



By Hallie Gu and Tom Polansek BEIJING/CHICAGO, May 18 (Reuters) – China dropped its anti-dumping probe into imports of U.S. sorghum on Friday, beating a hasty retreat from a dispute that wreaked havoc across the global grain market and raised concerns about rising costs and financial damage at home.

The move was seen as a goodwill concession as Chinese Vice Premier Liu He was in Washington for talks aimed at resolving trade tensions between the world’s two largest economies.

The end of the investigation came as a huge relief to U.S. sorghum growers, who saw sales to the top grain buyer come to a halt and prices plummet over the past month.

But U.S. farmers and traders said they remained worried that China might still implement restrictions and tariffs on other agricultural products such as soybeans, corn and cotton.

Tensions between the nations have climbed. U.S. President Donald Trump has threatened to impose up to $150 billion in punitive tariffs to lower trade deficits and combat what he calls Beijing’s misappropriation of American technology.

China has threatened equal retaliation, including tariffs on some of its largest U.S. imports including aircraft, soybeans and autos.

China’s Commerce Ministry said in a statement the investigation into sorghum, used in animal feed and liquor, had revealed that anti-dumping and anti-subsidies penalties would inflate living costs for Chinese consumers.

China’s investigation, launched in early February, showed its top trading partner how much financial pain it could inflict on U.S. farmers, analysts said. Last month, Beijing imposed hefty anti-dumping deposits on imports of the grain.

“China has taught a lesson to the United States and showed how it can hurt U.S. exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the U.S. does not have much sorghum left to export. The next U.S. sorghum crop will be harvested in August.”

Agricultural products are considered one of the most powerful weapons in Beijing’s arsenal because a strike against farm exports to China would hurt farmers in U.S. Midwestern states that backed Trump in the 2016 presidential election.

The United States accounts for more than 90 percent of total sorghum shipments to China, with the American imports worth just over $1 billion last year.

Most of Archer Daniels Midland Co’s sorghum shipments to China have already been diverted and resold to other markets, said Jackie Anderson, a spokeswoman for the agricultural trader.

The company warned earlier this month it would take a $30 million hit to trading profit due to the dispute.

“We are continuing to evaluate the impact of these developments on our business going forward,” Anderson said on Friday.


HOPES FOR TRADE AGREEMENT
The National Sorghum Producers, a U.S. industry trade group, submitted thousands of pages of information to China’s authorities to show that the United States was not dumping sorghum, the group’s Chairman Don Bloss said.

Bloss said he hoped the end of the probe reflects an easing of trade tensions with Beijing.

The deposit scheme stopped trade and disrupted supply chains worldwide, with almost two dozen ships carrying U.S. sorghum stranded at sea as merchants and buyers scrambled to sell cargoes at big discounts elsewhere.

Frantic Chinese importers lobbied the government to rethink the plan amid worries that higher costs would be passed onto feedmakers and eventually push retail meat prices higher.

Corn, soybean and soymeal futures in China fell on the news of the end of the probe as concerns eased that feedmakers would need to find alternative ingredients.

In the United States, corn futures jumped as traders said the move signaled that supplies of livestock feed would tighten. U.S. soybean futures rose on hopes that the end of the probe is a step toward a broader trade agreement.

Dropping the probe “is an important sign of progress in our efforts to resolve trade tension with China,” Kansas Governor Jeff Colyer said in a statement.

China’s Commerce ministry said it would return the deposits on sorghum imports it collected, bringing relief to Chinese buyers who still had cargoes stuck at ports.

“This is great news! We are now saved,” said a private sorghum trader who had more than 600 tonnes of U.S. sorghum stranded at a Chinese port. “We will clear our goods immediately today.”

The government would not, however, compensate traders for losses linked to reselling or demurrage, said Cherry Zhang, analyst at Shanghai JC Intelligence Co Ltd.

“The damage has been done, and mainly to the domestic buyer,” Zhang said.

The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth around $1.1 billion and making up the bulk of China’s roughly 5 million tonnes of imports of the grain last year, according to Chinese customs data.

(Reporting by Tony Munroe, Josephine Mason and Hallie Gu in Beijing, and P.J. Huffstutter and Tom Polansek in Chicago; Additional reporting by Naveen Thukral in SINGAPORE; Editing by Tom Hogue, James Dalgleish and Will Dunham)

(c) Copyright Thomson Reuters 2018.

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DO WE REALLY NEED $716 BILLION FOR THE PENTAGON? || WARTHOG 2018
Warthog Defense


Published on May 21, 2018
As Congress continues its consideration of the National Defense Authorization Act for fiscal 2019, there is one question that is not being asked: Do we really need $716 billion to defend the United States?

BY WILLIAM D. HARTUNG

http://thehill.com/opinion/national-s...
 

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U.S. Commodity Exports to China to Rise Amid Trade Talks
May 21, 2018 by Reuters



FILE PHOTO: Containers are seen at the Yangshan Deep Water Port in Shanghai, China April 24, 2018. REUTERS/Aly Song/File Photo



By Florence Tan and Dominique Patton SINGAPORE/BEIJING, May 21 (Reuters) – China has pledged to buy more U.S. goods to reduce America’s huge trade deficit and help avoid exacerbating a trade war between the world’s two biggest economies, with energy and commodities high on Washington’s list of products for sale.

The U.S. trade war with China is “on hold” after the governments agreed to drop tariff threats and work on a wider agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday. Washington is especially keen to sell more of the United States’ surging oil and gas production.

Yet infrastructure bottlenecks mean energy and commodity exports can grow only gradually, and only if U.S. oil, gas and other goods remain cost attractive against global competition.

Morgan Stanley estimates it could take up to three years to increase Chinese purchases of U.S. goods by $60 billion to $90 billion, with a rise in agricultural imports in the near term followed by energy.

OIL & GAS
Total U.S. oil and gas exports to China in 2017 were worth $4.3 billion, based on average prices, a far cry from a deficit reduction target of $200 billion.

But U.S. exports are rising, and China has spent $2 billion on U.S. oil in the first quarter of 2018 alone.

Increased purchases of U.S. oil will help China replace Iranian supplies, which are expected to fall as the United States re-imposes sanctions on Tehran.

“Buying U.S. crude would help with the Iranian situation in … that these barrels from the U.S. would provide additional supplies at a time when buyers will be expected to cut Iranian volumes,” said Michal Meidan of consultancy Energy Aspects.

China’s U.S. oil import bill this year could rise to $9 billion to $11 billion with purchases rising to 300,000 to 400,000 barrels per day (bpd) in the second half of 2018, according to Energy Aspects.

That would still be only a fraction of China’s import needs of 9.6 million bpd in April, worth around $20 billion. And while U.S. exports may grow somewhat, infrastructure bottlenecks for the time being hold back sales.

U.S. oil export terminals are small by global standards and the biggest tankers – Very Large Crude Carriers (VLCCs) – don’t fit through the Panama Canal. Having to take the detour around Africa, they are at a cost disadvantage against producers from the Middle East, Africa and Europe.

Washington also wants the United States to export more liquefied natural gas (LNG) to China.

While LNG shipments have increased, there are only two U.S. export facilities, both of which have largely contracted out their supplies. There are also restraints in China due to pipeline and terminal capacities.

U.S. LNG exports to China could eventually surge if Chinese companies become partners in many of the U.S. export projects that still seek financing.

AGRICULTURE
China could direct its state-owned soybean crushers to buy more of America’s surplus oilseed, said Paul Burke, North Asia regional director for the U.S. Soybean Export Council.

That would potentially add 14 million tonnes of imports worth $6 billion to this year’s trade bill, at the expense of major exporters, Brazil and Argentina.

Soybeans were the United States’ second-largest export to China by value, worth $12 billion last year.

China easing controls on processing imports of genetically modified strains of corn and fully allocating its low-tariff import quota for wheat would also add to grain shipments.

Analysts reckon buying more poultry, beef and pork would be another way to boost trade, but tough import regulations would likely limit volumes without big concessions from Beijing.

Beijing removed anti-dumping tariffs on U.S. poultry in February after eight years, but a ban due to avian influenza remains in place. Without the ban, the U.S.-China poultry business could be worth up to $600 million, an industry expert estimated.

China has in the past made large purchases of American pork for its strategic reserves. There is also strong demand for imported meat among the country’s middle class consumers.

But China has zero tolerance on the use of growth promoter beta-agonist ractopamine, widely used by U.S. pork farmers, and synthetic hormones used in U.S. beef.

The government lifted a 14-year-old ban on U.S. beef last year, but it has only approved a dozen processors for export.

In the first quarter, U.S. imports accounted for less than 1 pct of China’s total beef imports, but a pick-up in purchases would challenge Australia, Brazil and Uruguay.

“Big (meat) purchases and shipments need time to put together. You can’t just turn on the spigot,” said an industry source who declined to be identified.

(Reporting by Florence Tan in SINGAPORE and Dominique Patton in BEIJING; Additional reporting by Osamu Tsukimori in TOKYO and Jane Chung in SEOUL; Editing by Henning Gloystein, Josephine Mason and Tom Hogue)

(c) Copyright Thomson Reuters 2018.

http://gcaptain.com/u-s-commodity-exports-to-china-to-rise-amid-trade-talks/
 

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