The Trump administration will impose substantial trade penalties on a critical export for Argentina, delivering a significant blow to one of President Donald Trump’s few friends in the hemisphere.
According to two people familiar with the plans, the Commerce Department will announce aggressive anti-dumping duties on biodiesel imports as soon as Friday.
That would have an outsized impact on Argentina — the world’s No. 1 exporter of soy oil, used to make biodiesel. The country provides roughly two-thirds of U.S. foreign imports of biodiesel.
What's more, the announcement, if released as scheduled, would come just two days before crucial midterm elections in Argentina that are widely seen as a referendum on President Mauricio Macri’s pro-market, pro-America reforms.
“You’re going to hurt your best friend in the hemisphere at the worst possible time,” said one of the sources familiar with the Trump team’s plan.
But this action is in line with others taken by Trump's Commerce Department.
Led by Commerce Secretary Wilbur Ross, the Trump administration has been cracking down on what it sees as unfair trade practices, slapping punitive tariffs on aluminum foil from China (17 to 81 percent), Bombardier jets from Canada (219 percent) and biofuels from Indonesia (up to 68 percent). Trump also has threatened to raise tariffs on foreign lumber and steel and pull out of the North American Free Trade Agreement if he can't negotiate a better version with Canada and Mexico.
The U.S. National Biodiesel Board filed a petition this spring asking Commerce to address what it said was a “flood of subsidized and dumped imports” from Argentina and Indonesia that cut market share and depressed prices for domestic biodiesel producers.
“These surging, low-priced imports prevented producers from earning adequate returns on their substantial investments and caused U.S. producers to pull back on further investments to serve a growing market,” the board said in a statement.
Anti-dumping duties are compensatory taxes imposed on imports that have been deemed unfairly subsidized and sold below reasonable production costs, harming U.S competitors.
You’re going to hurt your best friend in the hemisphere at the worst possible time.
Source familiar with the plan
Michael McAdams, president of the Advanced Biofuels Association, which represents some of the larger Argentine producers and U.S. distributors, said he didn’t think the petition would have been filed if Trump hadn’t been elected.
What he sees are Midwest soybean farmers and biodiesel companies taking advantage of a political opportunity created by the America First agenda to capture bigger profit margins. He argued that farmers have overreached and created an unnecessary battle between growers of soybeans against the people who are their customers.
“I don’t generally find it’s a good idea to kick your customer in the pants,” McAdams said.
The political implications in the hemisphere are significant. Trump does not have many allies in the region who have not felt alienated (Mexico), been distracted by their own internal challenges (Colombia), or had domestic support to get much done (Brazil).
On Wednesday, Trump and Macri spoke by phone about improving their economic ties. “The two leaders underscored their continued commitment to expanding trade and investment between the United States and Argentina,” according to a White House readout of the call.
Macri was one of the first Latin American leaders to reach out to Trump following the November election. The two have a relationship that dates back decades.
They’ve done business together. They’ve played golf together.
Trump once broke his clubs after playing golf with Macri during a tense real estate deal in New York in the 1980s, according to a book by Macri’s father, Francisco Macri.
“He's been my friend for many years,” Trump said, when Macri visited the White House in April. “We've known each other for long, prior to politics.”
When Vice President Mike Pence visited Buenos Aires in August, he described Macri’s pro-market reforms as a model that could be exported to other parts of Latin America.
“Argentina in many ways is an inspiration across this hemisphere and across the wider world,” Pence said.
On Sunday, Argentine voters head to the polls for midterm elections, where a third of the Senate and around half the seats in the lower chamber are in play. The election is widely seen as a referendum on Macri’s first two years in office and his effort to modernize Argentina’s economy.
Polls suggest Macri’s minority coalition will pick up some seats, but Argentine voters have also questioned his market-minded reforms. The extent of the penalties could raise more questions about Macri’s proposed reforms and provide ammunition to his opposition, which includes former president Cristina Fernández de Kirchner, who is running for a Senate seat and charging Macri with undoing her populist policies.
Specific details about Friday’s announcement are uncertain, but previous duties imposed on the biodiesel industry issued earlier this year were as high as 64 percent. Those familiar with Commerce's plans said there is still time for things to change. Industry leaders in the United States and Argentina are trying to negotiate down the duties. Officials at the State Department have pressed to delay the decision.
The State Department referred questions to Commerce, which did not respond to questions.
Argentina’s supply of soy is backing up because the country has lost an economic incentive for processing soy beans.
It’s a real problem for Macri, said Arlan Suderman, chief commodities economist at INTL FCStone Inc.
“It’s certainly a negative for Macri,” Suderman said.
How it will impact his relationship with Trump, Suderman wasn’t sure, but he added:
“Obviously, it would create some tensions, but that’s world politics.”