Trump to Meet with House and Senate Republicans Today

News/Markets/Policy Updates: Jan. 21, 2025

Today’s dispatch also includes items on: (1) Szabo appointed to lead EPA’s Office of Air and Radiation under Trump 2.0; (2) Legal challenges to DOGE; (3) Teamsters union set to strike at Costco; (4) India allows 1 MMT of sugar exports; (5) Trump plans 25% tariffs on Mexico, Canada by Feb. 1; (6) Trump orders comprehensive trade policy overhaul amid anticipation; (7) Rubio confirmed as Secretary of State; first Trump Cabinet pick approved; (8) Senate passes Laken Riley Act, moves to House; (9) Panama Canal issues; (10) China’s hog farmers recover, cattle and dairy still struggling; (11) U.S., Canada ease ban on French poultry imposed after HPAI vaccination; (12) Trump cracks down on immigration: Deportations and border enforcement loom; and (13) Historic winter storm grips the South and beyond.

— Equities today: Asian and European stock markets were mixed overnight. U.S. stock futures are pointing to a solid trading day, while Bitcoin retreated from a record high as traders awaited crypto policy directives that were surprisingly omitted from the president’s day-one orders. In Asia, Japan +0.3%. Hong Kong +0.9%. China -0.1%. India -1.6%. In Europe, at midday, London flat. Paris +0.1%. Frankfurt -0.2%.

— Apple: iPhone sales dived 18.2% in China during the December quarter, according to Counterpoint Research.

— Teamsters union set to strike at Costco over contract disputes. Teamsters union members have voted to authorize a strike against Costco starting Feb. 1, pending a new agreement before the current contract expires on Jan. 31. The potential strike involves 18,000 workers across 56 warehouses in five states. Key sticking points include disagreements over wages, benefits, seniority pay, paid family leave, bereavement policies, sick time, and surveillance safeguards. Costco has yet to comment on the vote, which saw 85% of members in favor of striking.

— Ag markets today:

Grains firmer to open the week. Corn, soybeans and wheat traded higher overnight coming out of the extended holiday weekend. As of 6:30 a.m. CT, corn futures are trading around a penny higher, soybeans are mostly 13 to 15 cents higher and wheat is 3 to 6 cents higher. The U.S. dollar index is around 675 points lower and front-month crude oil futures are $1.85 lower.

Cash cattle post another record high. Cash cattle averaged a record $203.67 last week, up $1.09 from the previous week. Cash cattle prices have risen for nine straight weeks, surging $18.88 during that span. February live cattle futures finished last Friday $6.92 below the average cash price, suggesting traders sense a short-term top is near.

Cash hog index, pork cutout show signs of stabilizing. After pressure in early January, the CME lean hog index and pork cutout showed recent signs of stabilizing. The cash index has firmed for a week, while the pork cutout rose $1.71 on Monday amid gains in all cuts except hams.

— Ag trade: Egypt purchased a “significant” amount of wheat from Russia, though no specific tonnage was announced. Japan is seeking 126,893 MT of milling wheat via its weekly tender. Algeria tendered to buy up to 240,000 MT of corn from Brazil or Argentina and 50,000 MT of optional origin soymeal. Iran tendered to buy up to 120,000 MT of corn sourced from Brazil, Europe or the Black Sea region, 120,000 MT of feed barley sourced from the EU, or Black Sea region and 60,000 MT of soymeal from Brazil or Argentina. Mauritius tendered to buy 8,000 MT of optional origin long-grain white rice.

— India allows 1 MMT of sugar exports. India will allow mills to export 1 MMT of sugar through September, the food ministry announced. The ministry allocated mills a uniform export quota of 3.174% of their three-year average production, which they can export directly or via merchant exporters. India did not allow sugar exports during 2023-24.

— Trump plans 25% tariffs on Mexico, Canada by Feb. 1. President Donald Trump announced plans to impose tariffs of up to 25% on imports from Mexico and Canada by Feb. 1, citing concerns over undocumented migration and fentanyl trafficking. The announcement, made during his first Oval Office comments after his inauguration, signals potential strain on trade relations with two of America’s largest partners under the USMCA agreement. Both Mexico and Canada have threatened retaliation, raising fears of a trade war. Analysts warn the tariffs could severely impact the U.S. auto industry, increasing car prices and disrupting supply chains. While Trump hinted at broader tariffs on all foreign imports, he stated such a move was “not ready” for immediate implementation.

Market impact: The dollar index rose 0.5%. The Canadian dollar and Mexican peso slid more than 0.8% against the greenback. Says ING Economics: “With more than 15% of all U.S. imports coming from Mexico and 13.7% from Canada in 2023, about a third of everything the U.S. imports would be affected by unilateral tariffs, potentially disrupting supply chains and impacting the economy significantly. Mexico’s share of U.S. imports exceeds 25% in seven categories, Canada’s share of U.S. imports exceeds 25% in 20 HS2 (Harmonized System Code) categories. These categories include agricultural products, food and beverages, automobiles, metals, wood, and industrial products. As a result, everyday items, including a typical U.S. breakfast, could see a significant price hike this year, in addition to already soaring coffee prices.”

Of note: President Trump mentioned the possibility of introducing tariffs on China if it rejected an American-led deal to buy TikTok’s assets in the country. He spared China — for now — and instead ordered a probe into Beijing’s compliance with a deal struck during his first term (see next item).

— Trump orders comprehensive trade policy overhaul amid anticipation. President Trump has ordered an expansive investigation into America’s trade policy, divided into three critical areas, with recommendations due by April 2025.

Massive Overhaul in the Works
The investigations aim to address trade imbalances and unfair practices, focusing on trade deficits, currency manipulation, and counterfeiting. Key areas under review include:

• The USMCA and other trade agreements.
• Anti-dumping duties and discriminatory taxes.
• The potential establishment of an External Revenue Service (ERS) to collect trade-related revenues.

China in the Spotlight
Trade policy with China will face intense scrutiny, with reviews of the 2024 practices report, compliance with existing agreements, and investigations into intellectual property rights and unreasonable practices.

Focus on Economic Security
Broader economic security measures will examine the U.S. manufacturing base, the effectiveness of steel and aluminum import measures, and the impact of foreign subsidies on federal procurement.

April Deadlines and Possible IEEPA Action
The results of those reviews and recommendations are to be delivered in three reports by April 1, 2025, and the report on foreign subsidies on U.S. federal procurement by April 30. The administration may invoke the International Emergency Economic Powers Act (IEEPA) to enact sweeping changes. The next few months could bring significant shifts in U.S. trade policy and economic strategy.

Of note: JP Morgan has set up a war room to analyze the trade policy impact.

— Trump promised to unleash American energy development and revoked measures that had effectively blocked drilling in most U.S. coastal waters. Oil prices fell, with West Texas Intermediate sliding below $77 a barrel.

— Rubio confirmed as Secretary of State; first Trump Cabinet pick approved. Marco Rubio, a seasoned Republican senator and former presidential contender, was confirmed as Secretary of State with a unanimous 99-0 Senate vote. Known for his hawkish stances on China, Iran, and leftist regimes in Latin America, Rubio represents a more traditional choice among Trump’s second-term nominees.

While Rubio’s NATO support and previous legislative actions might diverge from Trump’s priorities, he has pledged to align with the administration’s “America First” strategy. However, his influence could face challenges due to the president’s reliance on billionaire advisers and special envoys.

— Senate advances several other key national security nominees.

Committee votes:

• Pete Hegseth, Defense Secretary: Approved by the Armed Services Committee (14-13). His confirmation vote on the Senate floor could take place sometime over the weekend or early next week.
• John Ratcliffe, CIA Director: Approved by the Intelligence Committee (14-3). He could get a vote on the Senate floor as soon as today. Sens. Tom Cotton (R-Ark.) and Mark Warner (D-Va.), the panel’s chair and vice chair, released a joint statement calling for an immediate floor vote.
• Kristi Noem as the head of the Department of Homeland Security won committee approval on Monday in a bipartisan 13-2 vote. She could be confirmed by Thursday or Friday, allowing senators to head home for the weekend.

These appointments underline the administration’s focus on experienced loyalists while navigating political controversies and international priorities.

— Senate panel advances Russell Vought’s nomination for OMB chief. The Senate Homeland Security and Governmental Affairs Committee voted 8-7 to advance Russell Vought’s nomination to lead the Office of Management and Budget (OMB), bringing President Donald Trump’s former budget chief closer to confirmation.

The Senate Budget Committee will review Vought’s nomination Wednesday, with their approval required for a full Senate vote.

Vought, who led the OMB during the latter half of Trump’s first term, has faced bipartisan criticism for his stance on the Congressional Budget and Impoundment Control Act of 1974, which mandates federal agencies to spend appropriated funds.

Senate Budget Chairman Rand Paul (R-Ky.) acknowledged concerns about Vought’s position but expressed his intention to support the nominee. Vought’s OMB previously faced scrutiny after the Government Accountability Office determined it violated the law by withholding congressionally approved aid to Ukraine during Trump’s first term.

— Trump’s DHS pick Kristi Noem nears confirmation. South Dakota Gov. Kristi Noem, President Donald Trump’s nominee to lead the Department of Homeland Security (DHS), is on the verge of confirmation following a 13-2 Senate panel vote. Noem, a staunch advocate of border security, is expected to spearhead Trump’s immigration enforcement agenda once confirmed. Despite lacking traditional homeland security credentials, Noem’s national prominence grew after deploying the National Guard to the southern border in 2021. While praised by conservatives, her nomination has drawn criticism from immigrant rights groups due to her support of hardline policies from Trump’s first term.

Noem has outlined ambitious plans for the 260,000-employee department, pledging to overhaul entities like the TSA and FEMA, refocus the Secret Service, and streamline intelligence coordination. She also vowed to curb the Cybersecurity and Infrastructure Security Agency’s work on misinformation, aligning with concerns of “mission drift” voiced by Senate panel chair Rand Paul (R-Ky.).

— Senate passes Laken Riley Act, moves to House. The Senate on Monday approved the Laken Riley Act in a 64-35 vote, advancing the legislation to the House of Representatives for final approval. The bill, a key GOP priority in 2024, aims to simplify law enforcement’s ability to detain undocumented immigrants accused of crimes, marking an early legislative victory for President Donald Trump.

— U.S. concerns over Chinese investments in the Panama Canal. The Panama Canal has emerged as a focal point of tension between the U.S. and China due to significant Chinese investments in the region, according to the Wall Street Journal (link). Two major container terminals at either end of the canal, operated by Hong Kong-based Hutchison Whampoa, are central to the Trump administration’s concerns. In his inaugural address, President Trump pledged to “take back” the canal, citing Chinese infrastructure around the waterway as a national-security threat and a possible violation of U.S./Panama treaties that transferred canal control to Panama.

Hutchison’s presence is part of a broader Chinese investment strategy in Panama, which includes projects such as a canal bridge, a subway line, a cruise-ship terminal, a convention center, and a wind-energy farm. While some experts downplay the possibility of these facilities being converted for military use, others argue that encouraging American companies to invest in Panama would be a more effective counter to China’s growing influence.

Of note: “China is operating the Panama Canal, and we didn’t give it to China. We gave it to Panama, and we’re taking it back.” — President Trump in his inaugural address.

— Panama launches audit of China-linked port operator amid Trump’s Canal takeover threats. Panamanian authorities have initiated an audit of Panama Ports Co., a subsidiary of Hong Kong billionaire Li Ka-shing’s CK Hutchison Holdings Ltd., which operates two ports adjacent to the Panama Canal, according to Bloomberg (link). The investigation, led by the comptroller’s office, aims to ensure the “efficient and transparent use of public resources.”

The move follows President Donald Trump’s renewed claims that China has influence over the canal and his pledge to take control of the strategic waterway. Trump’s allegations, which Panama’s government denies, have drawn attention to Hong Kong companies’ growing vulnerability to geopolitical risks as U.S. policies tighten against perceived Chinese influence.

The audit also seeks to review compliance with a 25-year concession agreement granted in 1998, renewed in 2021. Comptroller General Anel Bolo Flores cited concerns about insufficient revenue sharing despite increased cargo volumes.

CK Hutchison’s regional ports business, a key profit driver, could face heightened scrutiny amid escalating U.S./China tensions. Meanwhile, Panama’s President Jose Raul Mulino reiterated the canal’s sovereignty remains firmly under Panamanian control.

— Trump’s second term: U.S./China relations reset to Phase 1. As Donald Trump begins his second term, his administration is revisiting the “Phase One” trade deal, a centerpiece of his first term’s approach to China. Despite China’s failure to meet the deal’s targets, the Trump administration has chosen negotiation over immediate tariff hikes, signaling a potential reset in the bilateral relationship.

Trump’s Treasury Secretary, Scott Bessent, aims to enforce China’s purchase commitments under the agreement and explore catch-up provisions. Meanwhile, Beijing, facing domestic economic pressures, welcomes the return to talks but is ready with countermeasures as great-power competition intensifies.

The Wall Street Journal notes that while the “Phase 1" deal provides an opening for renewed engagement, skepticism persists about its feasibility and past enforcement failures. Both sides face a delicate balancing act as they navigate an unpredictable dynamic under Trump’s leadership.

Phase 1 required China to increase purchases of American goods and services by $200 billion over a two-year period ending in December 2021. In the agreement, China committed to buying around $40 billion of farm goods annually in 2020 and 2021, and even as high as $50 billion. Overall, Beijing pledged to increase its purchases of U.S. products by $200 billion during that time period compared to 2017, the year before the trade war with the first Trump administration began. Back then, China imported around $186 billion from the U.S. In the end, according to estimates by the Peterson Institute for International Economics, China bought only 58% of the U.S. goods it had committed to purchase, not even enough to reach its import levels from before the trade war. Under Phase One, the U.S. has the right to impose tariffs or other trade measures as a response to noncompliance by China. Despite Beijing’s failure to hold up its end of the bargain, Bessent noted in his testimony that the Biden administration never enforced the deal.

— China’s hog farmers recover, cattle and dairy still struggling. China’s hog farms have recovered from a period of losses, while declines in cattle and dairy farming have been partially alleviated, an ag ministry official said. However, the meat and dairy sectors are struggling with oversupply challenges due to a slowing economy and declining consumption. China will continue to implement policies to address challenges in the beef and dairy sectors and stabilize production capacity. Authorities are investigating beef imports as part of efforts to protect domestic producers. China is also considering trade restrictions on imports of dairy and pork from the European Union.

— China’s pork imports rise in December. China imported 200,000 MT of pork in December, up 20,000 MT (11.1%) from November and 7.7% above year-ago. In 2024, China imported 2.28 MMT of pork, down 15.7% from the previous year.

— U.S., Canada ease ban on French poultry imposed after HPAI vaccination. The U.S. and Canada have lifted embargoes on certain French poultry imports imposed after Paris decided to vaccinate ducks against highly pathogenic avian influenza (HPAI) in October 2023, the French ag ministry said. The U.S. also lifted its ban on imports of ducks and duck products from other EU member states, the French ministry said. While French poultry exports to the U.S. and Canada are minimal, shipments of avian genetics are more common.

— Trump cracks down on immigration: Deportations and border enforcement loom. Millions of migrants face a grim outlook as former President Trump rapidly shuts down CBP One, an app used to seek asylum, and moves to end birthright citizenship. Troops are being mobilized to bolster border enforcement, and communities in cities like New York, Chicago, Denver, and San Diego are preparing for immigration raids as soon as today. However, legal challenges from immigration advocates may complicate efforts, particularly over ending automatic citizenship for U.S.-born children.

(U.S. Census Bureau, Bloomberg)

— Historic winter storm grips the South and beyond. A powerful winter storm, described as a once-in-a-generation event, is bringing extreme cold and potentially record-breaking snowfall to the southern United States. Governors in Louisiana, Georgia, Alabama, Florida, and Mississippi have declared states of emergency, while Texas is mobilizing resources to address heavy snowfall. Bitter cold is impacting over 220 million people across 40 states, with wind chill temperatures in the Upper Midwest and Northern Plains plunging as low as -55°F. Exposure to such conditions can lead to hypothermia in mere minutes.

— NWS outlook: Dangerously cold temperatures and wind chill values to linger for much of the South and eastern U.S. through mid-week... ...Rare winter storm to bring heavy snow as well as areas of sleet and freezing rain to the Gulf Coast and Southeast with widespread travel impacts expected... ...Extremely Critical Risk of fire weather for southern California will continue into Tuesday.

(NWS)

24: USDA Food Price Outlook
26: AFC and NFC football championships
27: First day IRS will begin accepting 2024 federal tax returns
28: Florida’s 1st and 6th special primaries
31: Employers and financial institutions should send out W-2 and 1099 tax forms
31: Federal Open Market Committee meets
31: USDA Cattle

Economic aid for farmers | Disaster aid for farmers | Farm Bureau summary of aid/disaster/farm bill extension | 45Z tax incentive program | Poultry and swine line speeds | U.S./China Phase 1 agreement | WASDE | Crop Production | USDA weekly reports | Crop Progress | Food prices | Farm income | Export Sales weekly | ERP dashboard | RFS | IRA: Biofuels | IRA: Ag | SCOTUS on WOTUS | SCOTUS on Prop 12 pork | Gov’t payments to farmers by program | Farmer working capital | USDA Ag Outlook Forum |