Tuesday, September 24, 2024

Supply Lines: Port politics

The relationship between the US and Mexico is being strained in the final days of the Lopez Obrador government, deepening tensions that hang

The relationship between the US and Mexico is being strained in the final days of the Lopez Obrador government, deepening tensions that hang over their free-trade deal ahead of a review scheduled for 2026.

President Andres Manuel Lopez Obrador is under pressure from US lawmakers to back off plans to seize a port and limestone quarry owned by Alabama-based Vulcan Materials. AMLO, as the Mexican president is known, leaves office next week.

AMLO last month promised to turn the Vulcan facility on Mexico's Caribbean coast into a natural protected area, which the construction firm says is illegal and equivalent to expropriation.

A bill introduced Monday by a bipartisan group of US senators would prevent ships that use the port from unloading or getting repairs in the US or its territories — if Mexico follows through with the seizure. 

Without naming specific countries or companies, the bill's intention is to render the port useless for shipping or cruises, according to aides to the author, Republican Senator Bill Hagerty.

This comes on the back of an overhaul pushed through by AMLO's party that threatens to erode the judicial independence that companies say is needed to protect their investments and make sure that Mexico adheres to international trade regulations.

It also adds to simmering disputes between the two nations, which trade everything from energy to corn to motor vehicles, and could complicate an upcoming review of the US-Mexico-Canada Agreement required under the four-year-old trade deal.

US lawmakers are urging US Trade Representative Katherine Tai to pursue negotiations with AMLO and President-elect Claudia Sheinbaum, who takes power on Oct. 1. 

In a recent letter, lawmakers warned that changes in Mexico could make the 2026 review of the USMCA "more difficult" and potentially compromise US investors' access to a "stable, predictable, and unbiased regulatory framework." 

Here's selected timeline on the dispute:

Eric Martin in Washington

Charted Territory

German luxury auto brands would be most exposed if China whips out a higher, 25% import tax vs. the current 15% on gasoline cars with engines larger than 2.5 liters, according to research by Joanna Chen, Bloomberg Intelligence's China auto analyst. About 5% of Mercedes, BMW and Audi's combined China sales could face higher tariffs, and nearly 70% for Porsche, which lacks a local factory. This may force them to raise vehicle prices as an offset, yet that would likely dent demand given tough market competition and their weakened brand images. 

Today's Must Reads

  • China succeeded in its second attempt to establish a dispute panel at the WTO to review whether subsidies from the Biden administration's Inflation Reduction Act unlawfully favor US goods over imports.
  • Vietnam's Communist Party General Secretary To Lam told investors he expects the US to soon classify Vietnam as a market economy.
  • Indian producers of components used in solar panels have sought trade protections against a deluge of imports, including from China and Vietnam, arguing that safeguards against 'dumping' are needed to expand domestic capacity.
  • Austria's national railways will need months to restore the country's busiest train line after catastrophic floods wrecked infrastructure, throttling the capacity to move people and goods.
  • Donald Trump threatened to hit farm machinery maker John Deere with 200% tariffs if the company moves production to Mexico. On Tuesday, the former president will pledge to personally recruit foreign companies and outline new incentives designed to lure operations to the US.
  • The latest Big Take podcast from Bloomberg asks what last week's pager attacks in Lebanon reveal about supply chain interference, which national security officials say is now a "rampant" global problem.

On the Bloomberg Terminal

  • China plans to import more pipeline gas from Russia this December now that the Power of Siberia is on track to reach its maximum contract level ahead of schedule, curbing the country's demand for expensive LNG over winter, BloombergNEF's Daniela Lee writes,
  • Feedstock-based aviation fuel production in Brazil has potential to reach around 50 billion liters (13.2 billion gallons) by 2030, Airbus Brazil President Gilberto Peralta said during an event in Sao Paulo. 
  • Run SPLC after an equity ticker on Bloomberg to show critical data about a company's suppliers, customers and peers.
  • Use the AHOY function to track global commodities trade flows.
  • See DSET CHOKE for a dataset to monitor shipping chokepoints. 
  • For freight dashboards, see {BI RAIL}, {BI TRCK} and {BI SHIP} and {BI 3PLS}
  • Click HERE for automated stories about supply chains.
  • On the Bloomberg Terminal, type NH FWV for FreightWaves content.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.

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