The Trump administration’s bid to seize more unilateral tariff power from Congress looks dead on arrival.
Key lawmakers from both parties are throwing cold water on the proposal, which the administration is weighing whether to roll out in the State of the Union address later this month, Bloomberg News reports. If anything, members of Congress appear inclined to seize some agency back from the Trump team when it comes to trade policy.
But the fact that the White House is considering requesting the authority to issue new tariffs, product by product, underlines a bracing reality: Even as Trump officials appear to be making progress in trade negotiations with Beijing, the administration’s wider trade war is far from over.
The Commerce Department, for example, is still preparing a recommendation on imposing duties on imports of autos and parts — a move, if it comes, that would represent a major escalation of Trump’s offensive with European trading partners and others. Morgan Stanley analysts predict the White House will follow through with those tariffs: “In contrast to China, we expect trade tensions with Europe to escalate in 2019, putting auto tariffs into play at least temporarily,” analysts for the bank wrote in a Thursday note.
Trump trade officials are set to start negotiations with the European Union, and, separately, Japan in the weeks ahead. “While things appear to be going smoothly with Japan so far, the US and EU are struggling to agree on whether or not agricultural goods will be covered in the scope of any agreement,” Beacon Policy Advisors notes. And given the president’s impulsive approach, there are a number of ways talks could go sideways. Trump, for example, could get frustrated with delays in the European negotiations, “which have so far proceeded slower than Trump had hoped and have not yet resulted in any deliverables and choose to impose auto tariffs on the EU without any temporary exemptions.” (U.S. Trade Representative Robert Lighthizer this week kicked off preliminary meetings with Cecilia Malmstrom, his European counterpart.)
The administration is still enforcing levies on aluminum and steel coming in from Mexico and Canada, despite having renegotiated the North American Free Trade Agreement with both countries. Canadian Prime Minister Justin Trudeau’s inner circle is readying a fresh lobbying push to get those tariffs lifted, “based on Canada’s long-standing position that the tariffs are both illegal and absurd,” CBC News’s Katie Simpson reported Thursday. Though Canadian officials are tempering their expectations. Simpson writes that “neither of the two senior government sources who spoke to CBC News is optimistic that Trump will abandon his enthusiasm for tariffs any time soon.”
And with China, trade experts say any deal would almost certainly include a cease-fire forestalling the imposition of new tariffs in March. But the Trump team is eyeing a process that would force Beijing to hit benchmarks demonstrating they are following through with changes to their trade and economic practices as a condition for gradually lifting duties on the books for about $250 billion in imports.
Trump continues to sound bullish about the prospects of a deal with China (for more on the the status of those talks, see below). He told reporters Thursday the regime there, which his administration has identified as a leading national security threat, is “more honorable” and a better negotiating partner than Congressional Democrats.
Watch him here:
President Trump: “I find China, frankly in many ways, to be far more honorable than cryin’ Chuck and Nancy. I really do. I think that China is actually much easier to deal with than the opposition party.” pic.twitter.com/fqMigRbE0H
— CSPAN (@cspan) January 10, 2019
But Rep. Ron Kind (D-Wis.), a key pro-trade Democrat, made clear he won’t support giving the administration a longer leash for its trade offensive:
Wisconsin has lost $139 million to import tariffs since this Administration got its hands on trade and started this unnecessary trade war. In what world would this be a good idea? https://t.co/pgd9w0ctxh
— Rep. Ron Kind (@RepRonKind) January 9, 2019
And the bill would likely violate World Trade Organization rules, notes Jennifer Hillman, a former commissioner at the U.S. International Trade Commission:
Bill lets President unilaterally raise US tariffs item by item, country by country. Doing so would be a total violation of our WTO obligation not to discriminate betw/ WTO members and not to raise tariffs above our bound rates. If we do this, others will do the same to us! https://t.co/nFjgxOYjPp
— Jennifer Hillman (@JAHillmanGULaw) January 10, 2019
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MONEY ON THE HILL
— Trump mulls emergency declaration, Army Corps funds. The Post’s Erica Werner, Josh Dawsey, Mike DeBonis and Seung Min Kim: “The White House has begun laying the groundwork for a declaration of national emergency to build [Trump’s] border wall, a move certain to set off a firestorm of opposition in Congress and the courts but one that could pave the way for an end to the three-week government shutdown.
“The administration is eyeing unused money in the Army Corps of Engineers budget, specifically a disaster spending bill passed by Congress last year that includes $13.9 billion allocated but not spent for civil works projects… Trump has urged the Army Corps to determine how fast contracts could be signed and whether construction could begin within 45 days.”
Pence rules out DACA deal. More from The Post: “On Thursday, after meeting with Senate Republicans, Vice President [Mike] Pence ruled out any agreement that involved protections for ‘dreamers,’ undocumented immigrants who were brought into the country as children. Sen. Lindsey O. Graham (R-S.C.) told reporters that talks were over and that he had ‘never been more depressed about moving forward than right now.'”
But Congressional GOP support for Trump’s position appears to be forming more cracks. Via Erica:
House has passed two more spending bills to reopen government.
10 R’s voted for the Ag spending bill.
12 R’s voted for the Transpo/HUD spending bill.
Slightly higher defections than on past couple votes.
— Erica Werner (@ericawerner) January 10, 2019
Federal workers miss paychecks today. Via AP: “Some 800,000 workers, more than half of them still on the job, were to miss their first paycheck on Friday under the stoppage, and Washington was close to setting a dubious record for the longest government shutdown in the nation’s history.”
Powell warns of economic damage. Jim Puzzanghera of the LA Times: “Federal Reserve Chairman Jerome H. Powell warned on Thursday that an extended partial government shutdown could damage the U.S. economy and starve the central bank of key data it needs to make monetary policy decisions. ‘If we have an extended shutdown, I do think that would show up in the data pretty clearly,’ Powell said during an appearance at the Economic Club of Washington.”
Trump announced he’s canceling his trip to Davos:
Because of the Democrats intransigence on Border Security and the great importance of Safety for our Nation, I am respectfully cancelling my very important trip to Davos, Switzerland for the World Economic Forum. My warmest regards and apologies to the @WEF!
— Donald J. Trump (@realDonaldTrump) January 10, 2019
— AOC in line for Financial Services seat. Politico’s Zachary Warmbrodt: “Rep. Alexandria Ocasio-Cortez is poised to win a seat on the powerful House Financial Services Committee, in what would be a victory for progressives fighting to curb Wall Street’s clout in Washington and inside the Democratic Party itself. The assignment, which lawmakers say they expect her to receive, would pit the 29-year-old New Yorker not only against banks that make up a major local industry but also potentially against business-friendly Democrats who have backed financial deregulation.”
That means she could be questioning Powell as soon as next month, as New River Investments portfolio manager Conor Sen points out.
Meanwhile, some House Dems are trying to rein her in. More from Politico: “Ocasio-Cortez is already making enemies in the House Democratic Caucus — and some of its members are mounting an operation to bring the anti-establishment, democratic socialist with 2.2 million Twitter followers into the fold. The effort, described by nearly 20 lawmakers and aides, is part carrot, part stick: Some lawmakers with ties to Ocasio-Cortez are hoping to coax her into using her star power to unite Democrats and turn her fire on Republicans. Others simultaneously warn Ocasio-Cortez is destined for a lonely, ineffectual career in Congress if she continues to treat her own party as the enemy.”
— Stocks, down early, recover for fifth straight day of gains. WSJ’s Michael Wursthorn and Avantika Chilkoti: “The S&P 500 recouped an early loss to clinch its fifth straight session of gains after [Powell] reiterated the central bank’s willingness to adjust its pace of interest-rate increases if economic conditions weaken. . . . The comments helped ease the fears of some investors who earlier Thursday had been parsing a series of lackluster holiday sales reports from retailers, along with weak economic data out of Asia and Europe, for additional signs of fading global growth. . . .
“The S&P 500 added 11.68 points, or 0.5%, to 2596.64 after falling nearly 1% earlier in the session. While stocks had been moderating their losses as the day wore on, the S&P 500 got a nudge following Mr. Powell’s speech, helping the index notch its longest winning streak since September.”
— Powell says no recession in 2019. The Post’s Heather Long: “Powell, one of the nation’s top economic policymakers, predicted the economy is not going to plunge into a deep downturn this year. ‘I don’t see a recession’ in 2019, Powell said Thursday… ‘The U.S. economy is solid. It has good momentum coming into this year.’
“Several prominent economists and investors have said there’s a heightened chance of a recession by 2020. Lawrence Summers, a Harvard University professor and former treasury secretary under President Bill Clinton, said this week that he thinks there’s “better than a 50/50 chance” of a recession in 2020. Powell stressed the Fed is ‘watching’ the situation closely and monitoring potential cracks in the economy.”
But he is ‘very worried’ about U.S. debt. CNBC’s Thomas Franck: “Powell is concerned about the ballooning amount of United States debt. ‘I’m very worried about it,’ Powell said . . . ‘it’s a long-run issue that we definitely need to face, and ultimately, will have no choice but to face,’ he added. The Fed chief’s comments came as the annual U.S. deficit reaches new sustained highs above $1 trillion, a fact many economists worry could spell trouble for future generations.”
Powell also signals more balance sheet selloffs. CNBC’s Jeff Cox: “The Federal Reserve’s balance sheet will be reduced significantly from where it is now, [Powell] said Thursday in remarks signaling that more monetary tightening is ahead. Powell did not specify how much smaller the central bank’s portfolio of bonds would get, but the remark seemed to take some momentum out of the stock market during afternoon trading. ‘It will be substantially smaller than it is now,’ the chairman said . . . ‘It will be smaller than it is now, but nowhere near where it was before.’
“The Fed had been holding about $4.5 trillion worth of mostly Treasurys and mortgage-backed securities that it accrued during three rounds of monetary stimulus during and after the financial crisis. Starting in October 2016, the Fed began allowing a fixed cap of proceeds from those bonds to run off each month, with the level now reaching a ceiling of $50 billion.”
— Fourth-quarter earnings bring hotly anticipated numbers. NYT’s Matt Phillips: “It’s time to see the numbers. Investors are about to get a read on the health of corporate America, as businesses begin releasing quarterly profit reports and laying out expectations for the coming year. The results may resolve a roaring debate on Wall Street that has pitted economists, who have argued that the economy remains healthy, against investors, who pushed stocks to the brink of a bear market over concerns that growth is waning . . .
“On the whole, the numbers are expected to be solid. Analysts estimate that, when all the results are in for S&P 500 companies, fourth-quarter profits will have risen 15 percent over a year earlier. That would be the fifth-straight period of double-digit profit growth . . . It doesn’t guarantee investors will be happy.”
But gloomy signs right off the bat. Bloomberg’s Cécile Daurat: “Just Thursday, more than a half-dozen corporate giants either lowered their profit forecast, announced massive job cuts or pulled plans in the face of market volatility. American Airlines Group Inc., Jaguar Land Rover, Macy’s Inc. and BlackRock Inc. were among the biggest casualties, joining the likes of Apple Inc. and FedEx Corp. that have warned recently that the future isn’t looking as good as it did just a few weeks ago. The year is just 10 days young.”
— Pelosi slams Mnuchin after classified sanctions briefing. Politico’s Martin Matishak: “House Democrats excoriated Treasury Secretary Steven Mnuchin on Thursday following a classified briefing about the Trump administration’s decision to ease economic sanctions on three companies linked to Russian oligarch Oleg Deripaska. ‘One of the worst classified briefings we’ve received from the Trump administration,’ House Speaker Nancy Pelosi told reporters. ‘The secretary barely testified.’ …
“House Democrats called for the briefing after Treasury announced last month that it would lift sanctions on Rusal, one the world’s largest aluminum producers, as well as En Group, the holding company that owns roughly half of Rusal, and EuroSibEnergo, a Russian power company. Deripaska — an ally of Russian President Vladimir Putin who was one of several associates sanctioned last year over Moscow’s interference in the 2016 presidential election — has a large stake in all three companies… ‘We’ll see,’ Pelosi replied when asked whether she would consider a resolution of disapproval to block the removal of sanctions.”
— Top Chinese official to visit Washington this month. WSJ’s Lingling Wei: “China and the U.S. are moving ahead with plans to hold a round of higher-level talks to resolve their continuing trade conflict, with President Xi Jinping’s economic-policy captain scheduled to visit Washington in late January. For now, Vice Premier Liu He is planning to meet with his U.S. counterparts including [Lighthizer] and Treasury Secretary Steven Mnuchin for negotiations on Jan. 30 and Jan. 31, according to people briefed on the matter. These people caution that the plan could be delayed by the partial U.S. government shutdown.
“We’re negotiating and having tremendous success with China,” Trump told reporters on Thursday.
Huawei’s headaches spread. “Polish authorities detained and charged the local sales director of Huawei Technologies Co., a Chinese national, for conducting high-level espionage on behalf of China, amid widening global scrutiny by Washington and its allies of the technology giant,” WSJ’s Drew Hinshaw and Dan Strumpf report. And unlike the arrest in Canada last month of the company’s chief financial officer, “the nature of the charges in Poland speak directly to suspicions by Washington and other Western governments that Huawei could be used by Beijing as a global spying tool.
— Chamber of Commerce criticizes Trump on trade and shutdown. Bloomberg’s Mark Niquette and Ben Brody: “The U.S. Chamber of Commerce took on [Trump] over the partial government shutdown and trade tensions, urging him to resolve his differences with Congress over a border wall and ease tariffs that have roiled markets. ‘We’re pushing our leaders to restore responsible governing,’ Thomas Donohue, the chamber’s president, said in his annual address on American business on Thursday as the shutdown extended into a 20th day. He also urged Trump to abandon tariffs and ‘advance strong new trade deals’ to stoke U.S. growth.”
— Ford launches major European shakeup. WSJ’s William Boston: “Ford Motor Co. is launching an overhaul of its money-losing European business that is expected to include thousands of job cuts, plant closures and the cancellation of low-profit models amid a series of bad news for global carmakers. The move is part of a broad cost-cutting effort that Ford Chief Executive Jim Hackett has embarked on in an industry facing the challenges of electric vehicles and a push toward autonomous driving. In October, Ford informed employees of a global reorganization that could affect salaried jobs, part of Mr. Hackett’s push to improve profits and boost its sagging stock price.”
The move comes amid broader trouble for automakers in Europe. Bloomberg News’s Elisabeth Behrmann: “After a decade-long boom, Europe’s automaking wheels are coming off. Demand in the region fizzled late in 2018 due to a combination of emissions-testing bottlenecks and economic headwinds, signaling an abrupt end to years of robust growth. British consumers led the change, and more pain could lie ahead as doubts linger about the U.K.’s relations with the European Union after it leaves the bloc.”
— Mall-based stores suffered this holiday season. WSJ’s Sarah Nassauer: “The strong U.S. economy wasn’t enough to boost all retailers during the key holiday season, with Macy’s Inc. and other mall-based stores continuing to lose customers to discounters and e-commerce. Shares of Macy’s Inc. were down almost 19% in morning trading Thursday as the department store lowered its full-year guidance following weak December sales. Rival Kohl’s Corp. and mall stalwart Victoria’s Secret owner L Brands also posted tepid holiday sales, triggering a broad-based sell off in retail stocks. …
“The negative sentiment even weighed on discounters like Target Corp. and Costco Wholesale Corp., which reported strong holiday sales. Those chains, which are less dependent on apparel, and Amazon.com Inc. have been taking market share from department stores.” (Amazon founder and CEO Jeffrey P. Bezos owns The Washington Post.)
— A #MeToo reckoning for economists. NYT’s Ben Casselman and Jim Tankersley: “The economics profession is facing a mounting crisis of sexual harassment, discrimination and bullying that women in the field say has pushed many of them to the sidelines — or out of the field entirely. Those issues took center stage at the American Economic Association’s annual meeting . . . Spurred by substantiated allegations of harassment against one of the most prominent young economists in the country, top women in the field shared stories of their own struggles with discrimination. . . .
“Leading male economists offered an unprecedented acknowledgment of harassment and discrimination in the field. ‘Economics certainly has a problem,’ said Ben Bernanke, the former Federal Reserve chairman, who took over as A.E.A. president this year . . . Janet L. Yellen, who was the first chairwoman of the Fed and will head the A.E.A. next year, said that addressing the issue ‘should be the highest priority’ for economists in the years to come.”
— BlackRock cuts 500 jobs. WSJ’s Dawn Lim and Justin Baer: “BlackRock Inc. is cutting about 500 jobs as the world’s largest money manager looks to simplify parts of its business and focus more on areas such as technology, retirement and alternative investments. The cuts make up roughly 3% of BlackRock’s more than 14,000 workforce and will take place over the coming weeks. BlackRock began laying off staffers Thursday, said a person familiar with the matter. The cuts will happen broadly across the firm; it isn’t clear which areas will be most affected.”
It could be just the start. Bloomberg’s Shelly Hagan: “Asset managers and banks are under pressure as volatility roils global markets and investors pile into passive, low-fee funds. The $3 trillion hedge fund market has been hit hard as performance sank and funds closed last year. One recruiter thinks more shakeout lays ahead.” She has a run-down of the financial services firms that have already announced lay-offs this year.
— From The New Yorker’s Lila Ash:
Here’s why some people who think they know it all don’t
Is your food safe to eat? Shutdown forces FDA to sharply reduce food inspections
Furloughed employees rally against shutdown: ‘Stop playing politics with our lives’