The winds of trade war circling the White House seem to shift as often as the actual weather, but for now they’re blowing toward compromise. 

Treasury Secretary Steven Mnuchin extended an olive branch to China on Saturday, telling reporters that he’s considering a trip to Beijing in the hope of negotiating a solution to the escalating trade conflict between the world’s two biggest economies. The Chinese Commerce Ministry said it would welcome the visit. 

“We are cautiously optimistic,” Mnuchin said, following three days of meetings with other finance chiefs at the  the International Monetary Fund and the World Bank in Washington. The treasury secretary said he made progress on the Trump administration’s trade disputes during talks with counterparts from China, Japan and Europe last week, although he declined to get specific, per the Associated Press’s Paul Wiseman and Martin Crutsinger

In another signal that the Trump team is looking to pause the pressure it has been ratcheting up on Beijing, it has yet to release the list of products targeted for $100 billion in additional tariffs the president threatened earlier this month. 

Trade diplomacy is advancing on a front closer to home, as well. Canadian Foreign Minister Chrystia Freeland reported “good progress” toward new terms for the North American Free Trade Agreement after a Washington meeting last week with U.S. Trade Representative Robert E. Lighthizer and the Mexican economic minister.

Mexican President Enrique Peña Nieto echoed the assessment Sunday — a day after his government  forged an agreement on a new trade deal with the European Union. The talks are set to pick up Tuesday in Washington, zeroing in on automotive rules of origin, agriculture and legal dispute mechanisms, Bloomberg's Eric Martin writes

President Trump remains a free radical at the center of the action. Meetings with French President Emmanuel Macron and German Chancellor Angela Merkel bracket his week: Macron arrives today for the first state visit of Trump's presidency while Merkel comes to town Friday for a one-day visit.

The Trump administration’s exemptions to the steel and aluminum tariffs expire May 1, with no guarantees that the E.U. is in line for an extension on the one it secured. Macron and Merkel met in Berlin last week to discuss their concerns, and the E.U. is preparing a proposal to forestall the levies again, The Washington Post’s Karen DeYoung reports.  

Trump is coming off two days of meetings with Japanese Prime Minister Shinzo Abe at Mar-a-Lago last week during which he downplayed prospects for rejoining the Trans-Pacific Partnership but floated the possibility of a bilateral pact with Japan. 

His attention, however, appears focused mostly elsewhere. He hasn’t tweeted about his administration’s trade beef with China in a week, for example; he’s tweeted about his pending nuclear talks with North Korean leader Kim Jong Un seven times since and spent much of the weekend using the platform to vent about the investigations encircling his team. 

Those two things could push the president in either direction. He’s demonstrated an inclination to launch offensives when he looks cornered. Then again, as long as North Korea remains a preoccupation, the pressure will be on to keep Beijing in the fold and lean on the rogue regime.

Ben Purser, the deputy assistant secretary of state for counter-proliferation, met with Chinese officials in Beijing over the weekend, The Wall Street Journal’s Lingling Wei and Bob Davis report. Said Mnuchin, “China has been very helpful on the sanctions with us.” 


Tencent plans IPO. WSJ's Maureen Farrell and Julie Steinberg: "Tencent Music Entertainment Group, China’s largest music-streaming company, is preparing what would be one of the biggest technology IPOs ever following the successful debut of its European counterpart, Spotify Technology SA. The digital-music business of Chinese internet giant Tencent Holdings Ltd. TCEHY -1.71% plans to interview potential underwriting banks over roughly the next month, according to people familiar with the matter. The initial public offering, potentially coming in the second half of 2018, would be one of the largest deals of the year and is expected to raise billions in proceeds, some of the people said. Tencent Music is expected to list in the U.S., but it is unlikely to make a final venue decision for several months, they said."

Investors' new headache. WSJ's Gunjan Banerji and Sam Goldfarb: "Investors are having a tougher time trading in a number of financial markets, a development that is weakening their ability to raise cash or to protect against big stock declines. The capacity to get in or out of an investment, known as liquidity, was rarely tested during the long stretch when stocks and bonds rallied with little volatility. Now as inflation concerns, trade anxiety and tension in Syria roil markets, investors notice it is getting harder to trade as easily... The liquidity problem has been worsening for years.Investors say it began nearly a decade ago, when post-financial-crisis regulation prevented banks from trading for themselves, and forced them to hold larger amounts of capital—thereby shrinking their inventory of riskier assets."

The dollar rallied at the start of a week packed with catalysts, from economic data to new debt supply, as the yield on benchmark U.S. Treasuries climbed toward 3 percent. European stocks edged lower after a broad retreat for equities across Asia.
The global bond market’s primary benchmark, the 10-year U.S. Treasury yield, is knocking on the door of 3 percent, a level it hasn’t topped in more than four years.


Consumer pain. Reuters's David Lawder and Howard Schneider: "U.S. consumers may be about to directly feel the effects of the trade fight started by [Trump] with China and other countries this year when a new list of Chinese imports to be taxed is announced in coming days... A Reuters analysis of Chinese imports shows that to quickly reach $100 billion worth of goods to tax, Trump may have to target cellphones, computers, toys, clothing, footwear, furniture and other consumer goods, prompting price rises at U.S. retailers."

Schumer backs Trump on China. NY Post's Tamar Lapin: "Sen. Chuck Schumer on Sunday said he agrees with President Trump’s “squeezing” of China on trade issues — because it’s the best way to get at North Korea. 'China is not helpful to the United States, they’re happy to see us in trouble. And the way to get at them is by what is the motherload for China — their trade with us,' the Democrat said... The Senate minority leader said Trump’s tough stance with China will help in negotiations with North Korea, noting that 90 percent of North Korea’s trade is with China, he said."

Ernst: Tariffs hurt farmers. Washington Examiner's Naomi Lim: "Sen. Joni Ernst (R-Iowa) defended U.S. agriculture Sunday, speaking out about the financial pain President Trump's proposed tariffs on China is inflicting on American farmers and ranchers. 'We appreciate the president and his stance against China but, for the meantime, it is hurting our farmers and ranchers,' Ernst said Sunday... 'I understand the need to protect American jobs, but American farmers are holding American jobs,' she continued."

U.S. okays World Bank capital boost. Bloomberg's Andrew Mayeda and Jess Shankleman: "The World Bank won support from its member countries for a $13 billion capital increase, with the U.S. dropping its objection as the lender imposes measures that would potentially reduce loans to China. The boost will be accompanied by internal steps 'including operational changes and effectiveness reforms, loan pricing measures, and other policy steps,' the World Bank said in a statement after policy makers met on Saturday in Washington."

Mnuchin to Jerusalem. Axios: "Mnuchin is expected to lead the United States' delegation to the inauguration ceremony of the new American embassy in Jerusalem on May 14th... The Israeli Foreign Ministry and Prime Minister's office have started to prepare for the embassy event and for welcoming the delegation. The officials added the Israeli government want to use the event to give diplomatic boost to U.S.-Israeli relations and to the Israeli efforts to convince other countries to move their embassies to Jerusalem."


Trump's Cohen problem. The Post's Michael Kranish, Tom Hamburger, and Roz Helderman:  "When... Trump won the presidency, his longtime attorney Michael Cohen seemed in position for a coveted spot in the senior ranks of the White House. At one point, Cohen topped a list of five candidates for White House counsel, according to documents reviewed by The Washington Post. He suggested to some Trump allies that he might make a good chief of staff. But when Trump built his West Wing team, the brash New York lawyer did not make the cut... Associates of Trump and Cohen say that Cohen, with his deep knowledge of Trump’s personal and financial life, could seek to cut a deal with prosecutors at a moment when Trump’s business dealings are facing scrutiny related to the separate inquiry by special counsel Robert S. Mueller III into Russian interference in the 2016 election."

Trump lashes out. Politico: "For much of his week at Mar-a-Lago, President Donald Trump seemed almost reserved by the standards of his Twitter feed, save for sustained attacks on former FBI Director James Comey. But by Friday night, the president had had enough. In the span of 15 hours, Trump alleged that... Mueller’s investigation was 'established based on an illegal act,' threatened to countersue the Democratic Party, bashed a Pulitzer-prize winning New York Times reporter and called one of his former aides a 'drunk/drugged up loser.'"

Watchdogs say there should be a ban on such money being funneled to the president’s business empire.

GOP split as banks turn on gun industry. Politico's Zachary Warmbrodt: "Some Republicans, enraged at moves by Citigroup and Bank of America to distance themselves from some retailers and gun manufacturers, have called on government agencies to cancel contracts with the banks and defer deregulation proposals that would benefit them. But other Republicans want to keep their hands off, saying lenders are free to decide who they do business with... 'It is a blurrier area,' said Senate Banking Chairman Mike Crapo (R-Idaho), the most senior lawmaker to have started to push back against the banks."

Uber's lobbying spikes. Bloomberg's Naomi Nix: "Uber Technologies Inc. spent a record on federal lobbying in the first three months as it seeks to emerge from a series of scandals and change gears in Washington under new leadership. The ride-hailing company disclosed spending $540,000 in the first quarter of 2018, up from $510,000 in the last quarter of 2017 and from its previous quarterly record of $520,000 in the third quarter... Uber’s Chief Executive Officer Dara Khosrowshahi, who was appointed in August, made his first trip to Washington earlier this month, where Danielle Burr become its head of federal affairs in January. Burr previously worked under House Majority Leader Kevin McCarthy."

What's a 'deficit owl' and why do they make everyone so mad?
Jeff Stein

Fraudsters exploit banks' answer to Venmo. NYT's Stacy Cowley: "Big banks are making it easy to zap money to your friends. Maybe too easy. Zelle, a service that allows bank customers to instantly send money to their acquaintances, is booming. Thousands of new users sign up every day. Some $75 billion zoomed through Zelle’s network last year. That’s more than twice the amount of money that customers transferred with Venmo, a rival money-transfer app. But the same features that make Zelle so useful for customers, its speed and ubiquity, have made it irresistible to thieves. Hackers and con artists have used the system to steal from victims — some of whom had never used Zelle or even heard of it until someone used it to clean out their bank accounts."

Chase spreads out. The Post's Aaron Gregg and Renae Merle write that JPMorgan Chase is looking to buck the decades-long trend of financial institutions closing branches. The bank, American's largest, "is preparing to open its first-ever Washington-area branches, executives announced recently, part of a regional expansion that will bring 70 Chase offices to the District, Maryland and Virginia by 2023 and make room for an estimated 700 new hires. Some of the 70 planned branches already have received regulatory approval, the company says. They include sites in the District’s Columbia Heights, Logan Circle and Georgetown neighborhoods; one branch near the McPherson Square Metro station; one in Ward 7 east of the Anacostia River; one in Bethesda, and two in Arlington."

Based on 6% annual growth in wealth, they would hold assets worth approximately $305 trillion.
The Switch
It's the second time since 2016 that federal officials have questioned carriers about the matter.
Brian Fung and Tony Romm
Median pay at Amazon reveals the predominantly blue-collar nature of its workforce, which sets it apart from tech peers Facebook, Apple and Google-parent Alphabet Inc.

Wells Fargo in a bind. WSJ's Emily Glazer: "Wells Fargo is facing more challenges with one of its regulators. The bank late last week agreed to a $1 billion settlement with the Office of the Comptroller of the Currency and Consumer Financial Protection Bureau related to its risk management in consumer-lending businesses. Meanwhile, it is planning to ask the OCC for an extension of a deadline to satisfy an enforcement action related to anti-money-laundering controls... If Wells Fargo misses a June 30 deadline from the OCC to satisfy that order’s requirements, it could result in another enforcement action against the bank."

President Trump’s bizarre behavior is good for trading desks. It has plenty of downsides for big, diversified financial firms. Not to mention for our country.
Allan Sloan


  • The SEC holds a roundtable on market structure for thinly-traded securities.
  • The Peterson Institute for International Economics holds an event on Central Bank independence.

Coming Up

  • The Senate Finance Committee holds a hearing on early impressions of the tax law on Tuesday.
  • The Heritage Foundation holds an event on how congress governs the Federal Reserve on Tuesday.
  • Legislators and regulators will address bank leaders at the ABA Summit on Tuesday and Wednesday.
  • The House Appropriations Subcommittee on Transportation, Housing and Urban Development and Related Agencies holds a hearing on the Office of Housing and Federal Housing Administration’s 2019 budget on Wednesday.  
  • The House Financial Services Subcommittee on Housing and Insurance holds a hearing on “HUD’s Role in Rental Assistance” on Wednesday.
  • The U.S. Chamber of Commerce holds the 12th Annual Capital Markets Summit on Thursday.
  • The House Financial Services Committee holds a hearing on oversight of the SEC’s corporation finance division on Thursday.
  • SEC chairman testifies before the House Appropriations Subcommittee on Financial Services and General Government on Thursday.
  • The Heritage Foundation holds an event on crowdfunding on Thursday.
  • The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on reform of the CFIUS review process on Thursday.



From the New Yorker: 

A cartoon by @tbtoro, from 2012. #TNYcartoons

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