THE TICKER

A whirlwind of French charm just failed to forge a trade armistice between the Trump administration and Europe. Now a punch of German pragmatism will take a crack at it. 

German Chancellor Angela Merkel arrives in Washington tomorrow for a one-day visit with President Trump amid considerably less fanfare than what greeted French President Emmanuel Macron’s state visit that concluded Wednesday. 

But the stakes are arguably higher. The exemption from steel and aluminum tariffs that the Trump administration granted the European Union last month expires Tuesday, and the White House has yet to indicate it will extend it. 

That it could fall to the second half of the European tag team engaging Trump this week to close the deal doesn’t necessarily bode well. Trump has an unusually warm rapport with Macron, as evidenced by their handsy interactions this week; by contrast, the last time Merkel met with Trump in the Oval Office, the president caused a stir by appearing to ignore a suggestion to shake her hand. More to the point, the United States runs a $65 billion trade deficit in goods with Germany, its widest in Europe and third- largest overall — a key sticking point for Trump in his relationships with foreign leaders. And the president has called out what he views as a lopsided relationship with Europe’s manufacturing powerhouse: 

It may not matter much to Trump, but that trade imbalance owes to macroeconomic choices rather than German protectionism. "A country’s balance of payments is the difference between its overall spending and saving. Germans have chosen in aggregate to save more than they spend—and export surplus capital to be invested overseas," The Wall Street Journal's Simon Nixon writes. "A number of structural factors help explain this preference for saving. The most important is acute demographic pressures which have led aging baby boomers to prioritize saving for their retirement and encouraged German firms to invest in more promising overseas markets... Besides, Germany’s surplus also reflects the policy choices of other countries. Mr. Trump’s new tax law, for example, will boost spending and therefore likely increase the U.S. trade deficit with Germany and the EU."

Macron and Merkel — who met last week in Berlin to coordinate their trade pitch to Trump — have been aiming to secure a permanent European exemption from the administration's 10 percent levy on imports of aluminum and 25 percent levy on imports of steel. “We expect an unconditional and permanent exception,” E.U. Trade Commissioner Cecilia Malmstrom said Monday. (So far, only South Korea has snagged permanent terms, as part of a renegotiated bilateral deal; it agreed to accept the aluminum tariff and limit steel exports to 70 percent of its average over the last three years.)

Macron attempted to make the case for a final deal — and one that involves the entire E.U. — in his talks with Trump. Politico’s Nicholas Vinocur reports, “During their discussions, an aide said that Macron had pressed the point that ‘we cannot conceive of a trade war among allies,’ and that France would only speak ‘in concert with Europe’ on trade. ‘We put across the point that the exemptions should be extended,’ added the aide, who sat in on discussions with senior U.S. officials following Macron’s bilateral talks with Trump.”

The French leader also spoke up for freer trade, guaranteed by international institutions, in his Wednesday address to a joint meeting of Congress. “I believe we can build the right answers . . . by negotiating through the WTO and building cooperative solutions,” Macron said. “We wrote these rules. We should follow them.”

See highlights of Macron's speech here: 

Macron’s approach had the virtue of novelty. “This combination — flattery plus direct talk — hasn’t yet been tried on Trump,” Washington Post columnist Anne Applebaum writes. “The friendly gestures will appeal to his narcissism; there is a slim chance — very, very slim — that it might even get him to change his mind about some things. There is a greater risk that the clear opposition, even cloaked in elaborate references to Lincoln and both Roosevelts, might irk him.”

But at least in the immediate term, as far as Europe’s trade agenda, it was to no apparent avail. Merkel and her team understand they have a difficult task on their hands. Until March 1, Trump and Merkel hadn’t even spoken for five months.

“The visit definitely won’t be easy,” Peter Beyer, Merkel’s transatlantic coordinator, told Reuters last week.

Yet he said the visit fit into a context with Macron’s. “I think one has to see the Macron and Merkel visits as one. Macron will take care of the nice pictures and play his role. Merkel will deliver the hard work and play hers.”

MARKET MOVERS

Public confidence in stocks craters. CNN Money's Matt Egan: “Main Street's confidence in the stock market is crumbling at the fastest pace since at least 1987. Americans remain optimistic about the economy, but their attitude toward stocks has gone from euphoric to negative as turbulence has rocked Wall Street. Just 33% of people polled by the Conference Board this month expected stock prices to rise over the next year. That's down dramatically from a record high of 51% who were bullish in January, back when the Dow was zooming beyond 26,000.”

But Wall Street stock traders are having their best year since the crisis. WSJ's Telis Demos: “A surge on Wall Street stock-trading desks is being driven by manic investor moves in derivatives, as fund managers scramble to protect their gains from future volatility. Following a leap in stock market gyrations so far this year, the biggest U.S. banks generated more revenue from stock trading than in any first quarter since the financial crisis, according to a Wall Street Journal analysis of bank regulatory filings.”

Shine is off tech stocks. WSJ's Ben Eisen and Akane Otani: “Investors rattled by recent volatility are becoming choosier about which technology-focused stocks they scoop up, a reversal from 2017 that threatens to undermine the tech sector’s dominance in the long stock rally. The S&P 500 tech sector, up 1.8% in 2018, is still among the best-performing groups in the broader index. But more than a third of the 69 stocks in the sector have declined in 2018, the most for any full year since 2011. In 2017, only six of them had lost ground. The divisions are likely to come into sharper focus as more tech-focused companies report financial results in the coming days.”

Tencent selloff demonstrates the tech rout. "The shares fell as much as 2.5 percent on Thursday to drop below their 200-day moving average for the first time since 2016," Bloomberg notes. "The Shenzhen-based giant, Asia’s biggest company by market value, has now tumbled almost 20 percent since its Jan. 23 high, losing some $114 billion. To put that into context, fewer than 3 percent of Europe’s biggest companies are worth that much."

Moody's affirms U.S. credit rating. Reuters's Noel Randewich: “Ratings agency Moody’s on Wednesday maintained the United States’ top-notch 'Aaa' credit rating, saying the country’s “exceptional” economic strength would counterbalance lower fiscal strength. The ratings agency also kept its stable outlook on the United States and said it expects Washington to resolve its recent trade dispute with China.”

Wall Street limped into positive territory on Wednesday on optimism over a spate of upbeat earnings that was nearly offset by jitters over rising U.S. bond yields and corporate costs.
Reuters
The basketball fans at Bespoke Investment Group note a disconcerting trend that’s developed as companies release their quarterly results: a tendency for stocks to pop after reporting earnings, only to drop thereafter.
Bloomberg
TRUMP TRACKER

TRADE FLY-AROUND: 

Beijing ready to strike back against investment restrictions. WSJ: "The U.S. threat of investment restrictions is already damping the enthusiasm of Chinese businesses, with some canceling or slowing plans to invest in the American market, China’s Commerce Ministry said. Ministry spokesman Gao Feng, without specifying what actions China could take, said Beijing is prepared to respond if the U.S. goes ahead with the plan... Rising uncertainty about the possible U.S. restrictions has already led some Chinese firms to reconsider their investment plans there, Mr. Gao said. He didn’t name any specific businesses, but said that reduced investment from Chinese companies could affect U.S. employment  and economic growth."

NAFTA's next hurdle: Congress. NYT"s Ana Swanson and Alan Rappeport: “A revised deal with Canada and Mexico will need approval from the Senate and House, which, under current trade laws, must pass the revamped agreement by a simple majority. But Republicans may balk at some of the provisions, including overhauls to investment rules that help companies invest abroad, while Democrats, who have long criticized the existing deal, may argue that President Trump’s changes do not go far enough.

“Congressional approval has become the latest sticking point in the revamp of a trade pact that, after eight months of fractious negotiations, could finally be in reach. Ministers from Canada, Mexico and the United States were scheduled to temporarily wrap up talks on Thursday, but lower-level negotiators could continue meeting into next week.”

Canada sees progress. Reuters's David Lawder: "Canadian Foreign Minister Chrystia Freeland said on Wednesday that good progress has been made at the NAFTA trade talks on the key issue of auto rules, though the threat of proposed U.S. steel and aluminum tariffs coming into force next week clouded the mood. Freeland, U.S. Trade Representative Robert Lighthizer and Mexican Economy Minister Ildefonso Guajardo met for a second straight day in a push to seal a quick deal on revamping the North American Free Trade Agreement. 'There is a very strong, very committed, good-faith effort for all three parties to work 24/7 on this and to try and reach an agreement,' Freeland told reporters after talks with Lighthizer."

Brewer seeks aluminum exemptions. Reuters: "Anheuser-Busch InBev, the world’s largest brewer, is hopeful that the United States will grant permanent exemptions to aluminum imported from allies and wants U.S. Congress to look into price spikes that have already set in. Carlos Brito, chief executive of Budweiser-maker AB InBev, which sells many of its beers in the United States in aluminum cans, said the company had been very disappointed by the introduction of tariffs, which he said had put U.S. manufacturers at a disadvantage."

Tim Cook visits Trump. The Washington Post's Tony Romm: “Trump huddled Wednesday with Apple chief executive Tim Cook to discuss trade as the White House forges ahead with tariffs on China and other trade policies that have provoked sharp rebukes from the iPhone giant and its tech-industry peers. Ahead of the meeting, Trump tweeted that he and Cook would discuss 'many things, including how the U.S. has been treated unfairly for many years, by many countries, on trade.' ... A spokesman for Apple declined to comment on the meeting.”

Cook was also at the White House on Tuesday night for the state dinner honoring Macron. Bloomberg News estimates the guests at the dinner were worth a collective $120 billion: “Five of them — LVMH Chairman Bernard Arnault, media mogul Rupert Murdoch, Blackstone Chief Executive Officer Steve Schwarzman, leveraged-buyout tycoon Henry Kravis and Federal Express founder Fred Smith — have a combined net worth exceeding $114 billion, according to the Bloomberg Billionaires Index. Other billionaires present were Carlyle co-founder David Rubenstein, cosmetics heir Ron Lauder and Trump himself, all with fortunes below the $4 billion cutoff for the ranking of the world’s 500 richest people."

Carson proposes raising rent. The Post's Tracy Jan, Caitlin Dewey and Jeff Stein: "Housing and Urban Development Secretary Ben Carson proposed far-reaching changes to federal housing subsidies Wednesday, tripling rent for the poorest households and making it easier for housing authorities to impose work requirements. Carson’s proposals, and other initiatives aimed at low-income Americans receiving federal assistance, amount to a comprehensive effort by the Trump administration and Republicans in Congress to restrict access to the safety net and reduce the levels of assistance for those who do qualify. The ambitious effort to shrink federal assistance has been dubbed 'Welfare Reform 2.0', after Bill Clinton’s overhaul of the welfare system in 1996. The proposals — affecting housing, food stamps and Medicaid — would require congressional approval."

MELTDOWN WATCH: 

Cohen will invoke the Fifth. The Post's Emma Brown and Roz Helderman: “Michael Cohen, the longtime attorney of President Trump, told a federal judge on Wednesday that he will invoke his Fifth Amendment right not to incriminate himself in a lawsuit brought by adult entertainer Stormy Daniels. Cohen’s declaration, in support of his request to pause proceedings in the civil case, cited an 'ongoing criminal investigation by the FBI and U.S. Attorney for the Southern District of New York.' Earlier this month, the FBI raided Cohen’s home, office and a hotel room where he had been staying. That investigation includes looking into the effort to quash embarrassing stories about Trump during the 2016 campaign, according to a person familiar with the matter.”

Giuliani reopens interview negotiations. The Post's Bob Costa and Carol D. Leonnig: "Rudolph W. Giuliani... Trump’s new personal lawyer dealing with the ongoing probe into Russian interference in the 2016 election, met with special counsel Robert S. Mueller III on Tuesday to reopen negotiations for a presidential interview, ­according to three people familiar with the talks. Giuliani, who joined Trump’s legal team last week, conveyed the ongoing resistance of Trump and his advisers to an interview with federal investigators, but did not rule out the possibility, the people said, adding that Giuliani pressed Mueller for clarity on when the probe is expected to end."

Trump's unimpeded pardon power. The Post's Sari Horwitz and Ellen Nakashima: “Attorney General Jeff Sessions told a Senate panel Wednesday that he believes ... Trump has the constitutional authority to pardon anyone and does not need to confer with the Justice Department, which traditionally has assisted presidents in such decisions. The president 'clearly has the constitutional power to execute pardons' without conferring with the Office of the Pardon Attorney, Sessions said.”

MONEY ON THE HILL

Brown calls for Mulvaney to resign. The Hill's Sylvan Lane: "The ranking Democrat on the Senate Banking Committee on Wednesday said that White House budget chief Mick Mulvaney should resign over comments suggesting he gave preferential treatment to lobbyists who had donated to his campaigns. Sen. Sherrod Brown (D-Ohio) said Mulvaney should step down as Office of Management and Budget director and acting chief of the Consumer Financial Protection Bureau (CFPB) after his Tuesday comments before a crowd of bankers. Mulvaney, a former GOP congressman from South Carolina, said Tuesday that he would only meet with lobbyists who had donated to his political campaigns but valued the opinions of his constituents over hired guns."

Gillibrand pitches postal banking. CNBC's Lorie Konish: "Senator Kirsten Gillibrand, D-N.Y., is proposing legislation aimed at putting an end to current payday lending practices by giving some banking services a new home: the U.S. Post Office. The legislation, called the Postal Banking Act, would make retail banking services available at all U.S. Postal Service locations. That amounts to 30,000 post offices nationwide. Services would include small-dollar loans for consumers that offer low fees and low interest rates. Those transactions would compete with payday loans, a short-term advance that typically comes due with your next paycheck."

Most don't see tax boost. Politico's Toby Eckert: "More than half of registered voters say they haven’t noticed an increase in their paychecks as a result of the new tax law, and support for the law overall remains tepid, according to a new POLITICO/Morning Consult poll. The April 19-23 survey suggests that Republicans’ message about the benefits of the tax cuts, which they are counting on to buoy their election fortunes in November, hasn’t broken through. At the same time, those who said they have seen a pay increase were more likely to support Republicans in Congress who voted for the tax overhaul than Democrats who opposed it."

Meanwhile, most Americans say they're still feeling the impact of the recession, according to a new Morning Consult poll. "Middle-class Americans were most likely to report that the recession still affects them, with 57 percent of those earning between $50,000 and $100,000 a year reporting some impact, the report found," The Hill's Niv Elis writes. "That number compares with 51 percent of those making less than $50,000 and 51 percent of those making more than $100k. The survey found that Americans blamed politicians more than any other group for the recession, with 73 percent of respondents laying the blame at their feet, just above the 72 percent who blamed big banks."

ABA will run first ads for candidates. American Banker's Neil Haggerty: "The American Bankers Association said Wednesday it will begin airing television advertisements in Montana and North Carolina in support of Sen. Jon Tester, D-Mont., and Rep. Ted Budd, R-N.C., in the upcoming midterm elections—the first time the group has independently funded ads in support of political candidates. The ads follow Tester’s support for a Senate bill to give regulatory relief to community banks, as well as Budd’s work on the House Financial Services Committee."

POCKET CHANGE

Deutsche Bank retreats from Wall Street. Bloomberg's Steven Arons: "Deutsche Bank AG is abandoning its ambitions to be a top global securities firm as it embarks on possibly the most sweeping overhaul yet of its struggling investment bank. Germany’s largest lender will scale back U.S. rates sales and trading, reduce the corporate finance business in the U.S. and Asia, and review its global equities business with a view toward cutting it back, the bank said in a statement Thursday. The measures will lead to a “significant reduction” in the 97,130-person workforce this year, Deutsche Bank said.

"The future of the investment bank had been a key factor in the tumultuous management shakeup that saw Christian Sewing take over as chief executive officer this month. A Deutsche Bank veteran who started as an apprentice, Sewing is accelerating a push to refocus the lender on its European home market and reverse a two-decade effort to compete head-to-head with the large Wall Street firms that dominate volatile securities trading."

Bank of America CEO on gun violence: "We have to help." Charlotte Observer's Rick Rothacker: "At Bank of America's annual shareholder meeting Wednesday, CEO Brian Moynihan stood firm on his company's decision to stop serving some gun makers in the aftermath of the Parkland, Fla., school shooting. During the question-and-answer session, a shareholder asked Moynihan how much business the bank was giving up because of its decision to stop lending to manufacturers of military-style guns sold for civilian use. The shareholder noted that renowned investor Warren Buffett has said he wouldn't take a similar action. Moynihan didn't provide any financial figures, but said the bank's support services group has worked with about 150 employees directly affected by the shootings. 'This comes from our teammates saying we have to help,' he said."

The Switch
Despite many users saying they deleted Facebook as the result of a privacy scandal that erupted in mid-March, 13 percent more people logged on each day in March
Elizabeth Dwoskin
Wonkblog
Giant airplane makers discover the most effective way to eliminate potential competition from upstart rivals: Buy them. Shouldn’t that be illegal?
Steven Pearlstein
Goldman Sachs has hired the reality-TV star JoJo Fletcher of "The Bachelorette" to help pitch its Marcus consumer-lending product.
Business Insider
THE REGULATORS

Otting's questionable trades. Reuters: "Trump’s nominee for Wall Street regulator Comptroller of the Currency bought financial stocks until he took office in November, according to financial disclosure documents filed with the Office of Government Ethics. While not illegal, the trading activity by Joseph Otting’s money manager could violate the spirit of ethics rules designed to prevent conflicts of interest... Otting gave the OGE a tally of his investments in March 2017 and agreed upon his June nomination to unwind millions of dollars in financial stocks within 90 days of being confirmed. However, following his nomination Otting bought hundreds more financial shares."

DAYBOOK

Today

  • The U.S. Chamber of Commerce holds the 12th Annual Capital Markets Summit.
  • The House Financial Services Committee holds a hearingon oversight of the SEC’s corporation finance division.
  • SEC chairman testifies before the House Appropriations Subcommittee on Financial Services and General Government.
  • The Heritage Foundation holds an event on crowdfunding.
  • The House Energy and Commerce Subcommittee on Digital Commerce and Consumer Protection holds a hearing on reform of the CFIUS review process.
THE FUNNIES

From The Post's Tom Toles: 

BULL SESSION

Republicans reflect on whether President Trump has changed the country's role in the world:

Kanye West shows Trump some Twitter love: 

Stephen Colbert on Emmanuel Macron's speech to Congress: