THE TICKER

With a trade war looming, the Trump team's willingness to embrace trade diplomacy faces key tests this week in Europe and Asia.

Exemptions from U.S. steel and aluminum tariffs expire at midnight, and the Trump administration has yet to announce extensions for any of the seven trading partners carved out. That includes the European Union — the leading U.S. trading partner —  despite direct appeals to President Trump last week by French President Emmanuel Macron and German Chancellor Angela Merkel. 

The decision “appears likely to come down to the whims of President Trump, who has been influenced by brief interactions with foreign leaders and has seesawed between scrapping and rejoining global trade deals,” the New York Times’s Jack Ewing and Ana Swanson write. The E.U. is poised to fight back with $3.5 billion of tariffs on U.S. imports of everything from motorcycles to peanut butter. Macron, Merkel and British Prime Minister Theresa May discussed the matter over the weekend, the Times reports, and the German government issued a statement pledging that the E.U. will be “ready to decisively defend its interests.”

The administration will grant extensions to some of, but not all, the exempted countries, Commerce Secretary Wilbur Ross told Bloomberg News over the weekend. And it will name those that made the cut just before the deadline, he said. Canada and Mexico will be among them, thanks to progress the Trump administration has made with them in talks over renegotiating the North American Free Trade Agreement, CNBC reports. (And South Korea secured a permanent exemption from the steel tariffs as part of its new bilateral deal with the U.S.)

Meanwhile, Treasury Secretary Steven Mnuchin leads a delegation of top Trump economic advisers to Beijing in the hopes of hammering out a framework for a deal that will avert mounting trade tensions between the two economic superpowers. “The U.S. team plans to take tough positions, say U.S. officials, who are skeptical that China’s pledges will amount to much,” the Wall Street Journal’s Bob Davis and Lingling Wei write. “The U.S. hasn’t sent an advance team to Beijing for preliminary negotiations, as is typical. Rather, when the two sides meet, the U.S. may simply note … Trump’s threats of tariffs and U.S. complaints, and wait to see what the Chinese offer, figuring that will force China to offer even deeper structural changes and faster action.”

For China’s part, The Times’s Keith Bradsher reports, it will refuse to discuss two of the Trump administration’s toughest demands, namely, “a mandatory $100 billion cut in America’s $375 billion annual trade deficit with China and curbs on Beijing’s $300 billion plan to bankroll the country’s industrial upgrade into advanced technologies such as artificial intelligence, semiconductors, electric cars and commercial aircraft. The reason: Beijing feels its economy has become big enough and resilient enough to stand up to the United States.”

There’s good reason to be skeptical of a breakthrough in Beijing. China watchers say that government still has no grasp of what terms the Trump team is seeking to call off the $150 billion in tariffs it has threatened to impose on Chinese imports. It’s not clear the Trump team itself knows. The negotiators the president tapped for the trip represent the poles of his administration’s thinking on the matter: Mnuchin and National Economic Council Director Larry Kudlow favor talks toward freer trade, while U.S. Trade Representative Robert E. Lighthizer and top trade adviser Peter Navarro advocate a more confrontational approach, backed by the threat of escalating punishments. 

Trump himself appears to be wrangling in real time with the benefits and demerits of either approach. At a White House dinner this month with Congressional Republican leaders, Senate Majority Leader Mitch McConnell (R-Ky.) urged him to resolve the tariff threats, which have rattled GOP incumbents in farm states, the Times reports. "Business leaders who have visited Washington recently said that the president had been unmoved by protests from members of his own party," the paper writes.

Yet the president — in a Saturday night rally in Michigan — acknowledged that his trade moves have spooked the stock market. “But he said it was necessary to push China for concessions beyond what Beijing has offered to date, even if it inflicts short-term ‘pain’ on many Americans,” The Washington Post’s Rachel Chason and David J. Lynch write. Then Trump surveyed the crowd on the idea of a temporary guest worker program to benefit farmers caught in the trade war crossfire — the sort of A/B testing he often employed during the campaign to test ideas with his base. The pitch, NBC reports, received “lackluster applause.”

MARKET MOVERS

Fed's rate plans under pressure. WSJ's Nick Timiraos: "Federal Reserve officials meeting this week are likely to hold interest rates steady, but signs of stronger price and wage pressures point to more difficult discussions over how much more they should raise rates in the next few years. Data to be released Monday are expected to show inflation has risen close to the central bank’s 2% target, using its preferred gauge, after years of falling short... Fed officials raised rates last month and penciled in two more increases this year. The inflation data will animate discussions about whether these moves will be enough to keep price pressures under control."

Economy revs? CNBC's Jeff Cox: "First-quarter indicators showed that while the economy has yet to roar due to all the recent fiscal stimulus, it's at least starting to purr. Friday's GDP report, for one, painted a somewhat positive picture. The 2.3 percent growth rate may not have looked like anything spectacular, but it was the first time the first quarter beat economist expectations since 2008, according to Bespoke Investment Group. The employment cost index, a metric closely watched at the Federal Reserve, showed compensation cost for nongovernment workers up 2.7 percent, compared with 2.4 percent a year ago."

The dollar is rallying after floundering for most of the past year, another sign that global growth momentum may be shifting back to the U.S. and away from other major economies.
WSJ
TRUMP TRACKER

Trump threatens shutdown over wall funding. Reuters: "Trump on Saturday threatened to shut down the federal government in September if Congress did not provide more funding to build a wall on the border with Mexico. 'That wall has started, we have 1.6 billion (dollars),' Trump said at a campaign rally in Washington, Michigan. 'We come up again on September 28th and if we don’t get border security we will have no choice, we will close down the country because we need border security.' Trump made a similar threat in March to push for changes in immigration law that he says would prevent criminals from entering the country."

NAFTA talks resume next week. Bloomberg's Josh Wingrove and Eric Martin: "A push for a tentative Nafta deal in coming days has come up short despite progress on key issues, with ministers not meeting again until after a U.S. trade trip to China... Lighthizer met again Friday in Washington with Canadian Foreign Minister Chrystia Freeland and Mexican Economy Minister Ildefonso Guajardo. After the meeting, Guajardo and Freeland stressed gains had been made and that more parts of a revised North American Free Trade Agreement are now almost done."

MONEY ON THE HILL

Tax law to wave investment home? WSJ's Richard Rubin: "The new tax law’s 21% corporate rate and revised system of rules for money earned at home and abroad were a message to American companies: Come invest at home. Will it work? Yes, tax experts say—but with limitations and caveats. The lower corporate tax rate reduces the advantage from earning profits abroad and companies don’t face additional U.S. taxes when they bring foreign profits back to shareholders. The playing field is more even, but it isn’t fully level. Tax rates still differ around the world and the revamped system has a few new quirks creating narrow incentives at the margins—where corporate decisions are made—to hold foreign assets."

Dems keep heat on Mulvaney. Washington Examiner's Joseph Lawler: "Mick Mulvaney’s Democratic antagonists in Congress aren’t going to let him off easy for his comments about lobbyists this week. Two prominent liberal lawmakers separately demanded Friday that Mulvaney disclose which lobbyists he might have met with in his role as acting director of the Consumer Financial Protection Bureau. The demand was in reaction to his comment at a meeting of bankers on Tuesday that, during his time in Congress, he only considered meetings with lobbyists who donated to him. One of the Democrats was Rep. Maxine Waters, D-Calif., the top Democrat on the House Financial Services Committee."

Meanwhile, he isn't blowing up the CFPB. Politico's Katy O'Donnell: "Mulvaney has continued with dozens of lawsuits and nearly 100 investigations into corporate abuses in the five months since President Donald Trump installed him as the bureau’s acting director. On his watch, the agency issued its second-largest fine ever — $500 million against Wells Fargo for auto insurance and mortgage-lending abuses. The only major regulation he has reined in is one curbing payday lending, which Republicans in Congress have in their cross hairs anyway. And the staff of 1,700 has only 10 fewer employees now than on the day he walked in the door...

"But what was once concern about a bomb-thrower tearing up the agency that was the brainchild of liberal firebrand Elizabeth Warren (D-Mass.) has now morphed into a less-immediate worry about a slowdown in efforts to combat corporate wrongdoing. Rather than fireworks, it’s death by a thousand cuts."

Politics
Richard Uihlein shuns the spotlight, but the shipping-supplies magnate has become one of the most influential Republican patrons in the country.
Michelle Ye Hee Lee and Michael Scherer
POCKET CHANGE

T-Mobile and Sprint announce merger. The Post's Tony Romm and Brian Fung: "T-Mobile and Sprint, the nation’s third- and fourth-largest wireless carriers, respectively, agreed to a nearly $27 billion merger Sunday that could dramatically reshape the U.S. telecom industry while testing the appetites of consumers and regulators alike for further corporate consolidation.

"The deal marks the latest attempt by T-Mobile, operated by Germany’s Deutsche Telekom, and Sprint, run by the Japanese conglomerate SoftBank, to combine forces as they seek to amass subscribers and challenge the national footprints of AT&T and Verizon. The move comes at a time when the industry is racing to deploy the next generation of ultrafast wireless technology, called 5G. The combined company's name would be T-Mobile."

AT&T trial winds down. WSJ's Brent Kendall: "The Justice Department’s case against AT&T planned acquisition of Time Warner has shown signs of strain after a grueling trial, highlighting the difficulty of challenging a merger involving companies that aren’t direct competitors. A key government witness drew skepticism from the judge, and five weeks of testimony turned up few major revelations from senior executives. Closing arguments, set for Monday, give the Justice Department a final chance to frame its arguments and AT&T an opportunity to cement its gains. It also provides a venue for U.S. District Judge Richard Leon, who is deciding the case, to further signal his thinking, although he isn’t expected to rule for several weeks."

Sainsbury plans to buy Asda in a $10 billion deal that would transform the U.K.’s supermarket industry
Bloomberg
Omeed Malik, a managing director fired by the bank in January, filed a claim this week through the Financial Industry Regulatory Authority.
CNBC
THE REGULATORS

Emboldened banks take aim at regs. Reuters's Michelle Price: "U.S. banks are pushing to scrap or revise more than a dozen other lesser-known rules they say are outdated, costly and hurt economic growth... Reuters has identified around 15 pre-crisis rules that bankers and lobbyists want to change, based on multiple interviews, disclosure forms, and advocacy documents submitted to the administration, its appointed officials and lawmakers. While promising considerable savings, most changes should be far less contentious than tweaking Dodd Frank, which aims to curb excessive risk-taking and predatory lending, lobbyists say. Still, some proposals face resistance from consumer groups and business advocates warning they could erode customer protection and hurt small businesses." 

Hoenig out. Bloomberg's Jesse Hamilton: "The ranks of regulators Wall Street loves to hate will lose one of its last and most prominent voices next week when Thomas Hoenig steps down as vice chairman of the Federal Deposit Insurance Corp. A free-market conservative who often saw eye-to-eye with pro-regulation forces, Hoenig has consistently argued that big banks should have huge stockpiles of capital and be less leveraged, a view that has become increasingly unfashionable in... Trump’s Washington...

"Throughout the post-crisis period, he offered pointed public reminders that under-capitalized megabanks had posed a real threat to the global economy just a few years earlier. And he continued to argue -- sometimes as a lone voice -- that new rules meant to remedy that problem weren’t strong enough... His message has been drowned out in the last year by the de-regulatory effort led by Trump’s appointees to key agency posts."

DAYBOOK

Today

  • The Heritage Foundation holds an event on “The Trump Boom and the Let’s Plot to Stop It.”
  • The Milken Institute’s 2018 Global Conference continues.

Coming Up

  • The Women in Housing and Finance, Inc. holds an event on Tuesday.
  • The U.S. Chamber of Commerce holds the 9th China Business Conference on Tuesday and Wednesday.
  • Securities of Exchange Commission chairman Jay Clayton speaks at Temple University on Wednesday.  
  • The 40th annual Law & Compliance Conference begins on Wednesday.
  • Brookings Institution holds an event on the future of trade in U.S.-Japan relates on Wednesday.
  • The American Enterprise Institute holds a conversation on President Trump’s strategy in the America on Thursday.
  • The National Economists Club holds an event on Thursday.
  • The 2018 Consumer Financial Protection Bureau Research Conference begins on Thursday.
THE FUNNIES

From The Post's Tom Toles: 

BULL SESSION

Here's what you missed from Michelle Wolf's routine at the 2018 White House correspondents' dinner:

Trump commented on skipping the White House correspondents' dinner during his own counterprogramming at a rally in Michigan: 

"Kanye West gets it," Trump tells the crowd during his rally in Michigan: