So much for that showdown with China over its trade abuses. 

The Trump administration and its counterparts in Beijing continue rapidly deescalating their confrontation, with the U.S. reportedly agreeing to a deal to drop severe penalties on Chinese telecom company ZTE as the Chinese consent to removing billions of dollars in tariffs on American agricultural products. Further, the Chinese foreign ministry said Tuesday it will follow through with an April pledge to slash tariffs on American cars, cutting the import duties from 25 to 15 percent. 

The two sides are still working out the terms of the ZTE agreement, The Wall Street Journal’s Lingling Wei and Bob Davis report. But the rough outline revolves around the U.S. removing a seven-year ban on the export of parts the company needs to stay in business in return for ZTE shaking up its management and potentially paying steep fines. The decision on autos, meanwhile, is likely to offer limited upside to American carmakers, since imports only account for about 4 percent of car sales in China and the move will also benefit "European and Asian manufacturers from Daimler AG to Toyota Motor Corp," Bloomberg notes.

What's notable in the flurry of activity is what the Trump administration is not prying from the Chinese: Namely, any changes to its deep-rooted program of abusing U.S. intellectual property, otherwise strong-arming American companies doing business there and providing anti-competitive support to domestic industries. Demands that China curb those practices lay at the heart of the case the Trump administration had been building.

Even before the overnight developments, Trump supporters — and those cheerleading his get-tough approach to trade with China — began reckoning with the likelihood that the president is abandoning the cause. 

Trump all but confirmed he’s backing away from a showdown with the nation’s leading economic rival in a series of tweets Monday. Trump’s tell: Rather than pledging to keep up the pressure on Beijing, the president began declaring a premature victory over a deal not yet sketched in pencil. 

“It gives the appearance of waffling,” says Dan DiMicco, the former chief executive of steel producer Nucor and a Trump trade adviser who oversaw the transition team’s work on the issue. DeMicco pointed as the first signs of trouble to the president’s decision to back off the crackdown on ZTE and then naming Treasury Secretary Steven Mnuchin to lead talks with Beijing. 

“All the Chinese want to do is maintain the status quo, so they can keep stealing and cheating,” he says. “President Trump was elected to stop that … I still believe he’s going to take care of it. But these delays seem to be playing into China’s hand. We’ve been doing the same thing for 25 years.”

Stephen K. Bannon, Trump’s former political strategist, expressed similar alarm. In a Monday interview with Bloomberg News's Kevin Cirilli, the onetime keeper of the “America First” flame also blamed Mnuchin for the administration’s turn toward Beijing. Trump “changed the dynamic regarding China, but in one weekend Secretary Mnuchin has given it away,” Bannon said. “You might as well have Hank Paulson doing this.” 

“For him to say the trade war is 'on hold?' It misses the central point,” Bannon continued. “They’re in a trade war with us and it hasn’t stopped. Mnuchin has completely misread the geopolitical military and historical precedence, and what President Trump had done was finally put the Chinese on their back heels.”

Sen. Marco Rubio (R-Fla.) likewise criticized the Trump's accommodation and said he will push congressional action to head it off: 

Other critics of the administration’s softening say the rapproachment fails to make a dent in rampant Chinese trade abuses.

U.S. Trade Representative Robert Lighthizer catalogued those practices in a March report. It described a Chinese campaign of plundering American intellectual property to assist the country’s bid to dominate the fields of robotics, electric vehicles, aerospace, artificial intelligence and others. Scott Paul, president of the Alliance for American Manufacturing and a champion of a tougher approach to China, said he “can’t escape the feeling that the administration got somewhat played this round.” 

“The question for me is what did we get out of it?” Paul says. “There’s a lot of work to be done and we may have given away the best leverage point we had for a long time, which is the threat of tariffs.” And he said if Trump has lost DiMicco, “he’s lost his base on trade.” 

That depends on the definition of Trump’s base. Fred Bergsten, founding director of the Peterson Institute for International Economics, agrees the administration is missing an opportunity to confront structural issues. But he sees the president maneuvering toward a political win as Beijing looks primed to break out a checkbook for more American agricultural and energy products. “He’ll be able to go to Des Moines and say to the farmers, ‘You were afraid you were going to lose sales because of tariffs. Now you’re going to gain sales.’ ”

Bergsten gives credit to China for accurately assessing that Trump is mostly concerned with narrowing the bilateral trade deficit. “They’ve read him correctly in terms of what they can do to assuage him at the least cost to themselves. We’re talking about a managed trade solution, where the Chinese buy more soybeans from the U.S. and fewer from Brazil, more aircraft from the U.S. and fewer from Europe, more semiconductors from the U.S. and fewer from Japan. That’s relatively easy for them to do,” he says.

For the United States, Bersgsten says that it has the virtue of averting an escalation of the conflict. “Any serious effort to get the Chinese to abandon [its industrial policy] would have failed, Trump would have retaliated, and we would have had a trade war. Given the realistic counterfactual, this is not a bad outcome.”

The Wall Street Journal's Greg Ip writes that China is winning, in part because Trump's "own tolerance for pain appears limited. Though the U.S. depends much less on exports to China than the reverse, China targeted farm exports from Republican states important to the outcome of November’s midterm elections. That may explain why U.S. officials have prioritized avoiding Chinese retaliation. China still holds the weaker hand in this trade dispute—but it has played that hand far better."


Stocks jump as trade war fears ebb. WSJ's Gunjan Banerji and Jon Sindreu: “The Dow Jones Industrial Average surged nearly 300 points Monday to its highest level in more than two months as concerns about a possible trade war between the U.S. and China temporarily eased ... Analysts cautioned, though, that the two countries haven’t reached a final resolution and that investor optimism could be short-lived. 'I’m very skeptical that we’re anywhere near a resolution on China,' said Peter Cecchini, chief market strategist at Cantor Fitzgerald ... The Dow industrials jumped 298.20 points, or 1.2%, to 25013.29 — the first time the blue-chip index topped the 25000 milestone since March 16, before Facebook Inc.’s data-privacy scandal sparked a big selloff in technology stocks that spread to the broader market.”

Mnuchin's “very bullish” on stocks. CNBC's Berkeley Lovelace Jr.: “Mnuchin told CNBC on Monday that he would be willing to bet that gross domestic product can sustain at least 3 percent growth later this year. 'That's really been the focus. That's what everyone should be focused on. That's our scorecard,” he said in a 'Squawk Box' interview. 'We are well on our way to 3 percent or higher sustained growth,' he predicted ... Mnuchin said the stock market is reflecting an improving economy ... 'There have obviously been various different world events and things that have created some volatility,' he said. 'But the stock market is up an enormous amount since the election.'”

Corporate bonds tank. Bloomberg's Cecile Gutscher: “You need to rifle through 18 years of history to find selloffs that compare to the one corporate bond investors are now enduring. Debt of American companies just posted their third-worst 100-day returns since 2000, according to a JPMorgan Chase & Co. index, as tighter monetary conditions leave their mark on high-quality bonds with longer maturities. With negative returns likely to scare off retail investors, the outlook for the asset class looks grim, JPMorgan strategists said in a Friday note. But they find a silver lining: the highest yields in almost five years are likely to discourage new bond supply, which would at least help the technical picture.”

David Kostin, Goldman's chief U.S. equity strategist, says investors should not worry about rising interest rates until the 10-year Treasury yield zeroes in on 4 percent.

Mnuchin: Justice Department should scrutinize Big Tech. Axios's David McCabe: “Mnuchin said Monday that the Justice Department should look at the increasing dominance of major tech companies ... 'These are issues that the Justice Department needs to look at seriously — not for any one company — but obviously as these technology companies have a greater and greater impact on the economy, I think that you have to look at the power they have,' Mnuchin said on CNBC following a 60 Minutes segment Sunday night on concerns about Google’s power.”


Trump team divisions undercut progress against China. NYT's Mark Landler and Ana Swanson: "Ceaseless infighting and jockeying for influence on the White House’s trade team helped deprive Mr. Trump of a quick victory on his most cherished policy agenda, several people involved in the talks said. The deep internal divisions carried over into how officials characterized the agreement and muddied the outlook for the next phase of the negotiations between Washington and Beijing... The Chinese were well aware of the divisions in the administration’s trade team — and set out to exploit them, according to people briefed on the deliberations."

Photo of trade negotiators goes viral in China. NYT's Raymond Zhong: "During trade talks in Washington last week, some people in China saw an exorcism of bitter, century-old ghosts. After Chinese delegates met with American lawmakers on Thursday, a photograph taken from one end of the table circulated on the popular Chinese social media service Weibo. It was shared alongside one from 1901, when representatives from China and colonial powers signed an accord to end the Boxer Rebellion, a violent uprising against foreign influence in China. In the earlier black-and-white photo from Beijing, the representatives from the West cut a striking contrast with the elderly envoys of the Qing dynasty. But in the photo from Washington, it is the Americans who appear to be older. 'Over the past 100 years, American officials have gone from young to old, and Chinese officials have gone from old to young,' one Weibo user wrote. 'This has a lot to do with the current state of the two countries. America today is just as closed off as China was 100 years ago.'” 

The photo:

Commodities set for a win. Bloomberg runs down the American products that stand to win from easing trade war fears — everything from cotton to crude oil. Reuters notes there's a limit to the benefits for producers of those goods China looks likely to buy more of: "Infrastructure bottlenecks mean energy and commodity exports can grow only gradually, and only if U.S. oil, gas and other goods remain cost attractive against global competition. Morgan Stanley estimates it could take up to three years to increase Chinese purchases of U.S. goods by $60 billion to $90 billion, with a rise in agricultural imports in the near term followed by energy."


WH will review classified info with GOP lawmakers. The Post's Matt Zapotosky, Seung Min Kim, Carol Leonnig, and Devlin Barrett: "The White House and the Justice Department have put off a high-stakes confrontation over the FBI’s use of a confidential source to aid an investigation into the Trump campaign, after top law enforcement and intelligence officials met with... Trump on Monday to discuss the brewing controversy. A White House spokeswoman said Chief of Staff John F. Kelly plans to convene another gathering between the officials and congressional leaders to 'review highly classified and other information' about the source and intelligence he provided. That could be viewed as something of a concession from the Justice Department, which had been reluctant to turn over materials on the source to GOP lawmakers demanding them. But it also could be a bureaucratic maneuver to buy time and shield actual documents."

During the presidential transition Navarro recommended Halper.
Donald Trump’s personal lawyer helped a major donor to the president’s inauguration pitch a nuclear-power investment to the Qatari sovereign wealth fund at a meeting in April.

GOP wounds Dodd-Frank, but it will survive. Politico's Victoria Guida and Zachary Warmbrodt: "Congress is expected to send to Trump’s desk this week a bank deregulation bill rolling back several pieces of the 2010 Dodd-Frank Act, which imposed sweeping new rules on banks in the wake of the financial crisis. But despite Trump’s promises to “do a big number” on Dodd-Frank, the bipartisan bill that is likely to be approved by the House as early as Tuesday leaves many of the Republicans’ most-hated provisions of the law in place, including the foundations of the Consumer Financial Protection Bureau and the government’s power to unwind failing megabanks... 

"The bill would scale back key sections of Dodd-Frank. Regional banks scored a huge victory by lifting a regulatory threshold that subjects them to stricter oversight by the Federal Reserve. Small banks secured streamlined capital requirements and exemptions from mortgage-lending rules. But most of the nation's biggest global banks — including Bank of America, Wells Fargo and Goldman Sachs — will get little from the legislation."

The administration has more ammo to aim at financial industry regulations. On Monday, Trump signed a repeal of a Consumer Financial Protection Bureau rule that targeted racial discrimination in auto lending. "Trump’s signature on a congressional resolution erases the CFPB’s 2013 guidance targeting 'dealer markups,' the additional interest that is added to a customer’s third-party auto loan as compensation for the dealer," The Hill's Sylvan Lane writes. "The president signed the resolution in a private White House signing ceremony. Auto dealers, banks and their allies in Congress said the CFPB policy was an unfair and unfounded attack on an essential and harmless financing tool."

Up next: A rollback of the Volcker Rule. "The Fed and other federal banking regulators are poised to soften the Volcker Rule, making it easier for giant banks to engage in a wider range of trading that can be highly profitable, but also very risky," NYT's Emily Flitter and Alan Rappeport write. "The changes, which are expected to be proposed later this month, are emblematic of the larger deregulatory effort underway in Washington... The real action is at the financial regulatory agencies, like the Fed and the Office of the Comptroller of the Currency, which have broad powers over the banking system."

Dems make anti-corruption pitch. The Post's Mike DeBonis: "Democrats plan to highlight allegations of corruption surrounding the Trump administration — and a legislative agenda to prevent future abuses — as they continue rolling out their party platform ahead of November’s midterm elections. The first planks of the 'A Better Deal' platform, released last year, focused on the party’s economic agenda. Now, with questions about pay-to-play politics swirling around... Trump and his current and former aides, Democrats introduced new anti-corruption proposals Monday billed as 'A Better Deal for Our Democracy.' 'Instead of delivering on his promise to drain the swamp, President Trump has become the swamp,' said House Minority Leader Nancy Pelosi (D-Calif.) during a rollout event on the Capitol steps."

Mulvaney has talked to McCarthy about replacing Ryan. The Post's Mike DeBonis: “White House budget director Mick Mulvaney acknowledged having discussions with House Majority Leader Kevin McCarthy about replacing House Speaker Paul D. Ryan before Ryan retires from Congress next year, a conservative newsmagazine reported Monday. The Weekly Standard reported that Mulvaney made the remarks Sunday during a conference sponsored by the publication in Colorado Springs. Fox News Channel anchor Bret Baier asked Mulvaney about the prospect of McCarthy succeeding Ryan this year, before the midterm elections, and Mulvaney suggested that it would become a referendum on the top Democratic leader, Nancy Pelosi.

"'I’ve talked with Kevin about this privately but not as much publicly,' Mulvaney said, according to the Weekly Standard. 'Wouldn’t it be great to force a Democrat running in a tight race to have to put up or shut up about voting for Nancy Pelosi eight weeks before an election? That’s a really, really good vote for us to force if we can figure out how to do it.' The comment constitutes a remarkable admission from a member of President Trump’s Cabinet that could be interpreted as conspiring to remove a sitting House speaker belonging to the president’s own party.”

As for forcing a vote on Pelosi, The Post's Dave Weigel runs down why that gambit makes no sense. 

The White House plans to seek at least $2.2 billion for the controversial project.

SCOTUS: Companies can force workers into individual arbitration. The Post's Robert Barnes: “An ideologically divided Supreme Court ruled Monday that companies may require workers to settle employment disputes through individual arbitration rather than joining to press their complaints, a decision affecting as many as 25 million workers. The court’s conservative majority said that the 5-to-4 ruling was a logical reading of federal law, and Congress’s preference for using arbitration to avoid costly and time-consuming litigation. But the decision, involving a wage dispute, was roundly criticized on the left, and advocates said it could make it harder to press other workplace complaints such as discrimination and sexual harassment.”

NYSE to get first female leader. WSJ's Bradley Hope and Alexander Osipovich: "The New York Stock Exchange is set to get its first female leader in its 226-year history. Stacey Cunningham, the NYSE’s chief operating officer, will become the Big Board’s 67th president, the exchange’s parent Intercontinental Exchange Inc. told The Wall Street Journal. She will start her new role Friday, succeeding Thomas Farley, an ICE veteran who is leaving the Atlanta-based company."

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Steven Zeitchik
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Michelle Singletary

U.S., Canada launch crypto probes. Reuters's Pete Schroeder: "U.S. and Canadian state securities regulators announced Monday they have launched dozens of investigations into cryptocurrency scams. The North American Securities Administrators Association announced the wide-ranging series of probes on Monday, dubbed 'Operation Crypto-Sweep.' The investigations, some of which have already concluded, are aimed at unregistered securities offerings and initial coin offerings that promise significant returns without informing investors of the risks. A task force convened by the group of state regulators in April has launched 70 investigations, with 35 already facing completed or pending enforcement actions."



  • The Senate Appropriations Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies holds a markup of the Agriculture Appropriations Bill.
  • The Senate Appropriations Subcommittee on Financial Services and General Government holds a hearing on the 2019 Treasury Department budget request.

Coming Up

  • The Senate Budget Committee holds a hearing on the Government Accountability Office’s annual report on Wednesday.
  • The House Education and Workforce Subcommittee on Workforce Protections holds a hearing on “Regulatory Reform: Unleashing Economic Opportunity for Workers and Employers” on Wednesday.
  • The Peterson Institute for International Economics holds a webcast on “What We Can Do to Make Open Economies Inclusive” on May 30.
  • The American Enterprise Institute holds a conversation with former Federal Reserve chairman Ben S. Bernanke on June 7.

From The Post's Tom Toles: 


President Trump calls the $20 million Russia probe a "witch hunt" and a waste of taxpayer money: 

President Trump said he will ask the Justice Department to look into whether the Obama administration surveilled his 2016 campaign

Stephen Colbert on the leaks coming out of the White House: