The Trump administration is accelerating its tilt into a global trade war.
Developments over the weekend tell the story of an offensive that is melting decades-old allegiances abroad and further isolating the administration at home. Here’s a look at where things stand across the multiple and potentially multiplying fronts:
1. No progress in China.
Talks toward reestablishing a truce with Beijing closed Sunday without a breakthrough agreement, setting the two economic superpowers closer to unleashing $100 billion in tariffs on one another.
For this, the third round of negotiations, Commerce Secretary Wilbur Ross and Chinese Vice Premier Liu He, leading the efforts for either side, didn’t even bother to cobble together the sort of bland joint communique that concluded the last round. And there was no evident progress on a Chinese commitment to buy more American agricultural and energy products, the purported goal of the meeting. Haggling over the terms of those purchases nearly derailed Ross’s visit; he made the trip to keep lines open, the Wall Street Journal’s Lingling Wei and Bob Davis report.
But in the wake of the Trump team’s renewed threat last week to slap $50 billion in levies on Chinese imports — tariffs that the administration said it will list June 15 — Beijing pledged to respond in kind.
2. G-7 minus one.
The Trump administration also earned a rare, sharp rebuke from some of the nation’s closest traditional allies for its decision to move ahead with tariffs on steel and aluminum imports from Mexico, Canada and the European Union. Finance ministers for the other six countries in the Group of 7 wrapped up a three-day huddle with a statement that urged Treasury Secretary Steven Mnuchin to communicate their “unanimous concern and disappointment” over the move to President Trump.
Some context on the statement from Bloomberg's Michael McKee:
I’ve covered G7 meetings since 1995. I’ve never seen a country, let alone a G7 member, singled out like this:https://t.co/E2RoBi06ct— Michael McKee (@mckonomy) June 3, 2018
Reuters notes that all six of the countries — Britain, Canada, France, Germany, Italy and Japan — are paying the metals tariffs and are taking different measures to retaliate: “Canada and Mexico, which are embroiled in talks with the United States to update the North American Free Trade Agreement, responded to the move by announcing levies of their own on a variety of U.S. exports. The EU is set to retaliate with tariffs on a range of U.S. goods, from Harley-Davidson motorcycles to jeans and bourbon.”
The missive from their finance chiefs sets up what promises to be a tense two-day meeting of the G-7 leaders themselves kicking off Friday outside Quebec City.
3. Canada riled.
Our neighbor to the north in particular is in uncharacteristically high dudgeon about the tariffs, partly over the Trump administration invoking national security as a justification. Canadian Prime Minister Justin Trudeau, appearing Sunday on NBC’s “Meet the Press,” called the White House’s reasoning “quite frankly insulting and unacceptable,” in light of the two nations' long history of military cooperation.
Chrystia Freeland, Canada's top diplomat, put a sharper point on it in an interview Sunday with CNN’s “State of the Union”: “What you are saying to us and to all of your NATO allies is that we somehow represent a national security threat to the United States,” she said. “And I would just say to all of Canada's American friends — and there are so many — seriously? Do you really believe that Canada, that your NATO allies represent a national security threat to you?”
Larry Kudlow, Trump’s top economic adviser, said Trudeau was “overreacting.” He dismissed the confrontation with Canada as a “family quarrel” that could be resolved through negotiations. “These tariffs may go on for a while or they may not,” he said on “Fox News Sunday.”
Meanwhile, Trump on Friday renewed his threat to scrap NAFTA altogether, a possibility Trump trade adviser Peter Navarro also invoked on Sunday, with regard to the terms the U.S. secures from Mexico:
Peter Navarro: "Either we're going to get a deal for the American people that basically reduces the trade deficit with Mexico and then allows us to build more factories here, or we're going to leave NAFTA." #SundayFutures @MariaBartiromo pic.twitter.com/WZzpWHbrCb— Fox News (@FoxNews) June 3, 2018
4. Trumpland turmoil.
The president appears as committed as ever to a maximally hawkish approach. And he sounded aggrieved in several weekend tweets defending his rationale for shaking up the global trading order:
When you’re almost 800 Billion Dollars a year down on Trade, you can’t lose a Trade War! The U.S. has been ripped off by other countries for years on Trade, time to get smart!— Donald J. Trump (@realDonaldTrump) June 2, 2018
Why is it that the Wall Street Journal, though well meaning, never mentions the unfairness of the Tariffs routinely charged against the U.S. by other countries, or the many Billions of Dollars that the Tariffs we are now charging are, and will be, pouring into U.S. coffers?— Donald J. Trump (@realDonaldTrump) June 2, 2018
The United States must, at long last, be treated fairly on Trade. If we charge a country ZERO to sell their goods, and they charge us 25, 50 or even 100 percent to sell ours, it is UNFAIR and can no longer be tolerated. That is not Free or Fair Trade, it is Stupid Trade!— Donald J. Trump (@realDonaldTrump) June 2, 2018
Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade! They must open their markets and take down their trade barriers! They report a really high surplus on trade with us. Do Timber & Lumber in U.S.?— Donald J. Trump (@realDonaldTrump) June 1, 2018
But in Trump’s inner orbit, the fight to steer the administration’s course rages on. Mnuchin, the administration’s most powerful free-trade defender, is outmanned. So he is urging like-minded officials at home and abroad to make their cases directly to the president. “He was in a tough spot, tough, tough,” Japanese Finance Minister Taro Aso told reporters at the G7 meeting, per Bloomberg, then channeled Mnuchin: “In all honesty, this issue, I can’t do anything about it, you have to say it directly to Trump otherwise nothing will change.” And Mnuchin recommended the same approach last month to Republican lawmakers angry over the president’s decision to lift severe penalties on Chinese telecom giant ZTE, the New York Times reports.
5. Republican pushback.
There are signs the president could face new challenges to his trade offensive from within his own party. Sen. Bob Corker (R-Tenn.) said in a Saturday tweet he is working with “like-minded Republican senators on ways to push back” on Trump’s recent moves. And Rep. Will Hurd (R-Tex.) said Sunday he would support legislation requiring congressional sign-off on tariffs. “A lot of us in Congress think this is this is not the way you handle trade. This is not the way you deal with your allies,” Hurd said on CBS’s “Face the Nation.” Appearing on the same program, Ohio Gov. John Kasich (R) said he has been “frankly shocked at the fact that our leaders think they have to ask permission from the president to do anything… I think they ought to make it very clear that they’re not going to just sit back and tolerate this.”
But will the sentiment manifest as more than just some scattered expressions of protest? Given the party's record of capitulating to Trump-held views that were recently anathema, there's no reason to think so.
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— Global growth story fades. WSJ's Michael Wursthorn, Daniel Kruger and Ben Eisen: "Stock indexes that rode accelerating global growth to fresh records in January are now hamstrung by a moderate but unmistakable slowdown in economic momentum in Europe and elsewhere. Business activity globally has slowed from multi-year highs, according to the JPMorgan Chase and IHS Markit global purchasing managers index... Hardly anyone expects a recession any time soon... But with government bond yields near record lows in many countries and the median S&P 500 stock trading at price/earnings multiples seen only rarely in the past century, many investors are buying government bonds and other lower-risk assets in a bid to brace against what is expected to be a volatile market year."
But U.S. fundamentals are strong, for now. CNBC's Jeff Cox: "In the face of persistent fears that the world could be facing a trade war and a synchronized slowdown, the U.S. economy enters June with a good deal of momentum. Friday's data provided convincing evidence that domestic growth remains intact even if other developed economies are slowing. A better-than-expected nonfarm payrolls report coupled with a convincing uptick in manufacturing and construction activity showed that the second half approaches with a tail wind blowing."
And yet economists see recession risk in 2020. AP's Martin Crutsinger: "A group of top business economists believes the major tax cuts President Donald Trump pushed through Congress will give a significant boost to economic growth this year and next year. But they worry that by 2020, the country could be entering a new recession. The National Association for Business Economics says in its latest quarterly outlook that its panel of 45 economists expects the economy, as measured by the gross domestic product, to expand 2.8 percent this year. That is down slightly from the panel’s March forecast, which put GDP growth this year at 2.9 percent."
— Less selling this May. Bloomberg's Elena Popina: "Beset with political drama in Italy, trade angst in China, a surging dollar, a plummeting Treasury yield and weakening economic data in Europe, equity investors in the U.S. still managed to muddle through. In fact, as far as Mays go, this was a good one, the best for the S&P 500 Index since the bull market began. The benchmark for U.S. equities rose 2.2 percent, the most since 2009, and the Nasdaq 100 jumped 5.5 percent. One big reason was the performance of technology megacaps. Apple posted its biggest monthly rally since July 2013. Then on Friday, the iPhone maker, Facebook Inc., Amazon.com and Netflix Inc. all closed at all-time highs."
— Where's the Wall Street freakout over trade? "Perhaps investors are shrugging it off as a negotiating ploy by an atypical president," CNN Money's Matt Egan and David Goldman write. "Or maybe they're just dizzy from the on-again, off-again trade war inside Trump's divided economic team. After all, just two weeks ago... Mnuchin declared the trade war was 'on hold,' setting off a celebration on Wall Street. But Wall Street may be minimizing — if not ignoring — the rising risks from Trump's aggressive trade agenda."
Here was Goldman Sachs in a Saturday note: "We do not expect trade policy risks to fade anytime soon. To maintain leverage in negotiations, the Administration must convince trading partners that the US intends to impose trade restrictions. However, it is unlikely that the White House can convince trading partners that tariff threats are credible without also convincing financial markets."
— Trump tweets jobs tease. The Post's Damian Paletta and Ashley Parker: "Trump on Friday shattered several decades of protocol — and possibly violated a federal directive — by hinting strongly that the monthly U.S. jobs report would be a rosy one 69 minutes before its release. In an 11-word Twitter post, Trump jolted financial markets and provided the latest example of how he is reshaping the presidency to fit his freewheeling impulses, pushing aside years of tight controls on the public release of sensitive material that were put in place by Republicans and Democrats. 'Looking forward to seeing the employment numbers at 8:30 this morning,' Trump tweeted at 7:21 a.m. Trump, like past presidents, is given a preview of the sensitive report before its official release, but a 1985 directive issued by the Reagan administration requires that the executive branch not comment on the information until an hour after it is made public."
A breakdown in conduct. From the WSJ's write-up: "One person close to the White House, and familiar with the process by which the monthly job numbers are released, said Mr. Trump has 'been told before that every piece of economic data that he receives the night before he can’t comment on until 9:30 a.m. the next day.' Asked if the tweet resulted from a breakdown in White House processes, the person added: 'It was a breakdown in his conduct.'”
Kudlow "hopes" against repeat. He tells Fox News Sunday: "Presidents can say what they are going to say. If he put the number out, that would have been a much more difficult proposition... Will he do it again, Chris? I don't know if he will do it again. I suppose I hope he doesn't."
— Trump's lawyers say the president can't obstruct justice. NYT's Michael S. Schmidt, Maggie Haberman, Charlie Savage and Matt Apuzzo: “Trump’s lawyers [argued] in a confidential letter that he could not possibly have committed obstruction because he has unfettered authority over all federal investigations. In a brash assertion of presidential power, the 20-page letter — sent to the special counsel, Robert S. Mueller III... contends that the president cannot illegally obstruct any aspect of the investigation into Russia’s election meddling because the Constitution empowers him to, 'if he wished, terminate the inquiry, or even exercise his power to pardon.'”
Giuliani: Trump can probably pardon himself, but wouldn't. The Post's Ashley Parker and Joel Achenbach: “Trump’s attorney Rudolph W. Giuliani publicly pressed Trump’s expansive view of executive power this weekend, arguing on two Sunday TV shows that the president probably has the sweeping constitutional authority to pardon even himself. 'He probably does,' Giuliani said, when asked on ABC’s 'This Week' whether Trump has the ability to pardon himself. 'He has no intention of pardoning himself, but he probably — not to say he can’t.'”
— Republicans worry over tax cuts. Axios's Jonathan Swan: "In mid May, senior House Republican officials huddled at the Hyatt on the Chesapeake Bay to discuss their messaging plan to save the House majority. One of their guest speakers was the well-respected election forecaster Charlie Cook, who founded the non-partisan 'Cook Political Report.' According to sources in the room, Cook gave the Republican staffers a bleak view of the midterms. He said he was deeply skeptical that simply touting the economic wonders of tax reform would be enough to save the House. Cook confirmed this to me via email: 'I told the group that the tax cut did help among Republican voters, but helped only a little and temporarily among independents and did nothing with Democratic voters.'”
— Wall Street turns to social media. WSJ's Telis Demos: "Wall Street is taking another step toward making social media as core to investment research as quarterly sales reports. M Science LLC, which sells alternative data research to big hedge funds, said last week that it is acquiring TickerTags Inc., a social-media tracking firm startup based in Dallas. Investment managers are increasingly looking to use technology to generate new trading ideas. Hedge funds in the U.S. and Europe now spend more than $170 million annually on so-called alternative data, according to a survey by Greenwich Associates."
— New leadership at Carlyle. Bloomberg's Jason Kelly and Heather Perlberg profile the new co-CEOs at the Washington-based private equity firm: "Kewsong Lee and Glenn Youngkin of Carlyle Group LP are ushering in private equity’s second generation. After three decades honing the art of investing, Carlyle’s billionaire founders are taking a chance on Lee, 52, and Youngkin, 51, as co-chief executive officers. Competitors Apollo Global Management LLC, Blackstone Group LP, and KKR & Co. have laid out their own succession plans, but none has turned over full control to new leaders. The Carlyle duo, both alumni of Harvard Business School and McKinsey & Co., inherited at the start of this year more than $200 billion of assets under management and flagship buyout funds that are among the industry leaders. But the stock has lagged behind rivals for the past five years, and Carlyle’s credit and real estate funds haven’t shown the same spectacular returns as some of the competition."
— Garrett lands at the SEC. Politico's Patrick Temple-West: "Former Rep. Scott Garrett, whose nomination to head the Export-Import Bank was rejected last year by the Senate, has been quietly hired through a noncompetitive process at the Securities and Exchange Commission, despite a hiring freeze at the agency. The New Jersey Republican, who lost his reelection bid in 2016 in part because he had made anti-gay remarks, has been a full-time employee in the SEC’s Office of the General Counsel since earlier this year, a personnel move that the agency never announced."
— Banks try to keep relief rolling in. American Banker's Neil Haggerty: "In the past two weeks, the industry celebrated a rollback of key Dodd-Frank Act provisions, and regulators proposed easing the Volcker Rule. But a continuing question is whether policymakers have the appetite to provide more regulatory relief. The biggest question mark is in Congress… Passage of more relief faces difficult odds since Democrats who supported the Senate bill said they are maxed out. But some industry representatives hope additional reforms can make it into a must-pass spending bill, and are eyeing a pending Volcker Rule bill in particular."
- The Center for American Progress holds an event on money in politics with Montana Gov. Steve Bullock on Tuesday.
- The House Small Business Committee holds a hearing on Millennials and the gig economy on Wednesday.
- The House Financial Services Subcommittee on Financial Institutions and Consumer Credit holds a hearing on transparency at the Consumer Financial Protection Bureau on Wednesday.
- The House Foreign Affairs Subcommittee on the Western Hemisphere holds a hearing on business investment and trade on Thursday.
- The American Enterprise Institute holds a conversation with former Federal Reserve chairman Ben S. Bernanke on Thursday.
- The Brookings Institution holds an event on “Building a more dynamic an competitive economy” on June 13.
From the New Yorker:
President Trump said his summit with North Korean dictator Kim Jong Un is back on:
The Fix's Aaron Blake breaks down Trump's pardoning strategy and what it says about his view of the legal system:
Former attorney general Eric Holder on a potential 2020 run against President Trump: "Two guys from Queens would be interesting:"