President Trump is insisting what’s good for General Motors will be good for the country as he reaches for new auto tariffs to wage his escalating trade offensive. But General Motors and an increasingly assertive array of corporate interests object to his prescription. 

The breach with erstwhile business allies threatens to lead the administration onto shakier ground as its confrontations with top trading partners appears headed for a tipping point. It could also have significant economic consequences that could hit Trump voters where they hurt heading into a very competitive midterm elections.

The iconic car brand — whose CEO in 1953, tapped by then-President Dwight D. Eisenhower to serve as defense secretary, famously asserted that he thought what was “good for our country was good for General Motors” — warned Friday that duties on auto imports would spark retaliation from key foreign markets and result in a “smaller GM.” And the U.S. Chamber of Commerce released a report Monday arguing that Trump’s tariffs on steel and aluminum imports, and those he has threatened on cars and car parts, “have pushed us to the brink of a global trade war” that risks up to 2.6 million jobs. 

Auto industry leaders and analysts say contrary to Trump’s argument in a weekend appearance on Fox News that higher trade barriers to car imports will only benefit production at home, the president is inviting a host of damaging outcomes: New tariffs would throw intricate global supply chains into disarray, discourage foreign investment in the United States and jack up prices for domestic consumers. 

Officially the Trump administration is conducting an investigation into whether it should use the same Cold War-era law it invoked to justify the metals tariffs to impose auto duties on national security grounds. Trade watchers expect the administration to accelerate the process, and Trump over the weekend said he expects the probe to wrap up in three or four weeks. “Our hope is they will conduct a thoughtful review of the submissions and ultimately decide that imposing tariffs on the auto industry would be significantly harmful to the U.S. and auto production,” Matt Blunt, president of the three Detroit carmakers’ American Automotive Policy Council, tells me. 

But Trump’s threats are already riling relations around the world. The Chinese government is set Friday to slap an extra 25 percent tariff on imports of American-made cars — in addition to new levies on agricultural products — in response to $34 billion worth of tariffs the Trump administration is imposing on Chinese goods the same day. The European Union warned over the weekend that Trump’s auto tariffs could invite retaliation on as much as $300 billion worth of American exports globally. Closer to home, Trump in his weekend interview renewed a warning to Mexico and Canada that he will “tax their cars coming into America” if they don’t accede to U.S. demands in renegotiations of the North American Free Trade Agreement. 

The potential NAFTA collapse poses the gravest near-term concern to domestic automakers, says Guggenheim Securities analyst Emmanuel Rosner. “The entire North American supply chain is built around the assumption that it’s one market, and you can build cars in Mexico and Canada just like you can in the U.S.,” he says. “There is a pretty big wall of worries from investors and the automakers themselves about what it could mean for them.”

Rosner says GM is particularly exposed to the NAFTA talks. Last year, it was the top U.S.-based automaker in Mexico — and that country’s top auto exporter. Tariffs would likely wreak havoc on auto parts makers, too. “All major automakers have plants in Mexico where they build some cars for the US market, so they would all have to pay a tariff on imported completed vehicles,” CNN Money’s Chris Isidore writes. “But tariffs on parts would nearly double their estimated import cost: Tariffs on parts would cost automakers $35 billion, on top of $48 billion in tariffs on imported cars that are assembled outside the United States.” Those costs likely would be passed on to consumers, depressing sales. 

The administration has taken an aggressive approach to the big-name companies starting to lodge complaints or announce moves in response to the tariffs. Trump trade czar Peter Navarro on Saturday dismissed GM’s warnings about the impact of potential tariffs as “smoke and mirrors” intended to mislead the public. That followed Trump’s attacks on Harley-Davidson last week for declaring it would shift some production abroad to dodge new European duties on motorcycle imports. 

But stalwart American brands aren’t alone. Daimler AG, which owns Mercedes-Benz, cut its profit forecast last month, saying its sales of U.S.-built SUVs to China could get caught in the trade crossfire between the countries, The Wall Street Journal reports. And BMW is warning its plant in Spartanburg, South Carolina — which exports most of its output — could suffer, too. 

The pressure on industry to prevail on the administration to shift course is piling up as Congressional Republicans, though nominally committed to free trade, shrink from a confrontation with the Trump team. Beyond “a small number of members who are not running for reelection,” the Congressional GOP is looking to avoid forcing the issue, says David French, the top lobbyist for the National Retail Federation. French said he’s “disappointed” by the dynamic and holds little hope it will shift before the midterms — though that could change, “if the tariffs bite harder, faster.” 

Other free-trade defenders believe a steep drop in the stock market could recalibrate the White House approach. But Commerce Secretary Wilbur Ross denied the possibility directly in a CNBC appearance on Monday. "There's no bright line level of the stock market that's going to change policy," Ross said. "The president is trying to fix long-term problems that should have been fixed a long time ago."

The stock market rallied to close higher after an initial dip on trade fears — GM included. Yet some market analysts see the Trump administration turning a corner in the trade conflict, from more bluster than action toward dangerous intensification. “We no longer doubt that the US administration’s proposals signal the direction of trade policy. An escalatory cycle of protectionist actions, not just rhetoric, has begun and will continue,” Morgan Stanley chief U.S. public policy strategist Michael Zezas writes in a research note. “This pattern of behavior shouldn’t be ignored: the US and its key economic partners now view trade differently. One party’s in-kind response is the other’s escalation. This is what a vicious cycle looks like.”

Trump seems unconcerned,as demonstrated by a tweet this morning:

Programming note: We'll be off tomorrow celebrating July 4th. We hope you are too! See you back in your inbox on Thursday.



— Trump threatens WTO. Reuters's Jeff Mason, Jan Strupczewski: “Trump warned the World Trade Organization on Monday that 'we’ll be doing something' if the United States is not treated properly, just hours after the European Union said that U.S. automotive tariffs would hurt its own vehicle industry and prompt retaliation. Trump, speaking to reporters during a meeting with Dutch Prime Minister Mark Rutte at the White House, said, 'The WTO has treated the United States very, very badly and I hope they change their ways.' His comments came after the Axios news website reported that Trump’s administration has drafted proposed legislation that would allow Trump to raise tariffs at will and negotiate special tariff rates with specific countries — two basic violations of WTO rules.”

Ross plays it down.  "We've made no secret of our view that there are some reforms needed at the WTO," the commerce secretary told CNBC on Monday. "There really is a need to update [or] synchronize its activities, and we'll see where that leads. But I think it's a little premature to talk about simply withdrawing from it."

So does White House press secretary Sarah Huckabee Sanders. See her here: 

Chinese issue U.S. travel warning. Reuters: China’s embassy in Washington has issued a security advisory to Chinese nationals traveling to the United States, the latest such warning as trade tensions escalate between the two countries. The embassy warned Chinese tourists to be aware of issues including expensive medical bills, the threats of public shootings and robberies, searches and seizures by customs agents, telecommunications fraud and natural disasters.

As the yuan bounces back. Bloomberg: "Two top Chinese central bank officials vowed to keep the yuan stable on Tuesday, stoking speculation that policy makers are prepared to take tougher actions to arrest the plunge in the currency... People’s Bank of China Governor Yi Gang said China will 'keep the yuan exchange rate basically stable at reasonable and balanced level.' That and comments by another central bank official earlier on Tuesday are the first clear statement on the currency from the authorities since the yuan started weakening in mid-June... The yuan is the worst performing currency in Asia over the past three weeks, losing 3.7 percent against the dollar as the domestic economy slows and the nation slides closer to a trade war with the U.S. A failure to contain the tumble will feed speculation that officials are effectively depreciating the currency to defend against the effects of trade tariffs."

Meanwhile, the U.S. moves to block Chinese wireless company. The Post's David J. Lynch: “A Commerce Department agency recommended Monday that the Federal Communications Commission reject China Mobile’s bid for a license to operate in the U.S. market, saying Beijing could use the state-owned Chinese telecom giant to spy on U.S. government agencies and businesses. The verdict from the National Telecommunications and Information Administration (NTIA), which gathered input from the law enforcement and intelligence communities, all but kills the Chinese company’s hopes of winning approval to handle Americans’ international calls after a nearly seven-year quest.”

— NAFTA negotiations may rebound. The Wall Street Journal's William Mauldin and Santiago Pérez: “The Mexican presidential election on Sunday removes a hurdle to the renegotiation of the North American Free Trade Agreement, raising the likelihood that the 24-year-old treaty once again will become a focal point in . . . Trump’s effort to rewrite the rules of global trade. Efforts to overhaul the pact had floundered in recent weeks, amid missed deadlines and concern among many observers and participants that Mexico’s shift to a leftist-nationalist government could complicate negotiations. In fact, the election of Andrés Manuel López Obrador may instead pave the way for at least some progress on the negotiations, according to trade negotiators and other observers. While U.S. businesses have concerns about Mr. López Obrador, the Trump administration’s approach to Nafta appears to dovetail with at least some of Mr. López Obrador’s economic priorities.”

— U.S. farmers fret. WSJ's Jesse Newman: “Mounting trade disputes, spurred by U.S. threats to withdraw from the North American Free Trade Agreement and tariffs on billions of dollars’ worth of goods from key trading partners, have cut U.S. agricultural exports and sent commodity prices tumbling. Many farmers, who depend on shipments overseas for one-fifth of the goods they produce, say they are anxious, especially because they are already expecting bumper harvests or grappling with a dairy glut . . . Since April, duties the U.S. has levied on goods from China, Mexico, Canada and the European Union have sparked retaliatory tariffs and trade threats, targeting American farm goods from pork to cheese to apples.”

"It's not positive." Must-see moment from Trump's Oval Office meeting with Dutch prime minister Mark Rutte, via CNN's Mike Krever:


— Michael Cohen speaks out. The Washington Post's Rosalind S. Helderman, John Wagner and Josh Dawsey: “Trump faced a mounting legal threat from his onetime lawyer and fixer Michael Cohen on Monday, as Cohen signaled in a new interview his willingness to cooperate with federal prosecutors, even if doing so would undercut the interests of the president. Cohen’s allies suggested in recent weeks that the Manhattan lawyer felt abandoned by the president as he faced a federal investigation of his personal finances. But a 45-minute off-camera interview with ABC News’s George Stephanopoulos published Monday represented a distinct escalation, a message to investigators that he is ready to deal. 'My wife, my daughter and my son have my first loyalty and always will,' Cohen told Stephanopoulos, according to a story posted Monday morning on the network’s website.”

Ross says he shorted stocks. CNBC’s Lori Ann LaRocco: “Facing scrutiny for his financial holdings . . . Wilbur Ross has revealed to CNBC that last year he shorted shares in two more companies than previously had been reported. Ross disclosed to CNBC that in May 2017 he shorted the stock of both Air Lease and Ocwen Financial Corporation. He maintains that he executed those trades for the same reason as three other recently revealed short sales that have raised eyebrows: to avoid any impression that his financial holdings represented a potential conflict of interest.

"The secretary noted that he had been in the process of divesting himself of known stakes in the companies before becoming aware of the fact he had been awarded additional small stakes in each of the five firms as a benefit of having served on their boards of directors. Those shares were held in accounts he had been unaware of, he said. Ross said the short sales in all five cases — which occurred during his tenure as Commerce secretary — zeroed out his stakes in the companies. After Ross covered the short positions, he realized no profit, or loss, on the trades, he said."

“America First” groups are seeking to raise $100 million this cycle, with the help of the president.
Michelle Ye Hee Lee

— Construction spending increases. The Associated Press's Matt Ott: “Spending on U.S. construction projects edged up 0.4 percent in May, while April’s figure was revised down significantly — signs that new building is still uneven despite a growing economy. The uptick in May brought total construction spending to a seasonally adjusted all-time high of $1.31 trillion, 4.5 percent higher than a year ago, the Commerce Departments said Monday. April’s figure was revised down to 0.9 percent from what was originally reported as 1.8 percent gain, which would have been the largest increase in 24 years. That came on the heels of 0.9 percent drop in March, the first monthly drop since July of 2017.”

And manufacturing is up. Reuters's Lucia Mutikani: “U.S. manufacturing activity surged in June amid signs a strong economy and import tariffs were causing bottlenecks in the supply chain, resulting in factories taking longer to deliver goods to customers . . . The Institute for Supply Management (ISM) said its index of national factory activity jumped to a reading of 60.2 last month from 58.7 in May. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the U.S. economy.”

— Washington wants to target Iran's oil. Reuters's Lesley Wroughton and Daphne Psaledakis: “The United States aims to reduce Tehran’s oil revenue to zero in an effort to force the Iranian leadership to change its behavior in the region and believes there is enough spare global oil capacity to make up for lower supply from Iran, a senior U.S. State Department policy adviser said on Monday. Brian Hook, the State Department’s director of policy planning, told a news conference that the U.S. goal was to get as many countries as possible down to zero Iranian oil imports.”


— The Fed helped two banks on stress tests. WSJ’s Liz Hoffman and Lalita Clozel: “Federal Reserve officials told Goldman Sachs Group Inc. . . . and Morgan Stanley . . . that they were about to flunk a portion of the annual stress tests but offered them a deal to avoid an outright fail and continue paying billions to shareholders. In phone calls to executives of the Wall Street titans on June 21, regulators told them that to fully pass the test, they would have to cut almost in half the combined $16 billion they had hoped to pay out to shareholders, according to people familiar with conversations between the Fed and both banks. But Fed officials gave the banks an unprecedented option: If they agreed to freeze their payouts at recent levels, they would get a 'conditional non-objection' grade and avoid the black eye of failure.”

Glencore slumps on corruption charges. Bloomberg's Thomas Biesheuvel and Franz Wild: "Glencore Plc tumbled the most in two years after U.S. authorities demanded documents relating to possible corruption and money laundering. The world’s biggest commodity trader said Tuesday that it’s been subpoenaed by the U.S. Department of Justice to hand over documents related to the Foreign Corrupt Practices Act and U.S money laundering statutes. The documents relate to the company’s business in Nigeria, the Democratic Republic of Congo and Venezuela from 2007 to the present. The shares plunged as much as 13 percent, knocking more than.. $7.3 billion off Glencore’s market value, about half the $14.8 billion of profit the company made last year."

— Atlantic Media sells Quartz. The Post's Thomas Heath: “Atlantic Media announced Monday that it is selling its Quartz business news platform to Uzabase, a publicly-held Japanese business intelligence and media company worth nearly $1 billion. The deal, which is expected to close within 30 days, will be worth between $75 million and $110 million, depending on how Quartz’s financial performance for the rest of this calendar year, according to the announcement.”

— Tesla hits a milestone. The New York Times's Neal E. Boudette: “Tesla produced more than 5,000 Model 3 sedans in the last seven days of June, the company said on Monday, reaching a goal it has said is critical to its bid to turn a profit in this year’s final two quarters. The electric-car maker is counting on the Model 3, its first mass-production vehicle, to increase revenue and offset the billions of dollars the company has been spending on setting up a huge battery plant in Nevada; manufacturing the Model 3 at its car plant in Fremont, Calif.; and developing the Model 3 and other vehicles.”

Morgan Stanley banker launches new party. Bloomberg's Sonali Basak and Max Abelson: "Eric Grossman doesn’t look like he would want to do anything drastic. The top lawyer at Morgan Stanley is a 51-year-old homeowner in the New York suburbs with twin sons and a seat on the firm’s management committee. He’s another man in a power suit in a midtown Manhattan bank. He also wants to topple America’s two-party system. Grossman is trying to build a new party—called the Serve America Movement, or SAM—even though third wheels in American politics tend to have the lasting power of the Free Soilers and the Anti-Masons. His quixotic goal hasn’t deterred donors that include fellow members of Morgan Stanley’s operating committee, the bank’s head of government relations, its top independent board member, and the last chief executive officer, John Mack."

Guggenheim Partners, overseen by billionaire Mark Walter, is facing a lawsuit claiming it defrauded annuity investors by saddling an insurance affiliate with risky assets, and siphoning cash for purposes including Walter's purchase of the Los Angeles Dodgers baseball team.

— Feinstein and Brown have questions about HSBC. Bloomberg News's Greg Farrell: “Two leading Senate Democrats have asked Attorney General Jeff Sessions to explain why the Justice Department allowed a five-year, $1.9 billion deferred prosecution agreement with HSBC Holdings plc to expire last December while another deferred prosecution agreement was being put in place. In a letter to Sessions last Friday, Senator Sherrod Brown of Ohio and Senator Dianne Feinstein of California said they were concerned that even after five years of Justice Department oversight, HSBC’s monitor had pointed out continued deficiencies in the bank’s financial crime compliance controls.”


— A federal probe of Facebook is expanding. The Post's Craig Timberg, Elizabeth Dwoskin, Matt Zapotosky and Devlin Barrett: “A federal investigation into Facebook’s sharing of data with political consultancy Cambridge Analytica has broadened to focus on the actions and statements of the tech giant and now involves multiple agencies, including the Securities and Exchange Commission, according to people familiar with the official inquiries. Representatives for the FBI, the SEC and the Federal Trade Commission have joined the Department of Justice in its inquiries about the two companies and the sharing of personal information of 71 million Americans, suggesting the wide-ranging nature of the investigation, said five people, who spoke on the condition of anonymity to discuss a probe that remains incomplete.”

— Some banks get a deadline extension. American Banker’s Rachel Witkowski: “Federal regulators announced Monday they were extending the deadline by a year for 14 regional banks to submit their next filings of living wills. The Federal Reserve Board and the Federal Deposit Insurance Corp. said in a joint statement that they were giving the banks an extension to Dec. 31, 2019, ‘to allow additional time for the agencies to provide feedback to the firms on their last submissions and for the firms to produce their next plan submissions.’ The move comes as some regulators have indicated an interest in moving away from annual filings for living wills.”


— From Bloomberg News:


Coming soon


— From the New Yorker’s Lars Kenseth:

A cartoon by @LarsKenseth, from 2017. #TNYcartoons

A post shared by The New Yorker Cartoons (@newyorkercartoons) on


FBI arrests man allegedly plotting July 4 attack in Cleveland:

Puppies face off in World Cup alternative programming:

The United States wins a World Cup — in quidditch: