President Trump’s trade war with China is barely four days old, but voters are already deeply skeptical of how they will fare.
Three-quarters of them expect the tit-for-tat escalation in tariffs with the world’s second-largest economy will jack up product prices at home, and by a solid margin, 56 percent to 39 percent, they expect the conflict will lead to job losses.
The results, from a new poll conducted by the Washington Post and the Schar School of Policy and Government at George Mason University, flash a warning signal to the White House: With a perilous midterm election season arriving, the trade offensive risks stepping on an issue where a majority still give Trump favorable marks. By 50 percent to 48 percent, respondents said they approve of how the president is handling the economy. But Trump is 16 points underwater with voters on his trade agenda.
Even among Republican voters, 56 percent believe the showdown with China will hit their wallets in the form of higher prices. Just 37 percent say it won't. The party faithful are more bullish on the question of jobs, with 64 percent responding that the situation will be good for employment.
Voters in battleground congressional districts take a slightly more negative view of the situation. And those respondents list the economy and jobs as the top concerns shaping their decision-making on the election.
Trump has offered sweeping reassurances to voters since he began dialing up trade hostilities this year. “Trade wars are good, and easy to win,” he tweeted in March. In April, he said his administration would “make it up" to farmers facing retaliatory tariffs on their goods. At a rally in Montana last week, he predicted swift victories and a jobs boon as a result. “The war was lost, but now we're going to win it and because we have all the cards,” he said.
Voters so far appear more inclined to credit the anecdotal evidence aligning to the contrary. And it continues to mount. On top of the layoffs at Mid-Continent Nail in Missouri and REC Silicon in Washington, the well-publicized decision by Harley-Davidson to move some production abroad, and the warnings from Maine lobster men, add the pain of cheese makers in California’s Trump-friendly Central Valley, auto parts manufacturers like Husco International in Wisconsin, and the bourbon industry in Tennessee and Kentucky.
That the countermeasures from China, Europe, Canada and Mexico are falling disproportionately on Trump country is precisely the point: U.S. trading partners are hoping to maximize the political pain on the Republican base in order to force the administration to back off. So far, the Trump team has only talked about escalating. The president says he is eyeing another $400 billion in tariffs on Chinese products and more on foreign autos and auto parts. “Either of those moves would immediately vault the number of imported goods subject to the extra tax to close to 20 percent, a far steeper hit,” my colleagues Heather Long and Christopher Ingraham calculate. “If Trump did both, a third of imported goods would be impacted, an amount that would almost certainly be felt when Americans go shopping.”
The Post poll shows a majority of voters agree with Trump that the U.S. has been taken advantage of by its trading partners. But as Heather and Christopher note, only 4 percent said the issue will drive their vote this fall. That, combined with the concern voters registered about the direction of the conflict, suggests the president faces a far steeper political downside as he presses forward.
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— Buybacks aren't helping share prices. WSJ's Michael Wursthorn: “U.S. companies are buying back record amounts of stock this year, but their shares aren’t getting the boost they bargained for. S&P 500 companies are on track to repurchase as much as $800 billion in stock this year, a record that would eclipse 2007’s buyback bonanza. Among the biggest buyers are companies like Oracle Corp., Bank of America Corp. and JPMorgan Chase . . . & Co. But 57% of the more than 350 companies in the S&P 500 that bought back shares so far this year are trailing the index’s 3.2% increase. That is the highest percentage of companies to fall short of the benchmark’s gain since the onset of the financial crisis in 2008, according to a Wall Street Journal analysis of share buyback and performance data from FactSet.”
— Trump's strategy leans on a robust economy. The Associated Press's Josh Boak: “From the safety of a resilient U.S. economy... Trump lit the fuse Friday on a high-risk trade war with China. History suggests that a cycle of tariffs and retaliations can eventually choke economic growth. But for now, employers, investors and U.S. consumers are weighing the perils of a prolonged rift between the world’s two largest economies against a far more positive backdrop: America’s healthiest job market in years... From this position of strength... Trump is gambling that he can deploy tariffs to his advantage even though they will inflict some pain on businesses and consumers that backed him in 2016. The Trump team’s calculation appears to be that foreign countries have no choice but to trade with the world’s largest economy and will ultimately have to yield... So far, the economy can absorb the costs of the new tariffs, including separate steel and aluminum import taxes, without suffering a crushing hit.”
China says it is committed to free trade. Reuters: “China will stick to the path of opening its markets and other reforms that has lifted its growth, Premier Li Keqiang said on Saturday, a day after Washington and Beijing slapped tariffs on $34 billion worth of each others’ imports. China will open its door wider to foreign products as free trade needs to be firmly upheld to ensure sustained global economic growth, Li told a summit of eastern European leaders in Sofia. 'For foreign products which meet Chinese consumer needs, we would open the door wider . . . We would lower overall import tariffs to the Chinese market,' he said through an interpreter, without going into details.”
Trump's negotiating style is showing its limits. The Post's Damian Paletta: “The Chinese government turned the table on... Trump on Friday and responded to his trade threats with tariffs of its own against U.S. companies, marking the latest example of the U.S. leader trying to exert leverage but finding himself confronted with rejection and retaliation. The escalating problems with China demonstrate how one of Trump’s most favored tactics in business — trying to create leverage by cornering an opponent — has not been particularly effective in the White House. Trump has tried this approach with foreign policy, immigration, budgeting and private companies — and frequently on trade. White House officials had hoped that threatening to impose tariffs on China would force Beijing to offer concessions, but talks fizzled out quickly.”
Tariff exclusions are announced. WSJ's Bob Davis: “The U.S. Trade Representative outlined a way for companies to get their products excluded from fresh tariffs on $34 billion worth of Chinese exports that were imposed on Friday... Exclusions could be granted for a product, USTR said, if the tariff caused a firm 'severe economic harm' and the product isn’t available from sources outside China and isn’t 'identified as benefiting from China’s industrial policies.'”
— López Obrador looks at lowering the VAT near the border. Reuters: “Mexico’s next government will press ahead with president-elect Andres Manuel Lopez Obrador’s plan to cut the value added tax (VAT) rate in a strip along the U.S. border, probably to 8 percent from 16 percent now, a top aide said on Friday. Lopez Obrador, who takes office on Dec. 1, hopes such measures could improve ties with the United States by reining in illegal migration, which has been a major bone of contention between Mexico and... Trump. The strip would be about 30 km (19 miles) wide so as to include major border cities such as Tijuana, Mexicali, Ciudad Juarez and Reynosa, said Carlos Urzua, the finance minister-designate.”
— France says Europeans are ready to strike back. Reuters's Leigh Thomas and Pascale Denis: “The French government insisted on Sunday that Washington should expect united retaliation from Europe to further tariff increases after Germany signaled it was prepared to negotiate. With Germany’s powerful car industry facing the threat of higher U.S. duties, Chancellor Angela Merkel said last Thursday she would back a lowering of European Union levies on imports of U.S. cars. 'If tomorrow there is an increase in tariffs, like in the car industry, our reaction should be united and strong to show that Europe is a united and sovereign power,' French Finance Minister Bruno Le Maire said.”
— What a forgotten trade war teaches us. The Post's Todd C. Frankel: “Brand-new Ford Transit Connect vans, made in Spain, are dropped off at U.S. ports several times a month. First, they pass through customs — and then workers hired by the automaker start to rip the vehicles apart. The rear seats are plucked out. The seat belts in back go, too. Sometimes, the rear side windows are covered with painted plates. Any holes left in the floor are patched over. This is how Ford Motor Co. tries to get around the half-century-old 'chicken tax.' It’s also a lesson in the long legacy of tariffs — and the unexpected ways that companies do everything possible to get around them. These creative workarounds are likely to become more common... The chicken tax is a 25 percent U.S. duty slapped on pickup trucks and work vans produced outside North America — 10 times the 2.5 percent duty on imported passenger vans. The tax is a relic of a mostly forgotten trade war from the early 1960s, when Europe tried to stop a flood of imported U.S. chicken and, in retaliation, President Lyndon B. Johnson imposed the big tariff aimed at European automakers such as Volkswagen.”
— Giuliani advises against a Cohen pardon. The Post's Shane Harris: “Rudolph W. Giuliani, an attorney for President Trump, said Sunday that he has counseled the president against granting a pardon to his longtime fixer Michael Cohen, at least for now. 'I have advised the president, which he understands: no discussion of pardons,' Giuliani said in an appearance on ABC News’s 'This Week.' But he seemed not to rule out that the president might change his mind . . . While Giuliani said he had advised Trump against pardoning Cohen, he also argued that to rule out a pardon 'wouldn’t be fair to — to the president, wouldn’t be fair to Cohen, wouldn’t be fair to future presidents. But the fact is there’s no reason for a pardon right now . . . and, quite honestly, it would just confuse everything.'”
— Court filing highlights link between Manafort and bank executive. American Banker's Kevin Wack: “How the CEO of a small Chicago bank landed a spot on Donald Trump’s economic advisory council during the 2016 campaign has long been a mystery. Federal prosecutors provided new clues in a court filing Friday. The document suggests that Stephen Calk, the chief executive of The Federal Savings Bank, was named to Trump’s 13-member team as payback for providing a $9.5 million mortgage to former Trump campaign manager Paul Manafort.”
— Fuel prices may hurt airlines. WSJ's Alison Sider:“U.S. airlines are aiming to convince investors that surging fuel costs won’t knock a record stretch of profitability off course. Some investors say airlines won’t be able to raise prices fast enough to cover a roughly 55% increase in fuel costs from a year ago. The NYSE Arca Airline Index is down nearly 13% this year while the S&P 500 is up 3.2%.They expect carriers to commit to schedule cuts to address the rising costs when they report quarterly earnings this month. Delta Air Lines is the first to report, on Thursday.”
— The reach of artificial intelligence continues to expand. The New York Times's Noam Scheiber: “Clothing design is only the leading edge of the way algorithms are transforming the fashion and retail industries. Companies now routinely use artificial intelligence to decide which clothes to stock and what to recommend to customers. And fashion, which has long shed blue-collar jobs in the United States, is in turn a leading example of how artificial intelligence is affecting a range of white-collar work as well. That’s especially true of jobs that place a premium on spotting patterns, from picking stocks to diagnosing cancer.”
— Patagonia wants to ensure its employees vote. The Post's Rachel Siegel: “The outdoor retailer Patagonia will close up shop this Election Day, and it’s urging other companies to do the same. Four years ago, voter participation hit its lowest since World War II, with only 36 percent of the voting-age population making it to the polls. A 2014 Pew Research Center study found that voters were likely to miss the midterms because they were indifferent about voting, had trouble with the voting process or because of structural forces, like job or school schedules that couldn’t budge. In the past, Patagonia — known for its advocacy of environmental causes — has encouraged people to vote with the planet in mind . . . Patagonia closed stores nationwide on Election Day 2016, as well as its headquarters and distribution and customer-service center, and gave employees paid time off.”
— Tax staffers stream to K Street. NYT's Alan Rappeport: "Six months after Republicans pushed a $1.5 trillion tax overhaul through Congress, many of the most influential players who worked behind the scenes on the legislation are no longer on Capitol Hill or in the Trump administration. They are now lobbyists... While they might not be household names, those who have decamped to the private sector played a major role in the passage of the most sweeping tax bill in three decades.
"More than a dozen people have already migrated this year, and more are expected to follow as the elections draw closer. In June, the Clearing House Association, an advocacy group focused on financial regulation, announced that it had hired Shahira Knight to lead its new joint venture with the Financial Services Roundtable. Ms. Knight was deputy director of the White House’s National Economic Council and a close aide to Gary Cohn, Mr. Trump’s top economic adviser who left earlier this year. Marc Short, the White House’s legislative affairs director, is expected to leave in the coming months."
— How Blackstone drew CFTC scrutiny. WSJ's Gabriel T. Rubin and Andrew Scurria: “When Blackstone Group . . . LP made a bet that shook confidence in the credit derivatives market, U.S. regulators waged an unusual campaign to pressure the investment firm to back down. The Commodity Futures Trading Commission took an interest last year when Blackstone’s GSO Capital Partners LP disclosed it had taken out insurance on bonds issued by Hovnanian Enterprises Inc. . . . wagering the home builder would default on its debts. Blackstone offered Hovnanian a low-cost loan and persuaded the builder to miss a small interest payment in exchange, which would trigger payouts on $333 million in Blackstone’s credit-insurance contracts and yield the firm tens of millions of dollars, depending on market factors. The insurance contracts Blackstone took out, known as credit-default swaps, typically pay out when a company defaults, usually reflecting dire financial straits. But Hovnanian was healthy enough to pay its debts, so a default would be opportunistic.”
— Regional banks to get relief. American Banker's Rachel Witkowski: “Federal financial regulators have begun rolling out a plan to provide regulatory relief to smaller regional banks no longer considered a systemic risk, as part of a much larger deregulatory package recently passed by Congress. The initial plan, outlined in a statement by regulators on Friday, addresses how they would provide relief to banks with $100 billion in assets or less after Congress passed a law in May that raised the threshold for systemically important banks. The Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency issued the joint statement.”
From Bloomberg News:
- Panel discussion on globalization at the American Enterprise Institute on July 11.
- Two House Foreign Affairs subcommittees hold a joint hearing on China’s trade practices on July 11.
- Treasury Secretary Steven Mnuchin appears before the House Financial Services Committee on July 12.
- Senate Banking Committee hearing on “credit bureaus and the Fair Credit Reporting Act” on July 12.
- House Financial Services subcommittee hearing titled “Countering the financial networks of weapons proliferation” on July 12.
- Conference on manufacturing at the Brookings Institution on July 12.
- Panel discussion on “what corporate America can do for employees” at the American Enterprise Institute on July 13.
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