THE TICKER

While President Trump was roaring at the U.S.-built international order at the NATO summit in Brussels on Wednesday, Senate Republicans finally managed to issue a peep of protest. 

Most of them, along with every Senate Democrat, lined up behind a measure asserting a “role for Congress” when Trump imposes tariffs in the name of national security. 

The 88-to-11 margin on the vote suggests that senators are serious about challenging a president who has riled decades-old trading ties to allies, created pain for key domestic industries and threatened to go much further as he pursues an aggressive reset of U.S. relationships abroad. 

But little else about the Senate’s move should give comfort to free-trade advocates. The vote was symbolic: The nonbinding resolution carries with it no mechanism to make the president stand down. It's doubtful a measure with teeth — should it get a vote — would draw the same level of support. And the legislation that free-trade Republicans have been pushing only addresses a fraction of the tariffs that Trump is threatening. 

Sen. Bob Corker (R-Tenn.), who sponsored the amendment, acknowledged it represents a “baby step.” Corker said he is continuing to push for a vote on his bill to require congressional approval for tariffs imposed in the name of national security. That would include the levies that Trump slapped on imports of steel and aluminum this year — and those he is eyeing for imports of autos and auto parts. But it wouldn’t cover the tariffs on $34 billion of Chinese imports that took force this month, or the $16 billion in additional duties due next. Nor would it touch the $200 billion in tariffs on Chinese goods that the U.S. trade representative just listed as a potential further escalation of Trump’s showdown with Beijing. 

It remains an open question how many of the 88 senators who backed Corker on Wednesday would also support the live-ammunition version of his proposal, even given its limited scope. Some certainly wouldn’t, including Sen. Sherrod Brown (D-Ohio), who blocked Corker from offering it as an amendment to the farm bill. Ditto Sen. Thom Tillis (R-N.C.), who said as much to the Weekly Standard’s Haley Byrd:

As a practical matter, Corker probably needs 67 votes — a veto-proof majority — since Trump wouldn’t be inclined to sign a bill that ties his own hands. One Senate Republican aide tells me the support for the enforceable version at the moment isn’t close. “We are still exceptionally tortured on trade,” this aide said. “And it’s a group of people who have no idea how to get an outcome, because there isn’t one, and that’s awful.”

Consider those who voted against the Wednesday measure. The list of 11 Republicans includes both South Carolina senators — Lindsey O. Graham and Tim Scott — who rejected an appeal from the state’s Chamber of Commerce. Their state is already feeling a burn: BMW’s plant in Spartanburg, S.C. is the largest exporter of vehicles in the United States, and the company announced Monday it would shift some production abroad and raise the price of South Carolina-built autos sold in China to compensate for retaliatory tariffs.

If it could gather the necessary support in the Senate, the measure still would need 290 votes in the House to ensure a veto-proof majority there. Some top Republicans in that chamber have grown increasingly vocal in their criticism of Trump’s trade war. House Ways and Means Committee Chairman Kevin Brady (R-Tex.), for example, issued a sharply worded appeal for detente between the Trump administration and Beijing on Tuesday after news broke of the USTR’s list of $200 billion in goods. “Despite the serious economic consequences of ever-increasing tariffs, today there are no serious trade discussions occurring between the US and China, no plans for trade negotiations anytime soon, and seemingly little action toward a solution,” he said in a statement.

But Speaker Paul D. Ryan (R-Wis.), a traditionally stalwart defender of trade liberalization, was mealy-mouthed Wednesday about the president's approach. “I don't want to hamstring the president's negotiating tactics, but I've long said I don't think tariffs are the right way to go,” he said at a news conference. “I think there are legitimate, absolutely unfair trade practices, particularly by China, that we and our allies should be confronting, so that is important to point out ... I just don't think tariffs are the right mechanism to do that.” 

That equivocation sums up the competing tensions pulling on congressional Republicans. Despite their historical commitment to freer trade, not enough of them are sufficiently spooked yet by Trump's protectionist moves to muster the will to confront him. 

My colleagues Erica Werner and Heather Long note that the lack of pushback from Congress is one of “several factors that have made it easier for the president to push on. Others have included markets that haven’t melted down, business leaders who have done little beyond using rhetoric to criticize the trade spat, and Republican voters who have stood by their president. In each of these cases, critics of his trade policy had hoped Trump would find reason to be dissuaded.”

More from Erica and Heather: “The parts of the country most affected by Trump’s trade war remain supportive of the president for now. Among the 15 states most affected by the tariffs, Trump’s approval rating is 57 percent, according to a recent Washington Post-Schar School poll. Trump won 52 percent of the vote in those states in 2016... Despite the escalating trade spats, markets have not cratered. While U.S. stocks slid Wednesday, with the Dow Jones industrial average falling 219 points, markets have kept relatively calm in recent weeks even as the United States and China swapped punitive trade measures.”

TRUMP TRACKER

TRADE FLY-AROUND:

— Trump said Thursday that NATO members will ramp up their defense spending, Michael Birnbaum and Philip Rucker report. "Trump reaffirmed U.S. support for NATO Thursday after he upended a summit here to admonish leaders and demand that they quickly increase their defense spending. Trump’s ambush jolted the transatlantic alliance, and some diplomats perceived his comments as threatening a U.S. withdrawal from NATO. But Trump later declared in a news conference, 'I believe in NATO,' and, as he prepared to depart Brussels, he reiterated that the United States is committed to its Western allies. 'I told people that I’d be very unhappy if they did not up their commitments very substantially,' Trump told reporters after the meeting. 'Everyone’s agreed to substantially up their commitment. They are going to up it at levels never thought of before.'"

Yet my colleagues note: "NATO member nations committed in 2014 to spend 2 percent of gross national product on defense by 2024. It was not immediately clear what specific new commitments had been made. Trump said that leaders responded to his demands by agreeing to reach that goal soon." 

— One day earlier, Trump raged at NATO. The Washington Post's Michael Birnbaum and Seung Min Kim: “Trump ripped into NATO allies Wednesday, slamming Germany for its dependence on Russian energy and demanding that nations double their military spending commitments. ... On spending, Trump insisted in a closed-door meeting of NATO leaders that the alliance increase its defense targets to 4 percent of each country’s gross domestic product — more than what the United States channels toward its military. ... The push came hours after Trump bashed Germany for 'being captive to Russia' because it imports much of its natural gas from there. That tirade, over breakfast with NATO Secretary General Jens Stoltenberg, was rare in its bitterness. 'We have to talk about the billions and billions of dollars that’s being paid to the country we’re supposed to be protecting you against,' Trump said, referring to European purchases of Russian natural gas.”

He also broadcast the gripes on Twitter earlier this morning:

And reassures U.S. farmers. The Post's John Wagner: “Trump on Wednesday sought to allay rising anxiety among farmers about the impact of his trade war with China, promising over Twitter to bolster sales of their products but acknowledging it could take a while. 'I will open things up, better than ever before, but it can’t go too quickly,' Trump said in a pair of tweets sent from Brussels, where he is attending a gathering of NATO leaders. 'I am fighting for a level playing field for our farmers, and will win!'”

— U.S., China hint at talks. Bloomberg: "Chinese and U.S. officials have raised the prospect of resuming talks over trade between the two nations after President Donald Trump ratcheted up the pressure by announcing a huge new round of potential tariffs. After the U.S. unveiled a list of Chinese imports worth $200 billion that could face higher duties, China’s Vice Minister of Commerce Wang Shouwen said “when we have a trade problem, we should talk about it.” While that came amid fresh threats of retaliation from Beijing, it matches some willingness from the Trump team to resume talks at a high level, according to a person familiar with the administration’s thinking. Communications between senior members of the Trump and Xi administrations have petered out since a third round of formal negotiations ended with scant signs of agreement in early June."

WH hits consumer goods. WSJ's Jacob M. Schlesinger: “The Trump administration is expanding the battlefield in its trade fight with China, moving beyond industrial goods to threaten tariffs for the first time on a range of consumer products that illustrates how dependent the U.S. consumer economy is on imports. The $200 billion in products under consideration for a new 10% duty includes bicycles, sound systems, refrigerators, pocketbooks, vacuum cleaners, cosmetics, tools and seafood. ... The wide range of products under consideration for the U.S. tariffs disclosed Tuesday—a 195-page list starting with 'frozen retail cuts of meat of swine' and rolling through 'ice hockey gloves,' 'carpets and other textile floor coverings' and 'sewing machines'—shows just how much the U.S. looks to China for consumer goods, as the world’s most populous economy has developed into the world’s factory floor.”

NYT points to a study showing so far, the trade wars will cost the average American family about $60 a year. It would jump to $270 if Trump follows through on his threats. And in that case, Morgan Stanley estimates the resulting damage would remove around .3 to .4 of a percentage point from U.S. growth.

And pummels Chinese tech. WSJ's Yoko Kubota, Dan Strumpf and Shan Li: “Chinese electronic components used to run computer networks and secure critical internet connections are the big target in the Trump administration’s new plan to expand tariffs, but the proposed levies will also hit fish, furniture and lighting fixtures. Some Chinese suppliers said they planned to start negotiating soon with their American buyers over how to handle the proposed tariff and who would absorb the costs of the levy. The move also was seen accelerating an existing trend to return some production to the U.S. and other developed markets. . . . The White House’s latest tariff list would add 10% duties on $200 billion in Chinese goods, including a broad range of products embedded in the electronics supply chain.”

China could target manufacturing. The New York Times's Alexandra Stevenson: “China is the major supplier of a number of mundane but crucial materials and components needed to keep the world’s factories humming. They include obscure materials like arsenic metals, used to make semiconductors; cadmium, found in rechargeable batteries; and tungsten, found in light bulbs and heating elements. They also include rare earths. A trade war risks putting those minerals in the middle of the conflict, potentially giving China a way to get back at the United States by cutting off supplies to American companies. Already rare earths have become embroiled in the conflict — they were among the long list released on Tuesday of Chinese-made goods that the Trump administration wants to tax.”

Meanwhile, the Trump administration lends a hand to ZTE. The Post's Damian Paletta: “The Commerce Department on Wednesday took a major step to loosen its restrictions on the controversial Chinese telecommunications company ZTE Corp., signing an escrow agreement that paves the way for the firm to continue doing business with U.S. companies. ... The Commerce Department in April announced severe penalties against ZTE, punishment for violating sanctions by selling products to Iran and North Korea and then lying about its practices to federal investigators. Among other things, ZTE was barred from doing business with U.S. companies, a move many in the U.S. and China believed would serve as a death sentence for the firm. ... The Commerce Department said Wednesday’s agreement established an escrow account, which allows the company to transfer $400 million in reserves. This was a condition of its release from severe regulatory penalties. Once the company deposits $400 million into the account, it will no longer be prohibited from doing business with U.S. companies.”

Treasury exodus strains trade team. Bloomberg's Saleha Mohsin: "About 20 career staff have quit the U.S. Treasury Department’s international affairs unit in less than a year, draining resources from a key office in the Trump administration’s escalating trade battles with China and Europe. The wave of departures began in September, shortly after David Malpass -- a champion of President Donald Trump’s protectionist message -- took over the division. The unit employed about 200 people at the end of the Barack Obama administration. Some of the former officials decided they couldn’t support the administration’s trade policies; others chafed at Malpass himself, whom they’ve described as disdainful of some civil servants and often unprepared, according to six people familiar with the matter."

Kushner's firm deepens Washington ties. NYT's Jesse Drucker and Kate Kelly: "Eighteen months into Jared Kushner’s White House tenure, his family’s real estate firm is deepening its financial relationships with institutions and individuals that have a lot riding on decisions made by the federal government. In the latest example, an arm of Brookfield Asset Management is close to completing an investment of up to $700 million in the Kushner family’s tower at 666 Fifth Avenue in Manhattan. The deal will be a boon to the Kushners, who are struggling to recoup their investments in their flagship building. At the same time, another Brookfield unit is awaiting the Trump administration’s approval of its acquisition of the nuclear-power company Westinghouse Electric. The deal is being reviewed by the Committee on Foreign Investment in the United States, made up of senior federal officials who consider the potential national security risks of transactions involving foreign companies."

MARKET MOVERS

Fed hunts for alternative signals. Reuters's Howard Schneider and Lindsay Dunsmuir: "Federal Reserve officials are scouring new niches of the financial markets to find signals accurate enough to warn the central bank when it is time to stop hiking interest rates before they risk tipping the economy into a recession. In the run up to previous downturns, the Fed has jacked interest rates to restrictive levels as it sought to temper inflation. This time, the central bank hopes for a softer landing with rates moving just high enough to avoid overheating without ending a nearly decade long expansion. It is a tricky exercise that pits standard views about the importance of longer term yield curves as signs of recession risk against new variations that look at shorter term interest rates. But it could influence just how far the Fed goes in its current rate hiking cycle."

— Gas prices surge. The Wall Street Journal's Stephanie Yang: “The highest retail gasoline prices in years are the latest development to raise concerns about one of the longest-running U.S. economic expansions on record. Drivers across the U.S. in May paid as much as $2.96 a gallon on average, the most since 2014. Prices have climbed to $3.63 in California and $3.39 in Washington, states where prices tend to be higher because of factors such as higher taxes, environmental regulations and a lack of pipelines that transport oil west. As of Monday, the national average was $2.86 a gallon. With wages in the U.S. climbing, Americans have so far been able to weather the higher prices. But analysts say that if average gas prices hit $3.50 or even $4 a gallon as global oil prices rise, that could dent growth by eating into disposable income and spending.”

— China's currency plunges. CNBC's Patti Domm: “China's currency fell to a near 11-month low against the dollar Wednesday, after the Trump administration fired off a new list of tariffs on $200 billion in Chinese goods. China's currency has been sliding noticeably since mid-June after bumping around at higher levels from February through May. Since June 14, it has lost about 4 percent. China's currency has been a sore point for a number of U.S. administrations, which have blasted China for allowing the renminbi to weaken to help exports. With the escalating trade war, market speculation points to the possibility that China will now use a weaker currency to fight the effect of tariffs.”

Investors’ enthusiasm has been waning as threats to the global trading system have flared, and the mood could darken quickly if the trade fights intensify.
NYT
POCKET CHANGE

— Papa John's founder quits. Bloomberg's Craig Giammona and Matthew Boyle: “Papa John’s International Inc.’s Chairman John Schnatter resigned after coming under fire for making racist comments that battered the shares of the pizza chain he founded. The independent directors of the company accepted Schnatter’s resignation, the Louisville, Kentucky, company said in a statement late Wednesday. Papa John’s will appoint a new chairman in the coming weeks, the company said. Just seven months after exiting the CEO role over critical comments about the National Football League’s national-anthem dispute, Schnatter came under pressure following a media report that he used a racial slur and graphic descriptions of violence against minorities on a May conference call with a media agency. Schnatter admitted to using an offensive racial term during the call and apologized, according to a separate statement earlier Wednesday."

— Broadcom wants to buy CA. Reuters's Greg Roumeliotis: “Broadcom Inc plans to acquire U.S. business software company CA Inc in a $19 billion deal aimed at diversifying Broadcom beyond semiconductors, but Wall Street analysts were immediately skeptical. The deal announced on Wednesday would come just four months after ... Trump blocked Broadcom’s $117 billion hostile bid for semiconductor peer Qualcomm Inc because it posed a threat to U.S. national security and gave an edge to Chinese companies looking to build next-generation wireless networks.”

— Another top Uber executive leaves. The Post's Hamza Shaban and Jena McGregor: “Uber’s head of human resources resigned Tuesday reportedly after a probe into how she had handled racial discrimination allegations at the company, marking the latest departure of a high-level executive there. Uber launched an internal investigation after anonymous whistleblowers claimed that Liane Hornsey, the company’s chief people officer, had systematically dismissed allegations of racial discrimination, Reuters first reported. Hornsey and chief executive Dara Khosrowshahi made no mention of the investigation’s finding in emails to staff about the resignation, obtained by The Washington Post. 'I know this comes a little out of the blue for some of you, but I have been thinking about this for a while,' Hornsey said. She thanked her colleagues and expressed pride for 'our shared ethic of doing what’s right for our employees.' ”

THE REGULATORS

Trump task force focuses on crypto crime. Bloomberg's Ben Bain and David McLaughlin: "In forming a new task force to protect consumers from fraud, the Trump administration made clear that one of the greatest threats to the public is just emerging: red-hot markets for crypto coins. The inclusion of virtual tokens -- along with traditional crimes like money laundering and investment schemes targeting the elderly -- as a focus of a panel announced Wednesday is the latest sign of Washington’s concern over digital currencies. The Justice Department, the Securities and Exchange Commission and the Commodity Futures Trading Commission are increasingly focusing their resources on scams tied to Bitcoin and other tokens, and government officials have frequently warned investors about potential dangers."

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