Treasury Secretary Steven Mnuchin wants lawmakers to know he’s focused on the economic pain that the Trump administration’s tariffs are spreading across the map. But he also says there hasn't been any yet.
The last, best hope for free traders inside the Trump team, Mnuchin delivered a Panglossian performance Thursday over the course of three hours before the House Financial Services Committee. As anxious members of Congress from both parties described the disruptions that tariffs are inflicting back home and pressed him for assurances that the administration has a strategy for bringing the hostilities to a close, the treasury secretary insisted that all is well.
“We have not yet seen any negative economic impact,” Mnuchin told Rep. Jeb Hensarling (R-Tex.), the panel’s chairman.
Mnuchin denied that the administration — having slapped levies on $85 billion worth of imports, drawing a similar number in retaliation, and threatened them on another $760 billion in goods — is engaged in a trade war, describing the state of play instead as a “situation of trade disputes.” But he acknowledged that talks with Chinese officials “unfortunately… have broken down.”
Hensarling set the tone for the hearing, telling Mnuchin in his opening remarks that business investment “checkbooks are closing and expansion plans are being put on hold as growing uncertainty creeps through our economy.” And of the new tariffs the administration is considering leveling on autos and auto parts in the name of national security, Henslaring said, “The 11-year old Honda Accord I drove to work in today simply doesn’t threaten national security, nor does any other imported vehicle.”
Mnuchin parried questions from Hensarling and several others about how the administration is weighing economic damage into its decision-making by assuring them that Trump officials are focused on the matter. “I can assure you that the president is very much focused on economic growth, and I can also assure you that I’m monitoring the situation very carefully,” he told Hensarling.
That became a refrain. To Rep. Ann Wagner (R-Mo.), who expressed concern about soybean farmers in her state, Mnuchin said, “I can assure you I never was an expert on soybeans, but I’ve now become an expert on soybeans. I follow this market daily. I can assure you we’re focused on this.” She told him Chinese retaliatory tariffs targeting imports of the product are “causing real harm in the present day.” Mnuchin repeated, “I can assure you I and the president understand that and we’re focused on that.”
Rep. Mia Love (R-Utah) pointed to a Federal Reserve report that business leaders are putting investments on hold. “I can assure you we’re not going to do anything that’s going to jeopardize the great growth of the economy,” Mnuchin said, “although I recognize there are certain areas in certain markets that we need to be careful and sensitive to.”
Federal Reserve Chairman Jay Powell highlighted the uncertainty the trade wars have unleashed in a radio interview Thursday. He said the central bank is “hearing a rising level of concern” from business contacts, and an escalated trade war would create “very challenging” conditions. “The administration says that what it's trying to achieve is lower tariffs. So if it works out that way, then that'll be a good thing for our economy,” Powell told Marketplace. “If it works out other ways, so that we wind up having high tariffs on a lot of products and a lot of traded goods and services, let's say, and that they become sustained for a long period of time, then yes, that could be a negative for our economy.”
Mnuchin remains the most powerful advocate in Trump’s orbit for mitigating the president’s trade offensive. But the trade hawks have been driving the policymaking all summer. Back on May 20, Mnuchin declared in a Fox News Sunday interview that the U.S. was “putting the trade war on hold.” Later that day, U.S. Trade Representative Robert E. Lighthizer issued a statement defending tariffs as an important tool. Trump followed Lighthizer’s lead, imposing duties on $34 billion worth of imports from China, with another $16 billion coming next and the possibility of $200 billion more after that.
Mnuchin on Thursday denied that Trump’s decision undercut his May assessment. “We were close to having an agreement,” he told Love. “We couldn’t reach an overall agreement and that’s why the president decided not to keep them on hold.” But the treasury secretary has taken pains throughout his tenure to allow no public daylight between him and Trump — an effort he kept up on Thursday. “I can assure you that the president listens to my advice,” Mnuchin told Rep. Gregory W. Meeks (D-N.Y.) in the hearing, again deploying his go-to verb. “He’s the president. Sometimes he listens to my advice, and sometimes he doesn’t, which I respect. But I wouldn't be in this job if I didn't think he listens to my advice, and I couldn't be happier with the economic plan we’re on.”
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TRADE FLY AROUND:
— Trump slams May's Brexit plan. The Washington Post's William Booth, Karla Adam and Josh Dawsey: “After Prime Minister Theresa May rolled out the red carpet at Blenheim Palace on Thursday night for . . . Trump’s first official visit to Britain, a London tabloid published an explosive interview in which Trump blasted May’s compromise, pro-business plan to leave the European Union and warned that her approach could imperil any future trade deal between the United States and Britain . . . If May has Britain align its rules and regulations for goods and agricultural products with Europe, following 'a common rule book' with Brussels, as May puts it, then, Trump said, that could derail a trade deal with Washington. 'If they do a deal like that, we would be dealing with the European Union instead of dealing with the U.K., so it will probably kill the deal,' Trump told the Sun, which published its splash at 11 p.m. in Britain.”
— Ryan hopes the tariffs won't last. Politico's Doug Palmer: “House Speaker Paul Ryan warned Thursday that the United States risks falling behind the rest of the world because other countries are pursuing free trade deals more aggressively. Ryan, speaking before the Economic Club of Washington, D.C., also said he hoped . . . Trump's moves to impose tariffs on China and other nations was a negotiating tactic that would only remain in place until trade deals with those countries are worked out. At the same time, Ryan threw cold water on the idea of Congress passing legislation to bar Trump from imposing tariffs, since that would require a veto-proof majority.”
— Trump's supporters still back him: The Post's Heather Long and Scott Clement: “China and other nations aimed their counterblows at farmers and small manufacturers in 'Trump country' in the hopes that some voters would reconsider their support for the president. So far, there’s little sign that is happening. Among the 15 states most affected by the tariffs (calculated by the Brookings Institution), Trump’s approval rating is 57 percent, according to a Washington Post-Schar School poll conducted June 27 to July 2. On Election Day in 2016, 52 percent of voters in those same states supported Trump. The 15 states with the highest share of jobs at risk in the U.S.-China trade war are Arkansas, Iowa, Nebraska, Alaska, Idaho, Mississippi, Washington, Kentucky, South Dakota, Alabama, Delaware, Michigan, Indiana, Wisconsin and North Dakota, according to a Brookings analysis by senior fellow Mark Muro.”
— The trade war with China is reaching consumer goods. The New York Times's Jim Tankersley: “Administration officials took pains in their first batch of Chinese tariffs to largely shield consumers from seeing immediate price increases on products they buy. . . . But the list of $200 billion worth of products administration officials proposed hitting with tariffs on Tuesday would push up prices at many American retailers. The tariffs would be lower than the previous round — 10 percent instead of 25 percent — and they still mostly avoid apparel, one of the most visible product lines that Americans buy heavily from China. But they include electronics, food, tools, housewares and a wide range of other consumer goods. The tariffs would not go into effect for several months and may not happen at all if the United States and China are able to resolve their differences.”
The trade deficit between the countries, meanwhile, keeps getting wider. China's surplus with the U.S. rose to a record in June, Bloomberg reports.
— How it is playing out in Michigan. NYT's Ana Swanson: “As Mr. Trump tries to punish China with tariffs and other restrictions, Michigan is caught in the cross hairs, with its ability to remain competitive and develop emerging technologies like autonomous vehicles, robotics and artificial intelligence highly dependent on ties to international markets, including China. ... General Motors now sells far more cars in China than it does in the United States, and the largest exporter of cars from the United States by value is not an American brand, but BMW. By some calculations, the car with the highest proportion of United States and Canadian-made content is the Honda Odyssey — and even that includes roughly a quarter of foreign-made parts. Companies — and their workers — say they recognize there are certain risks from sharing their technological secrets with Chinese competitors, but they say it is no longer a choice whether Michigan, the automotive capital of North America, should engage with China, the world’s largest auto market.”
— China calls the United States a “trade bully.” Reuters's Tom Miles: “The United States has started a trade war and China will defend itself, Chinese Vice Minister of Commerce Wang Shouwen said on Thursday, urging the United States to 'take the gun' of tariffs away to smooth the way for talks. Earlier on Thursday . . . Trump said the United States was in a nasty trade battle with China, but things would ultimately work out. Speaking after a regular two-yearly review of China’s trade policies at the World Trade Organization (WTO), Wang was skeptical. 'The measures taken are against the interests of China, they are against the interests of U.S. businesses, consumers, workers and farmers. They are hampering global economic growth. They are just a trade bully,' he told reporters in Geneva.”
— Germany and China pull together. Politico's Joshua Posaner and Hans Von Der Burchard: “Trump’s rapidly escalating trade war is pushing Berlin and Beijing into an uneasy economic alliance. Both China and Germany found themselves squarely in Trump’s sights this week. . . . Facing this open hostility, both countries are realizing that it makes sense to club together. . . . 'As relations with the U.S. become increasingly difficult, the other economic giant will inevitably become more important to us,' said Volker Treier, deputy chief executive of Germany’s Chambers of Industry and Commerce. Still, Germany and China are hardly natural bedfellows. Berlin is suspicious of China’s trade agenda and is at the forefront of trying to protect the EU from losing core intellectual property in buyouts in high-tech sectors such as robotics.”
— China will address its debt problem later. WJS's Chao Deng and Lingling Wei: “China is letting up on its drive to keep a lid on debt growth as it faces a softening economy at home and escalating trade tensions with the U.S. Senior Chinese leaders led by President Xi Jinping have been sending unmistakable signals that the campaign to rein in financial risk isn’t the overriding priority it has been. Financial regulators are delaying the release of rules to curtail risky lending by banks and other institutions out of concern that the regulations would choke off a source of funding and rattle financial markets already shaken by worries over trade and the economy, people familiar with the decision said. In a turnabout, the State Council, China’s cabinet, stopped hectoring city halls and townships to restrain spending and instead last week launched an inspection to urge them to speed up already approved investment projects to re-energize growth. The central government often uses inspections as a way to evaluate local officials and get top-level directives across.”
— Mooch tells Trump to stand down. Anthony Scaramucci, writing in the Financial Times: "During his first 16 months in office, President Donald Trump made all the right moves in leading the US economy and stock market to record heights: tax cuts, regulatory relief and pro-business rhetoric. Wages are inching upwards and people are returning to work. Yet, the potential for a full-blown trade war risks undoing much of that great work and punishing the very voters who elected him. The administration needs to change tactics now or risk jeopardising the midterms... Mr Trump recognises the problem, but his current approach to solving it needs refining. The administration has antagonised our allies and threatened to abandon the global rules-based system rather than building a coalition to reform the WTO and hold China accountable."
— Ross says he will sell his holdings. The Post's Steven Mufson: “The Office of Government Ethics strongly reprimanded Commerce Secretary Wilbur Ross for his failure to completely divest himself of his far-flung stock holdings in a timely fashion and for taking short positions in an effort to offset certain stocks until they could be sold. Ross replied by saying that even though his ethics agreement allows him to retain private equity holdings, he will now sell all his holdings and put them in Treasury securities in order 'to maintain the public trust.' David J. Apol, acting director and general counsel of the ethics office, told Ross that 'your failure to divest created the potential for a serious criminal violation on your part and undermined public confidence.'”
— Inflation hurts. The Post's Heather Long: “The 2.9 percent inflation for the twelve-month period ending in June is a sign of a growing economy, but it’s also a painful development for workers, whose tepid wage gains have failed to keep pace with the rising prices. The cost of food, shelter and gas have all risen significantly in the past year. Gas skyrocketed more than 24 percent, rent for a primary residence jumped 3.6 percent and meals at restaurants and cafeterias rose 2.8 percent. Prices have risen roughly at the same rate as wages, erasing any gains workers may have hoped to realize via bigger paychecks.”
— Consumer prices rise. Reuters's Lucia Mutikani: “U.S. consumer prices recorded their largest increase in nearly 6-1/2 years in the year through June, while the monthly pace continued to suggest a steady buildup of inflation that could keep the Federal Reserve on a path of gradual interest rate increases. Other data on Thursday showed first-time applications for unemployment benefits dropped to a two-month low last week as the labor market strengthened further. The tight jobs market is supporting inflation, and import tariffs, which are set to be broadened to include consumer goods, could fan price pressures.”
— Bank earnings could disappoint. Bloomberg's Michelle Davis and Laura Keller: "It was supposed to be the best of times for the biggest U.S. banks: Rising interest rates and corporate tax cuts would boost profitability and spur lending, while deregulation lowered costs. The optimism didn’t last. Loan books probably expanded only slightly last quarter while revenue failed to match the acceleration posted in the first three months of the year, based on the latest analyst estimates. And the outlook isn’t brightening. A flattening yield curve and a potential trade war threaten to make the second half even worse. 'We’re not expecting very strong results for the big banks,' said Jim Shanahan, an analyst at Edward Jones & Co... Investors will get the first details on Friday, when JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. report second-quarter results."
— Delta says it can handle rising oil prices. The Associated Press's David Koenig: “Delta Air Lines executives expressed confidence Thursday that they can raise prices high enough to cover a fuel bill that is likely to be $2 billion more this year than last year. . . . 'One of the things that has been weighing on the stock, as we all know, is the growth in fuel prices in the short term,' CEO Ed Bastian said on a call with analysts and reporters. 'We expect to be able to cover most if not all of it this year, by the end of the year.' Bastian made the comment as Delta reported a $1 billion profit in the second quarter, down 14 percent from a year earlier.”
— Tax credits for Tesla cars will decrease. Reuters's Nick Carey, Sonam Rai: “Tesla Inc has delivered 200,000 electric cars to buyers in the United States, a spokesperson said on Thursday, meaning tax credits will now begin to be lowered, while rivals such as Mercedes-Benz, BMW AG and Audi AG will bring electric models to the market with a full tax credit in place. Under a major tax overhaul passed by the Republican-controlled U.S. Congress late last year, financial incentives in the way of tax credits that lower the cost of electric vehicles are available for the first 200,000 such vehicles sold by an automaker. The tax credit is then reduced by 50 percent every six months until it phases out.”
— Fast-food chains will change labor practices. NYT's Rachel Abrams: “Seven major restaurant chains, including Arby’s, Carl’s Jr., McDonald’s and Jimmy John’s, have agreed to drop a hiring practice that critics say may be keeping tens of thousands of fast-food workers locked in low-wage jobs. Under agreements with Washington State announced on Thursday, the companies — Auntie Anne’s, Buffalo Wild Wings and Cinnabon are the others — have pledged to remove so-called no-poach clauses from their contracts with franchisees. The provisions prohibit workers at, for example, one Carl’s Jr. franchise from going to another Carl’s Jr. They do not stop those workers from taking jobs at restaurants run by a different chain.”
— McHenry: Leave Dodd-Frank alone. Bloomberg's Elizabeth Dexheimer: "A top Republican lawmaker wants the GOP to move on from its nearly decade-long obsession with killing the Dodd-Frank Act. U.S. Representative Patrick Patrick McHenry, a member of House Republican leadership and the GOP front-runner to become the next chairman of the Financial Services Committee, said his party should instead focus on legislation that will help prevent the next economic crisis and addresses all the ways that technology is rapidly reshaping banking. Such policies might draw bipartisan support, unlike efforts to gut Obama-era financial regulations. 'We need to get out of this Dodd-Frank morass we’ve been in,' McHenry said in an interview Wednesday at his office in the U.S. Capitol. 'The next crisis will look different from the previous crisis, so we need to be forward-looking when it comes to legislating.'"
— Knight to replace Short. Politico's Andrew Restuccia and Jake Sherman: "The White House announced on Thursday that Shahira Knight, a top economic adviser to President Donald Trump who played a central role in shepherding the Republicans’ tax bill through Congress, will replace Marc Short as legislative affairs director. Short, the White House’s longtime liaison to Capitol Hill, announced Thursday that he is leaving the administration... The decision to tap Knight for the job comes as the White House is preparing for a fight with Democrats over the president's nominee to the Supreme Court, Brett Kavanaugh, and as Trump looks ahead to November’s midterm election. Knight, a deputy director of the National Economic Council, announced in June that she would be leaving the administration for a job at the Clearing House, a banking policy and lobbying group. But she agreed to temporarily extend her tenure in the administration in the aftermath of NEC director Larry Kudlow’s recent heart attack."
— Bankers pour money into races. Politico's Zachary Warmbrodt: "Republicans and Democrats facing competitive midterm races this year are getting an early burst of support from bankers, who are riding high off the passage of a sweeping financial deregulation bill. The American Bankers Association, which has spent months overhauling its political operations, for the first time is running television ads in support of incumbent lawmakers from both parties who have backed industry-friendly policies. Another group organized as a super PAC, Friends of Traditional Banking, is calling on its 22,000 members — mostly from red states — to give to the campaign of Sen. Jon Tester (D-Mont.) — the first time it has backed a Democrat. The groups are getting involved in potentially tough races early as they try to tap into bankers’ enthusiasm over the bill that... Trump signed in May that eased post-crisis regulations for the industry."
— Tax bill 2.0 coming post-midterms. The Hill's Naomi Jagoda: "Speaker Paul Ryan (R-Wis.) said Thursday that he expects lawmakers to release a bill to make fixes to the new tax law following November's midterm elections. At an event hosted by the Economic Club of Washington, Ryan said glitches were bound to occur because the law made significant changes to the tax code, including to the international tax system. 'We're compiling those issues, typically on the international side, and then we intend to put together a technical correction bill at the end of the year,' Ryan said."
— DOJ appeals AT&T-TimeWarner loss. The Post's Brian Fung: "The Justice Department on Thursday filed an appeal challenging its loss in the AT&T-Time Warner antitrust trial, according to court documents, a potential warning for the deals that are expected in the wake of the $85 billion acquisition. AT&T completed its acquisition of Time Warner a few weeks ago after a federal judge rejected the Justice Department’s argument that the deal would be anti-competitive... The appeal could be seen as a warning sign for companies that have pursued their own mergers in the wake of Leon’s decision."
— SEC probes Facebook warning. WSJ's Dave Michaels and Georgia Wells: "Securities regulators are investigating whether Facebook adequately warned investors that developers and other third parties may have obtained users’ data without their permission or in violation of Facebook policies... The Securities and Exchange Commission’s probe of the social-media company... follows revelations that Cambridge Analytica, a data-analytics firm that had ties to... Trump’s 2016 campaign, got access to information on millions of Facebook users. The SEC has requested information from Facebook as it seeks to understand how much the company knew about Cambridge Analytica’s use of the data."
- Panel discussion on “what corporate America can do for employees” at the American Enterprise Institute
- House Energy subcommittee hearing on oversight of the Federal Trade Commission on July 18.
- House Agriculture Committee hearing on cryptocurrencies on July 18.
- House Ways and Means subcommittee hearing on the effects of trade tariffs on U.S. agriculture on July 18.
The fieriest moments from Peter Strzok's hearing:
Protesters clash with officers outside Portland ICE facility:
Researcher looks for northern long-eared bats: