Blink and you might miss it, but congressional Republicans are considering what for them has become the rarest of moves: rebuking President Trump. The crack in GOP unity has formed over Trump’s disastrous Monday news conference with Russian President Vladimir Putin, yet it could give new energy to Republican lawmakers agitating to block his trade offensive.
Sen. Bob Corker (R-Tenn.), a leading Republican critic of Trump’s tariffs, predicted in a Tuesday tweet that the “dam is finally breaking.” And he used the president’s embrace of Putin and antagonizing of European allies to stoke urgency for congressional GOPers to take back the initiative on trade:
The dam is finally breaking. Thankfully.— Senator Bob Corker (@SenBobCorker) July 17, 2018
As the president taxes Americans with tariffs, he pushes away our allies and further strengthens Putin.
It is time for Congress to step up and take back our authorities.
We have legislation to do that. Let’s vote.
Later Tuesday, Senate Finance Committee Chairman Orrin G. Hatch (R-Utah), issued his sharpest critique yet of the administration’s trade agenda, along with a warning. “If the administration continues forward with its misguided and reckless reliance on tariffs, I will work to advance trade legislation to curtail presidential trade authority,” the usually reliable Trump supporter said in a Senate floor speech. “I am discussing legislative options with colleagues both on and off the Finance Committee and I will continue to do so.”
Across the Capitol, House Ways and Means Committee Chairman Kevin Brady (R-Tex.) sounded a similar note in Monday comments to reporters. “I think there will be growing momentum for a legislative response or solution,” he said, unless the administration ratchets down tensions, including by laying out a timeline for resolving its dispute with China and cleaning up a messy process for companies seeking exemptions to metals tariffs.
And today, a bipartisan roster of 149 House members is sending a letter to Commerce Secretary Wilbur Ross urging him against recommending auto tariffs. “We do not believe the imports of automobiles and automobile parts pose a national security threat,” the lawmakers, led by Rep. Jackie Walorski (R-Ind.), write. “Rather, we believe the imposition of trade restrictions on these products could undermine our economic security.”
The notion these stirrings will translate into substantive action deserves maximum skepticism. Beyond Hatch’s speech, there was no evidence in the Senate on Tuesday to support Corker’s assessment the tide is turning against the president on trade. A senior GOP aide familiar with member discussions counseled against reading too much into Hatch’s timing. “His remarks today encompass what he has been saying for several weeks now,” this aide said, adding Hatch will come to a decision “in the coming weeks.”
Brady’s tough statement Monday should be considered alongside his Tuesday appearance at Trump’s side in the Oval Office with other Ways and Means Republicans.
The president gathered lawmakers to discuss unveiling another package of tax cuts, a messaging bill that stands no chance of passage. But confronting Trump over the very real prospect that he will dramatically escalate trade hostilities with China, the European Union and other key trading partners is risky: Republicans don't want to alienate Trump supporters as the midterms approach.
That makes it doubtful fallout from Trump’s news conference will actually spark a longer-term revolt from Republicans that translates into real action.
Republican leaders on Capitol Hill have said the party can’t muster a veto-proof majority to curb Trump’s tariff push. Senate Majority Leader Mitch McConnell (R-Ky.) last month dismissed Corker’s proposal to do so as an “exercise in futility” because the president wouldn’t sign it. Last week, after the Senate approved a toothless resolution asserting a “role for Congress” in setting trade policy, a GOP aide wrote off the possibility that lawmakers would follow it up with an enforceable measure. Congressional Republicans, the aide told me, remain “a group of people who have no idea how to get an outcome, because there isn’t one.”
Trump’s cozying up to Putin while identifying the E.U. as a trade “foe” proved galvanizing enough to draw a striking if indirect reprimand from McConnell on Tuesday. Addressing reporters, the Kentucky Republican said he wanted to send a message to Europe that “there are a lot of people in both parties who believe that these alliances painstakingly built in the wake of the end of World War II are important and we want to maintain them.” And he said “there is a possibility that we may well take up legislation” if there is new evidence of Russian election interference. In the House, Speaker Paul D. Ryan (R-Wis.) said he’s leaving it to committees to determine whether more sanctions against Russia are warranted, in which case he’d be “more than happy” to consider them.
One way to reassure European allies, it seems, would be to vote to block the administration from imposing tariffs on imports of European autos in the name of national security. But don't get too optimistic it will actually happen.
|You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.|
|Not a regular subscriber?|
— EU slaps Google with $5 billion fine. WSJ's Laurence Norman and Sam Schechner: "The European Union hit Alphabet Inc.’s Google with a record antitrust fine of €4.34 billion ($5.06 billion) on Wednesday, according to an official familiar with the matter, a decision that could loosen the company’s grip on its biggest growth engine: mobile phones. EU commissioners agreed on the fine in a Wednesday morning meeting, according to the person, marking Brussels’ sharpest rebuke yet to the power of a handful of tech giants... The EU’s antitrust regulator has been looking into whether Google had abused the dominance of its Android operating system, which runs more than 80% of the world’s smartphones, to promote and entrench its own mobile apps and services—particularly the company’s search engine.
— Fed to stay course. The Wall Street Journal's Nick Timiraos: “Federal Reserve Chairman Jerome Powell told Congress on Tuesday that strong U.S. economic growth and stable inflation should keep the central bank on track to gradually raise short-term interest rates. But he also highlighted growing risks if the Trump administration’s recent efforts to lower trade barriers result instead in permanently higher tariffs. The Fed’s rate-setting committee 'believes that — for now — the best way forward is to keep gradually raising' rates, he said, in offering a roundly upbeat assessment of the economy at a two-hour hearing before the Senate Banking Committee.
"Most Fed officials have signaled they expect the central bank will need to raise rates to a neutral setting that neither spurs nor slows growth. But the addition of the words 'for now' underscored how the Fed hasn’t put rates on autopilot and hasn’t resolved key debates over how to proceed once rates reach a neutral level.”
Powell warns about tariffs. Bloomberg's Reade Pickert and Christopher Condon: “Powell said protectionism can hurt economic growth and potentially undermine wages, just as the U.S. ratchets up trade tensions with commercial rivals as well as longstanding allies. ... 'In general, countries that have remained open to trade, that haven’t erected barriers including tariffs, have grown faster. They’ve had higher incomes, higher productivity,' he said. 'Countries that have gone in a more protectionist direction have done worse.' "
And worries over the decline in workers' share of growth. The Washington Post's Jeff Stein: "The fall in the percentage of economic growth flowing to workers is 'very troubling,' a worrisome sign in an otherwise bright U.S. economy...Powell [said]... Powell expressed concern that the share of the national income going to American labor had fallen 'precipitously' for more than a decade and was not reversing course."
— Debt markets bullish on America. Bloomberg's Sid Verma and Luke Kawa: “Global debt markets are flashing a bullish signal on America’s economic trajectory, leaving Europe and emerging markets in the dust. Money managers in America Inc. debt are shrugging off late-cycle angst and the trade-war fallout thanks to an upswing in earnings — while the rest of the world struggles for traction. The premium to hold high-yield dollar bonds around the globe versus U.S.-listed corporate peers has widened to levels last notched back in 2002, according to data compiled by Bloomberg. In other words, rarely has U.S. debt looked in such good shape relative to peers in the $2.4 trillion market.”
— Industrial production picks up. The Associated Press's Paul Wiseman: “The Federal Reserve said Tuesday that industrial production — which includes output at factories, mines and utilities — climbed 0.6 percent in June, recovering from a 0.5 percent drop in May. The May reading was warped by a fire at a Michigan parts factory that disrupted production of Ford Motor’s F-series pickup trucks, America’s bestselling vehicle. American industry continues to look healthy despite trade conflicts with China, Europe and Canada and a rising dollar that makes U.S. products more expensive abroad.”
— Trump to host Junker. AP: “Trump will meet with the president of the European Commission next week at the White House, days after labeling the European Union a 'foe' of the United States. White House press secretary Sarah Sanders says President Jean-Claude Juncker will meet with Trump at the White House on July 25. She says security, counterterrorism, and energy will be on the agenda, as well as trade. The commission is an institution of the European Union.”
— Uranium next? Bloomberg's Jennifer Jacobs: "The Trump administration plans to open an investigation into whether uranium imports are harming national security, a move that could lead to tariffs on foreign shipments of the metal, said three people familiar with the matter. U.S. uranium producers Energy Fuels Inc. and Ur-Energy Inc. filed a petition in January asking the Commerce Department to investigate the matter under Section 232 of the 1962 Trade Expansion Act, the same provision the president used to slap tariffs on steel and aluminum imports. U.S. industry wants the government to shield it from competition from state-owned companies in countries including Russia and Kazakhstan. The timing of the probe remains unclear... Some administration officials are debating whether to wait until the controversy blows over from... Trump’s meeting in Helsinki with Russian President Vladimir Putin on Monday."
— Treasury, House Rs tangle over CFIUS bill. Bloomberg's Jenny Leonard, Roxana Tiron, and Erik Wasson: "Republican lawmakers and the Treasury Department are struggling to reach agreement on legislation to bolster national security reviews of foreign investments, which could upend... Trump’s less confrontational approach toward Chinese firms taking stakes in U.S. companies, according to two people familiar with the matter. The White House last month decided against the harshest measures to restrict Chinese investment through invoking a national emergency law and instead rallied support for existing legislation to strengthen the Committee on Foreign Investment in the U.S., or CFIUS. U.S. lawmakers... are negotiating a compromise for two separate bills that they aim to pass with an annual defense spending bill later this month.
"Treasury Secretary Steven Mnuchin is leading the negotiations with Capitol Hill and has been making the case to lawmakers that the president is willing to use stricter investment curbs if the talks on a new CFIUS bill -- the Foreign Investment Risk Review Modernization Act, or FIRRMA -- fail to result in strong legislation. A key GOP lawmaker, Representative Jeb Hensarling of Texas, is pushing for FIRRMA to be taken care of outside of the defense spending negotiations and that may result in watering down the final language."
— Car dealers look for workarounds. WSJ's Adrienne Roberts: “Dealers say many customers can’t afford more expensive vehicles. So auto retailers say they may curtail orders of vehicles built abroad, and some say they may focus on used cars with higher margins. The tariff, to a lesser extent, could also inflate prices for U.S.-built cars, because many of them use foreign-built car parts, car companies say. ... Mazda and Mitsubishi are expected to be hurt more than many other foreign brands because they are 100% reliant on imports to stock U.S. dealer lots and typically sell to price-sensitive buyers. The Alliance of Automobile Manufacturers, the auto industry’s chief lobbying group in Washington, estimates a 25% tariff would increase the average price of an imported vehicle by $5,800.”
— Tariffs hurt pork exports. Reuters's Tom Polansek: “Before the U.S.-China trade war, American pig processors exported nine out of every 10 pigs’ feet and heads they shipped overseas to China and Hong Kong — for prices higher than they would fetch anywhere else... The pipeline for these profitable pig parts, known collectively as offal, is closing fast after China slapped two tariffs on U.S. pork totaling 50 percent. That’s forcing U.S. processors to sell an increasing amount of such parts for pennies to be rendered into food for pets and livestock. U.S. shipments of byproducts affected by the duties fell by about a third in April and May combined, after China imposed the first 25 percent tariff on American pork in April, according to the latest data from the U.S. Department of Agriculture.”
And increase newsprint prices. AP's Kevin Freking: “About a dozen members of Congress warned Tuesday that newspapers in their home states are in danger of reducing news coverage, laying off workers or going out of business if the United States maintains recently imposed tariffs on Canadian newsprint. ... Newsprint is generally the second-largest expense for local papers. The tariffs have generally increased newsprint prices by 25 to 30 percent. Sens. Susan Collins and Angus King of Maine both argued that the tariffs will hurt the industry they’re designed to help because it will diminish the market for newsprint in America as newspapers shrink or close.”
— Trump changes his tune after Helsinki. The Washington Post's Ashley Parker, Robert Costa and Felicia Sonmez: “Trump on Tuesday grudgingly sought to inch back his warm remarks about Russia and its leader during a summit in Helsinki a day earlier, saying he had misspoken when he appeared to accept... Putin’s denials that Russia had interfered in the 2016 presidential election. Initially crossing his arms in front of him, and reading haltingly from prepared remarks, the president said he accepts the U.S. intelligence community’s assessment that Russia sought to influence the election — but added that it 'could be other people also,' an assertion not backed by evidence. ... 'I accept our intelligence community’s conclusion that Russia’s meddling in the 2016 election took place,' Trump said Tuesday, flanked at the White House by Republican members of Congress who were preparing for a meeting on tax policy. 'Could be other people also. A lot of people out there. There was no collusion at all, and people have seen that, and they’ve seen that strongly.' The scene carried echoes of past moments of political crisis for Trump, including his comments last year that 'both sides' were to blame for a deadly white-supremacist rally in Charlottesville. Then, as now, Trump backtracked with apparent reluctance after a period of public outcry.”
So many people at the higher ends of intelligence loved my press conference performance in Helsinki. Putin and I discussed many important subjects at our earlier meeting. We got along well which truly bothered many haters who wanted to see a boxing match. Big results will come!— Donald J. Trump (@realDonaldTrump) July 18, 2018
— Blankfein says he's retiring. The Washington Post's Renae Merle: “Goldman Sachs’s longtime chief executive, Lloyd Blankfein, announced Tuesday that he is retiring and turning one of Wall Street’s most coveted jobs over to an investment banking veteran — and occasional DJ. David Solomon, 56, was named CEO of Goldman at a time the New York bank is trying to move into new markets and shed its long-held reputation as a secretive trading house. Blankfein’s retirement has long been expected. The 63-year-old is one of Wall Street’s longest-serving CEOs, helping Goldman navigate the perils of the global financial crisis. The bank is now smaller, in both revenue and profits, than when Blankfein took the reins in 2006. But it is also poised to benefit from the Trump administration’s regulatory rollback. The bank reported Tuesday that its profits jumped 40 percent to $2.6 billion during the second quarter. Its revenue rose 19 percent to $9 billion.”
- NYT's Michael de la Merced runs down Blankfein's highs and lows at Goldman. The lows include the firm's recent performance.
- Blankfein predecessor Jon Corzine thinks he'd make a good mayor, Bloomberg's Max Abelson reports.
- Blankfein himself says he's looking forward to unrestrained tweeting:
Looking forward to unrestrained tweeting! https://t.co/zFcwq97djQ— Lloyd Blankfein (@lloydblankfein) July 17, 2018
— Johnson & Johnson beats expectations. AP's Linda A. Johnson: “Fueled by a 20 percent sales jump in its prescription drugs business, Johnson & Johnson posted a 3 percent increase in second-quarter profit. Still, the world’s biggest maker of health care products trimmed its forecast for 2018. J&J’s prescription medicine business, which had lagged its medical device business until a couple years ago, accounted for half its $20.83 billion in total revenue. ... The $20.83 billion in revenue topped analyst expectations for $20.21 billion.”
— MGM sues shooting victims. Las Vegas Review-Journal's Rachel Crosby: “MGM Resorts International has filed federal lawsuits against more than 1,000 Las Vegas mass shooting victims in an effort to avoid liability. The company, which owns Mandalay Bay and the Route 91 Harvest festival venue, argues that it cannot be held liable for Oct. 1 deaths, injuries or other damages, adding that any claims against MGM parties 'must be dismissed,' according to complaints filed Friday in Nevada and California. 'Plaintiffs have no liability of any kind to defendants,' the complaints argue. The company cites a 2002 federal act that extends liability protection to any company that uses 'anti-terrorism' technology or services that can 'help prevent and respond to mass violence.'”
— House passes reg relief. Washington Examiner's Joseph Lawler: "The House of Representatives voted overwhelmingly Tuesday to approve a bipartisan legislative package of financial regulatory rollback measures, raising the prospect of Senate Democrats being asked to vote for a regulatory relief bill for a second time this year. The legislation, labeled the JOBS Act 3.0, is a grab-bag of several dozen provisions, many meant to make it easier for startups to raise funds... The bill also would change some rules relating to banks and to the insurance system, and even have the federal government weigh in on cryptocurrencies... The question is whether Democrats are eager to take another vote to cut regulations on the financial sector, and under what conditions."
— Quarles confirmed, again. WSJ's Ryan Tracy: "The Senate confirmed Randal Quarles to a full term on the Federal Reserve’s governing board, eliminating uncertainty that has persisted since he took office last fall. Mr. Quarles, a former banking lawyer, is already serving as a Fed governor and as the Fed’s vice chairman for supervision, a position that puts him in charge of the Fed’s bank regulatory agenda in addition to his monetary-policy responsibilities. Senators in October approved him for a four-year term as vice chairman and to a term as Fed governor that expired in January. Mr. Quarles needed another vote to give him a full 14-year term on the Fed board."
Dems look to stall CFPB nominee. The Hill's Lydia Wheeler: "Democrats on the Senate Banking Committee are calling on the panel's chairman, Sen. Mike Crapo (R-Idaho), to delay Thursday’s hearing for... Trump's nominee to lead the Consumer Financial Protection Bureau if the administration does not respond to requests for information in time. In a letter sent Tuesday night... the panel's Democrats said the administration has not responded to requests for relevant documents and other information in advance of Thursday’s hearing. Senators are scheduled to consider the nominations of Kathleen Kraninger to lead the CFPB and Kimberly Reed to be the president of the Export-Import Bank."
— Treasury ends dark money disclosure. The Post's Michelle Ye Hee Lee and Jeff Stein: "Nonprofits that spend money to influence elections but are not required to disclose donors to the public — called 'dark money' groups by critics — no longer need to share their donors’ names or addresses in their tax filings under a new Treasury rule announced Monday. The decision was immediately heralded by free-speech advocates who have long sought to protect donors’ private information. But it was rebuked by those who want to reduce the role of money in politics, who claim it would make U.S. elections more susceptible to anonymous foreign donations."
- House Energy subcommittee hearing on oversight of the Federal Trade Commission.
- House Agriculture Committee hearing on cryptocurrencies tomorrow.
- House Ways and Means subcommittee hearing on the effects of tariffs on U.S. agriculture.
- Senate Finance subcommittee hearing on trade and commerce at ports of entry.
- House Oversight subcommittee hearing on “regulatory divergence.”
- The Senate Banking Committee holds a confirmation hearing tomorrow for Kathy Kraninger, Trump's nominee for director of the Consumer Financial Protection Bureau, and Kimberly A. Reed, Trump's nominee for president of the Export-Import Bank.
- House Intelligence Committee hearing titled “China’s threat to American government and private sector research and innovation leadership” tomorrow.
- Two House Small Business subcommittees hold a joint hearing on financial investment in rural areas on July 24.
From the New Yorker's George Booth:
Former president Barack Obama said in a speech that “you have to believe in facts”:
The Kilauea volcano has created a tiny new island:
D.C. region hit with heavy rain, cars left stranded: