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The Trump administration is edging closer to the biggest escalation yet in its trade war with China.
The U.S. Trade Representative closed the books at midnight for comments about 25 percent tariffs on an additional $200 billion of Chinese imports. That’s probably the last hurdle the Trump team needs to clear before declaring its intent to move ahead with the duties.
Trump could announce as soon as today that he is imposing the tariffs. The move would constitute a fourfold increase over the 25 percent duties his administration has slapped on $50 billion worth of imports from China. That country on Thursday renewed its pledge to retaliate by targeting $60 billion of U.S. goods.
Lobbyists close to the matter say they don’t expect Trump’s decision to come until next week at the earliest. There is little suspense, however, about whether he will follow through: All signs point to the president making good on repeated threats to dial up the conflict in a major way. “There came time when I couldn’t delay it anymore because it’s too much money that they drain out of our country. Just too much money,” Trump told Bloomberg News in an interview last week. “That’s where we are now.” And James Freeman, a Wall Street Journal opinion editor, writes that in a Thursday phone call, the president sounded “very stable but unfortunately also still very focused on eliminating trade deficits with America’s trading partners.”
Business interests are preparing to fight back. The Consumer Technology Association, for one, will weighing whether to sue to block the tariffs if they go into effect. The group — which counts Amazon, Uber and Walmart among its members — believes the administration lacks the legal authority to impose the duties.
Their argument: The Trump team justified its first tariffs on Chinese imports by invoking its power under Section 301 of the Trade Act of 1974. The statute allows the administration to police violations of American intellectual property. But Trump is aiming to escalate in retaliation for China’s response to the initial U.S. salvo, grounds the group says are not justified under the law. “We are reviewing all options,” a CTA representative tells me.
Others are hoping to head off the tariffs through last-minute lobbying appeals. “On Thursday, Cisco Systems Inc., Hewlett-Packard Enterprise Co., and other technology companies sent a letter to U.S. Trade Representative Robert Lighthizer urging the administration to avoid imposing more tariffs,” Bloomberg News’s Andrew Mayeda, Mark Niquette and Shawn Donnan write. “By increasing duties on telecommunications networking gear, the administration would raise the cost of accessing the Internet and slow the roll-out of next-generation wireless technologies, the companies said.”
More from Bloomberg: “Manufacturers and small and mid-sized firms, in particular, can’t quickly adjust and the tariffs imposed so far haven’t led to any meaningful concessions, a coalition of the National Retail Federation and 150 organizations said in separate comments to Lighthizer. The administration should cease further tariffs actions and give another shot at talks for a trade deal with China, it said.”
And still others are making the case that the administration shouldn’t move precipitously to put the tariffs in force. “Companies had been preparing for the tariffs based on the cadence of the last two” rounds, Jake Colvin of the National Foreign Trade Council tells me. “If they come sooner, it will complicate fourth-quarter planning. A surprise announcement would be even worse than it already is.”
Negotiations between the U.S. and China last month left little hope for a last-minute detente. From the Wall Street Journal's Bob Davis and Lingling Wei:
“The August trade talks revealed chasms between Washington and Beijing. Chinese negotiators focused on their efforts to live up to World Trade Organization obligations, say people briefed on the talks, and offered 'conceptual' ideas for a deal. But Trump administration negotiators were looking for much more concrete offers. Even in an administration divided on trade issues, the U.S. side this time was fairly unified, U.S. officials say. The U.S. position has shifted more toward the view of Mr. Lighthizer, who has been pressing for deep changes in the Chinese economy, including reduction of subsidies and other industrial policies favoring domestic firms.”
Looming over the wait for the announcement is the turmoil roiling the White House this week, as the president and his top staff appear consumed by the forthcoming Bob Woodward book and a New York Times opinion piece from an anonymous administration official. “Certainly the Chinese are looking for signs of weakness and pullback, and certainly others the U.S. is negotiating with will be looking for indications the president is on his heels,” one source close to the process says. “To the extent the president wants to change the subject and show he’s in charge, it probably makes it more likely that he takes a significant action.”
— CEA responds. Yesterday's Ticker examined a new report by the White House Council of Economic Advisers arguing to replace the federal government's method for measuring wage growth with one that would yield a rosier number. CEA chief of staff DJ Nordquist got in touch to say the report is no critique of Labor Department data.
“We aren’t criticizing government data. We rely on it, every day at CEA, and in fact, this paper is based on [Bureau of Labor Statistics] data. We rely on BLS for many, many things – we are data nerds!” Nordquist writes in an email. “Our paper was just saying there are lots of measures out there but for some reason, the focus seems to be on a particular BLS wage number, even though BLS has many products that measure wages and inflation – which are more accurate than the headline number. Even the Atlanta and San Francisco Fed do not focus on average hourly earnings divided by CPI.”
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— Fed's Williams praises economy. Reuters's Howard Schneider: “Current economic conditions are ‘as good as it gets’ for the U.S. central bank, a key policymaker said on Thursday, with steady inflation and low unemployment allowing the Federal Reserve to continue gradually raising rates. ‘We can continue to be relatively patient and allow this economy to continue to grow,’ New York Federal Reserve bank President John Williams said at the University of Buffalo School of Management. There is ‘room to run’ in the current recovery, he said, particularly with weak wage growth indicating some ‘slack’ left in the labor market. Williams also serves as a Fed vice chair and has a permanent vote on the central bank’s policy-setting committee.”
More Williams: Fed shouldn't sweat the yield curve. “I think we need to make the right decisions based on our analysis of where the economy is and where it’s heading,” Williams told reporters after the speech, per the WSJ's Michael Derby. “If that were to require us to move interest rates up to the point where the yield curve was flat or inverted, that would not be something I find worrisome on its own.”
— Initial jobless claims dip. The Wall Street Journal's Sharon Nunn: “Initial jobless claims, a proxy for layoffs across the U.S., declined to a seasonally adjusted 203,000 in the last week of August, the Labor Department said Thursday. This is the lowest level of unemployment benefit applications since the end of 1969. Though data can be volatile from week to week, the four-week moving average of claims, a steadier measure, also fell to a 49-year low, signaling overwhelming tightness in the U.S. labor market.”
Job figures underscore business confidence. The Associated Press's Christopher Rugaber: “U.S. businesses added 163,000 jobs in August, a private survey found, a decent gain that suggests that employers are confident enough to keep hiring. Payroll processor ADP said Thursday that the job gains were the fewest since October. But last month’s pace of hiring is still enough to lower the unemployment rate over time . . . Hiring by small businesses — defined as those with fewer than 50 employees — remained sluggish last month and depressed overall job growth . . . Hiring was particularly strong last month for medium-sized companies, with 50 to 499 employees.”
— Worker productivity rises. WSJ's Eric Morath: “U.S. worker productivity rose this spring at the best quarterly pace in more than three years, newly revised numbers confirmed, though growth from a year earlier was more subdued. The productivity of nonfarm workers, measured as the output of goods and services for each hour on the job, increased at an annualized and seasonally adjusted rate of 2.9% in the second quarter from the prior three months, the Labor Department said Thursday. It was the best quarterly growth rate since the first three months of 2015.”
— Service industries expand. Bloomberg News's Katia Dmitrieva: “Expansion in U.S. service industries rebounded in August to a faster-than-expected pace, adding to signs economic growth will remain solid in the third quarter, an Institute for Supply Management survey showed Thursday . . . The reading on the main index matched the most optimistic analyst forecasts, signaling that demand for services is buoying U.S. companies and the economy. The gain across all four index components — business activity, new orders, employment and supplier deliveries — follows another ISM report this week showing the group’s factory gauge advanced to a 14-year high. Thursday’s numbers show little impact from ongoing trade conflicts, with an index of export orders increasing and imports little changed.”
— NAFTA talks crawl forward. Reuters's Daina Beth Solomon and David Lawder: “U.S. and Canadian negotiators started a second day of talks aimed at rescuing the North American Free Trade Agreement on Thursday as the deadline for a deal this week, set out by [Trump], inched ever closer. Aides to the U.S. and Canadian sides worked late into the night after the talks started in Washington on Wednesday, suggesting that areas for potential progress in the talks had been identified. Canada’s top trade negotiator, Foreign Minister Chrystia Freeland. repeated that the talks had been ‘constructive and positive’ as she entered the United Trade Representative building in downtown Washington . . . U.S. House Ways and Means Chairman Kevin Brady told reporters that differences remained between the two sides over Canada’s dairy quota regime and a dispute resolution settlement procedure.”
Democrats want Canada in revamped deal. Bloomberg News's Erik Wasson and Shawn Donnan: “Key Democrats warned that if their party wins a U.S. House majority in November, they will strongly consider rejecting a Trump administration rewrite of a North American trade deal that doesn’t include Canada and raise wages for U.S. workers. . . . Democrats said in interviews that a Mexico-only deal wouldn’t be acceptable and that any renegotiation of Nafta needs to have tangible benefits for workers. ‘We want to make sure people understand congressional authority here,’ said Richard Neal of Massachusetts, the top Democrat on the House Ways and Means committee, which oversees trade. ‘Canada should be in the deal. This should be a trilateral, not a bilateral deal.’”
Pence: “American people see through” New York Times op-ed
- “Pence and a growing cast of other Trump officials deny writing the Times op-ed.” The Washington Post's John Wagner.
- "Trump raises the specter of impeachment at Montana rally." The Post's Josh Dawsey and David Nakamura.
- “‘A never-ending cycle’: Book, op-ed show how some Trump aides work to curb his instincts.” The Post's Philip Rucker, Ashley Parker, Josh Dawsey and Greg Jaffe.
"Giuliani tells AP Trump won't answer Mueller's obstruction questions, then backtracks.” NBC’s Hallie Jackson and the AP.
- “Senators urge Justice Department to probe Giuliani’s foreign work.” WSJ's Julie Bykowicz.
— Impeachment wouldn't mean market crash. The Washington Post's Thomas Heath: “Markets may temporarily wane if [Trump] were impeached but would almost certainly recover, finance experts said Thursday, disputing the president’s assertion during a Fox News interview last month that stocks would crash and ‘everybody would be very poor.’ ‘Markets did not crash when President Clinton was impeached, so it’s not obvious they would crash if Trump is impeached,’ said John H. Cochrane, a senior fellow at the Hoover Institution, a right-leaning think tank. ‘Impeachment would mean that we just sit and yell at each other for a couple of years. Markets respond to economics. If the economy is going well, markets will do fine. If you are worried about crashes, worry about something financial or economic going wrong very suddenly.’”
— Talks seek settlement over control of CBS. WSJ's Keach Hagey and Joe Flint: “CBS Corp. is in talks with Shari Redstone and her family’s holding company, National Amusements Inc., to settle their litigation over control of the broadcaster, less than a month before the matter is scheduled to go to trial . . . A framework for the settlement would include CBS dropping its attempt to strip National Amusements of its voting control of the company by issuing shares as a dividend. In return, National Amusements would refrain from pushing for a merger of CBS and Viacom Inc. for an undisclosed period.”
— Speculation still rampant on Amazon's HQ2. NYT's Karen Weise: "Friday marks one year since Amazon announced its search for a second headquarters, a project called HQ2, which the company says will bring $5 billion in investment and 50,000 high-paying jobs to the area it chooses… After receiving 238 bids for HQ2, Amazon narrowed the list to 20 cities in January. It toured each in the late winter and spring, which many local news outlets covered. But since then, any back and forth has largely been out of the public eye, thanks to the nondisclosure agreements city officials and development agencies have signed with the company."
IS THIS THE TOP?
— War of the Los Angeles Megamansions. WSJ's Katharine Clarke: "At a time when many believe the ultra high-end real-estate market has peaked, a handful of colorful characters are forging on ahead, building some of the most lavish and expensive homes this country has ever seen. These Los Angeles developers are constructing modern-day palaces that serve as monuments to excess, with candy rooms, commercial-sized movie theaters, helipads and hair salons. The bet: Their over-the-top creations will outrun the market and sell for hundreds of millions—even up to $500 million for the priciest home hitting the block... The showiest house mantle may shift... once [builder Nile] Niami’s 'The One' comes on the market. With 20 bedrooms, a V.I.P. nightclub and jellyfish aquariums, it is asking $500 million—almost five times the Los Angeles record.
— House GOP plots tax tweaks. Reuters's David Morgan: "U.S. Republicans, aiming to get another round of tax legislation through the House of Representatives before the Nov. 6 elections, said on Thursday that they are considering ways to minimize political blowback from a new cap on federal deductions for state and local tax payments. House Ways and Means Committee Chairman Kevin Brady expects to unveil 'Tax Reform 2.0' legislation next week to make permanent the individual tax cuts contained in [Trump’s] tax overhaul in December... But faced with a possible rout in November, House Republicans could avoid giving permanence to the [SALT] cap, a measure that has helped make re-election difficult for Republican incumbents in largely Democratic states including New York, New Jersey, Illinois and California."
— Why the House GSE reform plan matters. American Banker's Hannah Long and Neil Haggerty: "The legislative path is extremely narrow for a new housing finance reform plan by House Financial Services Committee Jeb Hensarling, but it injected a dose of hope for progress on an issue that is more often stuck in neutral. The plan, co-drafted with Democrats John Delaney and Jim Himes, won some praise but several lawmakers said it lacked specifics. Yet the bill, which envisions Ginnie Mae stepping in for Fannie Mae and Freddie Mac, could help form the consensus for a future reform push as both sides of the aisle now agree there should be some continued government backing for the mortgage system."
- Senate Banking Committee hearing on “countering Russia” on Sept. 12.
- Commission on Security and Cooperation in Europe briefing on free-trade zones on Sept. 12.
- Senate Banking Committee hearing on the “implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act” on Sept. 13.
- Senate Agriculture Committee hearing on U.S. agricultural trade on Sept. 13.
From The Post's Tom Toles: “Trump has driven his administration to the edge.”
Alabama residents cleanup after Tropical Storm Gordon:
At least 9 killed, 32 missing in deadly Japan quake:
DOJ charges North Korean hacker in Sony attack: