THE TICKER

American business may be howling about the Trump administration’s new tariffs on Chinese imports. But on K Street, the trade war is already proving a winner for the bottom line. 

By more than doubling the duties on $200 billion worth of Chinese goods and threatening to extend that 25 percent levy to everything imported from the country, the Trump administration has created a new crowd of companies desperate for relief and lining up to hire Washington’s most connected operators to help. The hope: To convince the U.S. Trade Representative to exclude their product from the new tariffs.

“There’s a lot of activity and a lot of concerned companies out there,” says Ronald Oleynik, who leads the international trade practice at Holland & Knight. 

Richard Mojica, who focuses on imports at Miller & Chevalier, said he is fielding an “avalanche of inquiries, from both existing clients and new clients who up until very recently have not had to deal with the tariffs or deal with them as urgently as they have to right now.”

Early rounds of Trump’s tariffs — on steel and aluminum imports from around the world and mostly industrial products from China that end up in other finished goods — fell heavily on American manufacturers. But as the administration moves to broaden the levies to include everything imported from the country nicknamed the world’s factory, new classes of American businesses stand to feel a stronger pinch, including toy makers, big-box retailers and apparel companies. 

The record suggests there will be only so much even the best lawyers and lobbyists can do. Although companies seeking carve-outs from steel and aluminum tariffs have racked up an impressive success rate — winning exemptions for 42 percent of the more than 51,000 requests filed as of March — those seeking relief from China tariffs have a considerably lower batting average. Rough calculations by Christine McDaniel and Danielle Parks of the Mercatus Center found as of March, U.S. Trade Representative officials had approved only about 10 percent of nearly 11,000 requests for exclusion from the import taxes.  

For those companies nevertheless eager to challenge the odds, top trade hands for hire have some advice. First, any business seeking an exemption needs to marshal the best version of the facts supporting their case to present to USTR. The trade office requires petitioners to prove the product they want exempted meets four standards: It is not key to Chinese industrial policy, including its Made in China 2025 plan; it can’t be produced elsewhere; subjecting it to higher tariffs would cause severe damage to the company; and customs officers need to be able to identify the product easily so they can enforce the exemption.

“If you don’t hit every one of these factors, if you don’t answer the question in a definitive way,” companies stand a vastly diminished shot at approval, says Stacy J. Ettinger, who directs the trade policy practice at K&L Gates. 

Once the paperwork is in order, it helps to have friends in your congressional delegation adding their names to the cause. “They do make better advocates than most people,” Oleynik says. “When a senator calls the White House or USTR, they get more attention. Using that leverage is helpful. But they’ve got to want to do it.”

Indeed, Tesla failed to win an exemption for the Chinese-built Autopilot “brain” of its electric vehicles, with USTR pointing to the technology’s strategic importance to the Made in China 2025 plan. Mojica says his firm couldn’t win an exemption for a blender, because 5 percent of them were made in Brazil — a fact USTR cited in rejecting the claim the device had to be made in China. But he secured carve-outs for other low-tech products, including ball bearings and a salad spinner. 

Given the dismal success rate for companies seeking exemptions from China tariffs so far, Oleynik also proposes a different path altogether. Companies can seek deductions to the valuation that customs officers place on their imports, thereby shrinking the tab subject to the new tariffs. Shipping costs, for example, are deductible. Or the Chinese exporter can set up a sales subsidiary in the U.S. and effectively claim a wholesale price for the product when it is imported before selling it to an American customer. 

Options for importers may range from bad to worse. But lobbyists are still benefiting from all the increased action. In the first quarter of this year alone, 723 clients reported lobbying on trade matters, following a record-breaking year for trade lobbying in 2018, when nearly 1,300 clients worked federal officials on the issue, according to the Center for Responsive Politics. 

“It just doesn’t seem to be a very fair process,” McDaniel of the Mercatus Center says. “We talk to so many companies, and it’s heartbreaking: They can’t afford the K Street lawyer, not to mention the PR firm and the full-court press on their senator or representative. Sometimes a company gets an exclusion granted. But what about the hundreds of others who can’t afford to try?”

MARKET MOVERS

Stocks bounce back. Bloomberg's Randall Jensen and Sarah Ponczek: "U.S. stocks rebounded as [Trump] moved to reassure markets that he’ll clinch a trade deal with China. The dollar rose and Treasuries fell. The S&P 500 rose for the second time in three sessions after Trump said he’s talking with China. The benchmark is still down around 4% since the president escalated the trade war on May 5, and Tuesday’s rally faded into the close. Battered tech shares led the advance as Apple Inc. and Nvidia Corp. bounced back from their biggest one-day declines since January. Heavyweight exporters Caterpillar Inc. and Boeing Co. also reversed a portion of Monday’s losses."

TRUMP TRACKER

TRADE FLY-AROUND:

Trump’s trade war is about 2020: “[Trump] is telling advisers and close allies that he has no intention of pulling back on his escalating trade war with China, arguing that clashing with Beijing is highly popular with his political base and will help him win reelection in 2020 regardless of any immediate economic pain,” my colleagues Robert Costa, Josh Dawsey and Sean Sullivan report.

  • The view from Trumpworld: “I don’t see him crying uncle anytime soon,” Stephen Moore, a conservative economist who withdrew from consideration as a Trump Federal Reserve Board nominee amid an uproar told my colleagues. “It’s a high-risk strategy, but it’s not in his personality to back down. This goes back to what he said that first time he came down the escalator at Trump Tower.”
  • Frustration inside the Capitol: As I mentioned yesterday, Republican lawmakers are running out of patience. “I’m not sure if you talk to him face to face, he hears everything you say,” Senate Finance Committee Chairman Charles E. Grassley (R-Iowa) told my colleagues Damian Paletta, Erica Werner and Taylor Telford. 
  • Trump draws the Fed in the fray: The president tried to draw the independent Federal Reserve into the trade war by saying that low interest rates would help the U.S. win.

China is not flinching: The Chinese Foreign Ministry had a message for the U.S. on Tuesday: Don’t underestimate us.

  • “China doesn’t want a trade war, but we are not afraid of fighting one. If someone brings the war to our doorstep, we will fight to the end,” Foreign Ministry Spokesperson Geng Shuang told reporters at his daily news conference. “China never succumbs to external pressure. We have the resolve and capability to defend our lawful and legitimate rights and interests.”

Blankfein: Tariffs could work. The former Goldman Sachs CEO took to Twitter to argue Trump's strategy could help him achieve his goal of bringing China to heel: 

Yes, China could dump Treasuries. Bloomberg's Liz McCormick and Saleha Mohsin write that the so-called nuclear option for Chinese retaliation is in fact on the table. "The idea that China would dump its $1.1 trillion of Treasuries to retaliate against U.S. tariffs is often dismissed as improbable... Yet the tensions rippling through global financial markets could still lead Beijing to reduce its stockpile in the $15.9 trillion Treasuries market -- not to retaliate, but to defend its currency if it goes into a free-fall."

Huawei is willing to sign no-spy agreements with governments, including Britain, the Chinese telco company’s chairman said on Tuesday, amid U.S. pressure on European countries to shun the firm over espionage concerns.
Reuters
POCKET CHANGE

Americans are running up credit card debt: “More than half of U.S. consumers in their twenties own a credit card. As that number has increased in recent years, so have delinquency rates,” Bloomberg News’s Shelly Hagan and Marie Patino report.

“The move into serious delinquency rates for credit cards is a fairly new occurrence. It’s been rising since only 2017 whereas payments on auto loans that were at least 90 days late have trended upwards since 2012.”

— Uber is not happy with Morgan Stanley: “Morgan Stanley nabbed the biggest U.S. initial public offering of the past five years. Now it gets to field the second-guessing after Uber Technologies Inc. tumbled 18% in its first two days of trading,” Bloomberg News’s Eric Newcomer, Sonali Basak and Sridhar Natarajan report.

“The debate over how well Morgan Stanley and other banks handled the marquee offering is complicated by a lot of bad luck, including the abrupt flareup last week in U.S.-China trade negotiations that drove markets down around the globe, as well as the recent dismal performance of Uber’s main rival, Lyft Inc. There’s also a broad, gnawing concern about Silicon Valley’s penchant for delaying public listings until startups achieve full size: Who’s left to buy?”

— Alice Rivlin, budget maestro, dies at 88: “Alice M. Rivlin, a master of budgetary policy who held senior positions in the executive and legislative branches of government — notably as founding director of the Congressional Budget Office — and whose stewardship of the D.C. Financial Control Board guided the once-insolvent city to solid financial footing, died May 14 at her home in Washington,” Elaine S. Povich writes in The Post's obit. 

“'She was the decathlete of public policy,' said Robert Reischauer, an economist who helped Dr. Rivlin set up the Congressional Budget Office in 1975 and later headed the agency...

“As head of the Congressional Budget Office from 1975 to 1983, Dr. Rivlin weathered intense political head winds and set the agency on course to be Congress’s highly respected arbiter of fiscal policy. In 1994, President Bill Clinton made her the first female director of the White House Office of Management and Budget. From 1996 to 1999, she was vice chair of the Federal Reserve.”

Leadership
A new study by PwC found that CEO turnover hit a record high -- and that improper conduct was behind more forced departures than any other reason for the first time.
Jena McGregor
Boeing Co handed over 24 percent fewer jet airplanes in the first four months of 2019 compared with the same period a year earlier as the grounding of its top-selling 737 MAX aircraft halted deliveries for a second month.
Reuters
For anyone who owns a unit in the tower, the past two years have been brutal. Most condo sales have led to a loss after adjusting for inflation, property records show. Several sold at more than a 20% loss.
Bloomberg
One of Monet's most iconic 19th-century paintings was sold for over $110 million at a Sotheby's auction.
ABC News
MONEY ON THE HILL

Wyden wants info on Trump’s taxes: Sen. Ron Wyden (D-Ore.) is pressing Treasury Secretary Steven Mnuchin about why the department turned down House Democrats’ request for Trump’s personal and some business-related tax returns. “In a letter released Tuesday, [Wyden] asked [Mnuchin] to turn over any communications his agency has had with the White House or Trump’s personal lawyers related to Ways and Means Chairman Richard Neal’s (D-Mass.) request last month for the returns,” Politico’s Brian Faler reports.

“The letters come one day before Mnuchin and Rettig are slated to appear before a Senate Appropriations subcommittee on the Treasury Department’s annual budget request.”

THE REGULATORS

Calabria claims power to end government control of Fannie and Freddie. Politico's Katy O'Donnell: "Federal Housing Finance Agency Director Mark Calabria on Tuesday laid out his most forceful argument yet for why he has the power to end government control of Fannie Mae and Freddie Mac without legislation, even as he urged Congress to take the lead. Calabria, making his first public remarks since being confirmed last month for the post, said Congress has given the FHFA the same authority to deal with the mortgage financing giants as the Federal Deposit Insurance Corp. has in dealing with bank conservatorships...

"Ideally, though, Calabria wants to see Fannie and Freddie have competitors — which would happen only with Congress’ blessing, given the companies’ congressional charters."

DAYBOOK

Today:

  • Treasury Secretary Steven Mnuchin appears before the Senate Appropriations Subcommittee on Financial Services and General Government.
  • The Commerce Department releases the latest round of retail sales data.
  • Alibaba, Cisco and Macy’s are among the key companies reporting earnings, per Kiplinger.
  • The Senate Banking, Housing and Urban Affairs Committee holds a hearing focused on oversight of financial regulators.

Upcoming:

  • Walmart reports its earnings on Thursday, per Kiplinger.
  • The Oversight and Reform Committee Subcommittee on Economic and Consumer Policy holds a hearing on the Consumer Financial Protection Bureau’s “role in empowering predatory lenders” on Thursday.   
  • The Brookings Institution and the Washington Center for Equitable Growth host a joint event on preparing for the next recession on Thursday.
  • The National Economists Club holds an event with Intel’s chief economist on Thursday.
  • The Ways and Means Committee’s subpoenas for Mnuchin and IRS Commissioner Charles Rettig to produce Trump’s tax returns and audit reports require a response by Friday.
  • The University of Michigan releases its latest survey of consumer sentiment on Friday.
THE FUNNIES

From The Post's Tom Toles:

BULL SESSION

Virginia restaurant owner takes a stand against Sarah Sanders:

The Post's Geoffrey A. Fowler takes a first look on Lenovo's new laptop: