THE TICKER

Joe Biden is getting tougher on China. Whether voters think it's tough enough could shape the direction of the 2020 race. 

The former vice president, leading early polling for the Democratic presidential nomination, appeared to pivot Wednesday from a dismissive attitude he’d staked out just last month to a more confrontational posture toward the rising superpower. 

But some China hawks argue Biden’s hardened stance still reads as accommodating compared to President Trump’s tariff-backed bid to force structural economic changes in China. That creates a contrast for blue-collar voters in Midwestern states that Biden has said he is uniquely positioned to recapture. 

Biden, in a speech in Ottumwa, Iowa, blasted Trump’s trade war as damaging American farmers and autoworkers while neglecting the investments at home necessary to keep pace with China’s advancements in tech and infrastructure. “We need to get tough with China. They are a serious challenge to us, and in some areas a real threat,” Biden said. (Read his remarks as prepared for delivery here.)

The conclusion marked an apparent departure from Biden’s assessment of the Chinese threat in another Iowa speech on May 1. Then, he suggested that the U.S. does not need to worry about China as a geopolitical competitor. “China is going to eat our lunch? Come on, man,” Biden said at the time. “I mean, you know, they’re not bad folks, folks. But guess what, they’re not competition for us.” 

Now, the former vice president says, to counter China’s rise, the U.S. needs to plow money into research, workforce development and infrastructure; work with allies to police Chinese trading abuses; and “tighten up our defenses so that American companies don't have to keep giving away technology to China, or having it stolen.”

Rob Atkinson, who served during the Obama administration on the National Innovation and Competitiveness Strategy Advisory Board, said Biden is “clearly backtracking.”

“I think he knows his initial comments about China were not well received and were not going to play well in the battleground states, the heartland, so he had to change the narrative,” Atkinson said. 

But he added that he was struck that Biden didn’t call out Chinese mercantilism. “He’s saying China is a threat, but the response should be domestic policies only, and he appears to criticize aggressive trade policies going after China. If he stays with that and is the nominee, that’s going to be the dividing line.”

Ely Ratner, Biden’s former deputy national security adviser, said Wednesday’s speech didn’t represent an about-face. “I think the vice president has been consistent on this issue, and at the root of those earlier comments was what we heard today, which is an undying faith in the American people and faith in what makes America great,” Ratner said. “Having worked for him and heard him speak thousands of times, what I hear him saying is, given a level playing field, we can out-compete China.”

And he said Trump’s approach may look tough but is effectively a dead end. “Trump is not putting forward a competitive strategy with China,” he said. “He’s confrontational without being competitive.”

During the 2016 campaign, Trump broke from decades of Republican free-trade orthodoxy, effectively outflanking Hillary Clinton to the left on the issue by embracing a protectionist program. Since then, the tariffs he has imposed on key trading partners, and the retaliation from the countries facing them, have pinched farmers and autoworkers in the very Midwestern states that helped deliver him the White House. 

And Quinnipiac polling last month revealed Trump’s trade policies are underwater with voters in those Rust Belt battlegrounds: The survey of voters in Iowa, Michigan, Ohio, Pennsylvania and Wisconsin found 41 percent of respondents approve of his approach to trade, while 56 percent disapprove. 

Pointing to those results, the New York Times’s Neil Irwin seemed to anticipate Biden’s tack when he wrote last week, “You can imagine a trade pitch from the 2020 Democratic nominee that goes something like this: ‘I’ll work with allies to keep pressure on China over its unfair practices — but not with open-ended tariffs on thousands of goods that are a tax on American consumers and invite retaliation against American farmers. I won’t use tariffs against countries that are our close partners. And I’ll use trade policy to try to boost well-being for American workers, rather than using it as a cudgel on unrelated issues.’” 

Nevertheless, Trump on Wednesday appeared to relish the opportunity to put his record against Biden’s on the issue. “Joe Biden thought that China was not a competitor of ours. Joe Biden is a dummy,” he told reporters from the White House before leaving for his own trip to Iowa. “China is a major competitor, and right now China wants to make a deal very badly. It’s me right now that’s holding up the deal. And we're either going to do a great deal with China or we’re not going to do a deal at all… And China ate our country alive during Obama and Biden.”

Derek Scissors, a China scholar at the American Enterprise Institute, pointed out that the top four vote-getters in the 2016 presidential primaries — Trump, Hillary Clinton, Sen. Bernie Sanders (I-Vt.), and Sen. Ted Cruz (R-Texas), who reversed himself to oppose fast-tracking trade deals — all ran, to varying degrees, as protectionists. “Notwithstanding that Biden realizes he needs to sound tough on China, he’s still outlining the Obama approach,” he said. "The big question here in evaluating Biden’s speech is: Do you think we were in a good place with respect to the Chinese in 2016?”

MARKET MOVERS

Global bond markets taunt the Fed. Bloomberg's Emily Barrett: "Bond markets around the globe are acting like central-bank rate cuts are only a rubber-stamp away from becoming a reality. Just look at the size and scope of the recent rally, which has dragged down yields across the curve. For example, the aggregate rate on longer-maturity sovereign debt ended last week at 1.18%, a level last seen two weeks before [Trump] was elected U.S. president... The moves are underpinned by conviction that another global easing cycle is on its way."

Investors' inflation expectations fade. WSJ's Daniel Kruger: "Investors’ expectations for U.S. inflation have declined to their lowest levels since the start of the year, a sign of growing concerns about a slowdown in the global economy. The 10-year break-even rate, a market-based measure of investors’ expectations for the average annual rate of inflation over the next 10 years, has fallen to about 1.7% from nearly 2% in late April.

"The decline has coincided with a sharp rise in the odds in the futures market that the Federal Reserve will cut interest rates multiple times this year... Analysts say the combination is a signal investors have little confidence that the Fed can sustain the inflation rate at its 2% target."

Investors will get a better look at the situation when U.S. consumer prices for May are released at 8:30 a.m. this morning. 

TRUMP TRACKER

— Kudlow says USMCA is more important than China: “[Trump’s] top economic advisor, Larry Kudlow, told CNBC on Tuesday that enacting a trade pact with Mexico and Canada to replace the North American Free Trade Agreement is 'more important' for the U.S. economy than a deal with China,” CNBC’s Kevin Breuninger reports.

“Kudlow also said that he remains hopeful that negotiations between Beijing and the U.S. can return to the position of apparent near alignment they enjoyed before talks appeared to stall out last month, amid disagreements between the two economic superpowers.”

Meanwhile, Mick Mulvaney, the acting White House chief of staff, gives the USMCA a "better than two-thirds chance” of passing by the end of the year. 

Mexico pledged immigration crackdown to avoid tariffs. The Post's Nick Miroff, Kevin Sieff and John Wagner: "Mexican negotiators persuaded [Trump] to back down from his tariff threat by agreeing to an unprecedented crackdown on Central American migrants and accepting more-expansive measures in Mexico if the initial efforts don’t deliver quick results, according to officials from both governments and documents reviewed by The Washington Post.

"The enforcement measures Mexico has promised include the deployment of a militarized national guard at the Guatemalan border, thousands of additional migrant arrests per week and the acceptance of busloads of asylum seekers turned away from the U.S. border daily, all geared toward cutting the migrant flow sharply in coming weeks. The measures, described by officials from both sides and included in Mexican negotiating documents reviewed by The Post, appear to be more substantial than what the Mexican government has attempted thus far during the precipitous rise in migration to the U.S. border."

— More from Kudlow on China: “[Kudlow] said Tuesday that the U.S. economy will continue to grow at a strong pace through the rest of 2019 even if the U.S. and China don’t reach a trade deal,” CNBC’s Fred Imbert reports. “‘The U.S. economy is very strong,’ Kudlow told CNBC’s 'Power Lunch.' ‘I think we’re in very good shape and I think we’ll maintain a 3% growth pace this year.’ ”

— Silicon Valley turns away from Chinese cash: “Since late last year, amid rising U.S.-China tensions, venture firms with China ties have been dialing back their U.S. investments, structuring deals in novel ways to avoid regulators or shutting their U.S. offices,” the Wall Street Journal’s Rolfe Winkler reports. “Some American venture firms are dumping their Chinese limited partners or walling them off with special structures. And some U.S. startups that have taken significant Chinese money are keeping the investments quiet or trying to push their Chinese investors out to avoid scrutiny.”

“Behind the shift in sentiment is an effort by the U.S. government to stem a talent and technology outflow it fears could threaten American economic and military superiority. Some Chinese investors hoped a trade deal would be struck in April, easing tensions and reopening the path to investments, but instead the trade fight has spiraled into higher tariffs.”

Foxconn says it can move out of China. WSJ's Yoko Kubota: "Foxconn Technology Group said it is ready to shift production for Apple Inc. out of China if necessary, as the electronics assembler tried to assuage investors’ concerns over the U.S.-China trade conflict. In the company’s first-ever investor meeting and conference call since going public in 1991, senior executives at Taiwan-based Foxconn sought to address investor uncertainty as it prepares for a leadership transition."

Japanese firm follows Washington’s trade blacklist: “Japan’s Tokyo Electron, the world’s No. 3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters,” Makiko Yamazaki reports.

“The decision shows how Washington’s effort to bar sales of technology to Chinese firms, including Huawei Technologies, is ensnaring non-American firms that are not obliged to follow U.S. law.”

POCKET CHANGE

— Defense contractors are teaming up as spending slows: “The biggest aerospace-and-defense merger ever caps two years of deal making in an industry that is reorganizing in anticipation of slower growth in Pentagon spending and new priorities such as space systems and hypersonic missiles,” the Wall Street Journal’s Doug Cameron and Ben Kesling report.

“United Technologies Inc and Raytheon Co. would be the third-biggest aerospace-and-defense company by sales after Boeing Co and Airbus SE. Those companies along with Lockheed Martin Corp., Northrop Grumman Corp., General Dynamics Corp. and the U.S. arm of BAE Systems PLC would dominate a defense industry in which some 50 companies vied for big contracts 30 years ago. Cuts to U.S. military spending also contributed to an estimated 17,000 U.S. firms leaving the industry between 2001 and 2015, according to a study by the Center for Strategic and International Studies, a think tank.”

— Ten states sue to stop Sprint-T-Mobile merger: “Ten states led by New York and California filed a lawsuit on Tuesday to stop T-Mobile US Inc’s $26 billion purchase of Sprint Corp, warning that consumer prices will jump due to reduced competition,” Reuters’s Diane Bartz and David Shepardson report.

“The complaint comes as the U.S. Justice Department is close to making a final decision on the merger, which would reduce the number of nationwide wireless carriers to three from four.”

— Wells Fargo CEO search drags on: “Wells Fargo & Co. is having trouble getting top bankers interested in its open chief executive officer job,” the Wall Street Journal’s Rachel Louise Ensign and David Benoit report.

“The bank’s board has approached a small group of top candidates, including JPMorgan Chase & Co. consumer banking chief Gordon Smith, PNC Financial Services Group Inc. CEO William Demchak and former U.S. Bancorp chief Richard Davis, according to people familiar with the matter. Messrs. Demchak and Davis took a pass on potentially replacing Timothy Sloan, who resigned in late March, the people said.”

MONEY ON THE HILL

— 2020 Dems pressure McDonald’s to address sexual harassment: “Eight U.S. senators, including four presidential contenders, called on McDonald’s to do more to combat workplace harassment, saying the number of misconduct reports is ‘unacceptable,' ” my colleague Hamza Shaban reports. “In a letter dated Tuesday, the lawmakers urged chief executive Steve Easterbrook to require all McDonald’s franchise stores to update their policies against harassment, abuse and employee retaliation. They also wanted to know how the fast-food giant would evaluate workplaces to address harassment complaints and investigate reports of unsafe working conditions.”

Economy
The federal deficit is up 39 percent from last year, according to the latest Congressional Budget Office tally.
Heather Long
THE REGULATORS

— DOJ antitrust chief telegraphs possible tech moves: “The Department of Justice’s assistant attorney general brought the case against big tech into focus in a new speech delivered at the Antitrust New Frontiers Conference in Tel Aviv on Tuesday,” CNBC’s Lauren Feiner reports. “Makan Delrahim laid out some possible arguments against the tech giants as his office is reportedly taking the lead on investigating Google parent company Alphabet and a potential probe into Apple. The Federal Trade Commission, meanwhile, reportedly has taken jurisdiction over Facebook and Amazon.”

Financial regulator sounds alarm on climate change. NYT's Coral Davenport: "A top financial regulator is opening a public effort to highlight the risk that climate change poses to the nation’s financial markets, setting up a clash with a president who has mocked global warming and whose administration has sought to suppress climate science.

"Rostin Behnam, who sits on the federal government’s five-member Commodities Futures Trading Commission, a powerful agency overseeing major financial markets including grain futures, oil trading and complex derivatives, said in an interview on Monday that the financial risks from climate change were comparable to those posed by the mortgage meltdown that triggered the 2008 financial crisis."

DAYBOOK

Today:

  • The Cato Institute holds a summit on financial regulation, which will include FDIC chair Jelena McWilliams.
  • The Brookings Institution holds an event on Hong Kong and trade.

Upcoming:

  • The Peterson Institute for International Economics holds an event featuring National Economic Council Director Larry Kudlow on Thursday.
  • The National Economists Club holds an event with the National Association for Manufacturers' Chad Moutray on Thursday.
THE FUNNIES

From The Post's Tom Toles:

BULL SESSION

Stephen Colbert on "Trump's Super Secret Agreement With Mexico":