“They are going to do what they do. It’s not up to us,” JPMorgan Chase CEO Jamie Dimon, who chairs the Business Roundtable, said of the White House on Wednesday.
Business interests do have recourse: They can appeal to lawmakers to pass legislation reasserting Congress’s authority over tariffs. And many in the business lobby have been doing just that.
But in another sign of just how dramatically elected Republicans have diverged from their traditional allegiance to corporate America, the congressional GOP is showing little inclination to challenge Trump on the issue, even as the trade war threatens the bottom lines of leading multinationals. ("Companies that derive more than half their sales outside the U.S. are expected to see a 9.3% slump in second-quarter earnings as the reporting season looms about a month away, according to FactSet estimates that see the S&P 500 broadly reporting a 2.3% decline," CNBC's Jeff Cox reports.)
The business lobby’s push took on a new intensity this month when Trump threatened escalating tariffs on Mexico if the country didn’t meet his demands for an immigration crackdown. The president’s move appeared to mark a new phase in his use of the import taxes, since he was invoking them to try to secure a concession unrelated to trade.
“Members of Congress woke up to the reality that the president will disrupt global supply chains on a whim,” says David French, the top lobbyist for the National Retail Federation. “Many senators were very concerned.”
But he said the sense of urgency to respond has diminished since Trump struck a deal with the Mexican government and waved off his tariff threat. Sen. Ron Johnson (R-Wis.), for example, has criticized Trump’s trade aggressions but praised his performance in the confrontation with Mexico. “In general, Republicans understand that tariffs are attacks on American consumers and we don't want to see them in place long term, nor do I believe President Trump does either," Johnson said in an interview on “Fox News Sunday.” “He’s using tariffs as leverage in trade negotiations, and I think he used them as leverage in the situation brilliantly, quite honestly.”
Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said Tuesday he is moving forward with a bill that would limit the president’s ability to level tariffs under Section 232 of a 1962 law called the Trade Expansion Act — the authority that Trump has invoked to impose tariffs on steel and aluminum imports and would use to tax imports of autos and auto parts.
“It adds up to something pretty simple: Congress has delegated too much authority to the president of the United States,” Grassley told reporters Tuesday.
But that measure would leave Trump with a free hand to pursue dramatically ramped-up tariffs on Chinese imports, covering $300 billion in goods from the country yet to be taxed. For those duties, the president is relying on his authority under a different law — Section 301 of the U.S. Trade Act of 1974. So far this year, more than 70 percent of the federal government’s tariff revenue has come from duties imposed under Section 301, according to figures compiled by the pro-trade Tariffs Hurt the Heartland campaign.
Sen. Mike Lee (R-Utah) is sponsoring a bill that would require congressional approval for tariffs imposed under either law. “The business community has been asking about it, and senators have been asking about it, too,” Lee spokesman Conn Carroll says, though no hearings have been scheduled for it so far.
French said if Trump proceeds with auto tariffs, interest among GOP senators in reclaiming a check on him could revive. “The reaction will be stronger than Mexico,” he said. “We might be getting close to a veto-proof majority in the Senate.” As for the business community, he said, “Our efforts will grow as the risk of tariff-created uncertainty continues to shake the economy. The BRT survey was telling.”
|You are reading The Finance 202, our must-read tipsheet on where Wall Street meets Washington.|
|Not a regular subscriber?|
— Stocks down again. CNBC's Fred Imbert: "Stocks fell for a second day on Wednesday, pressured by declines in tech and bank shares, pausing a sharp rally to start off June. The Dow Jones Industrial Average dipped 43.68 points, or 0.2%, to 26,004.83 while the S&P 500 closed 0.2% lower at 2,879.84. The Nasdaq Composite lagged, sliding 0.4% to 7,792.72... Market focus remained largely attuned to global trade developments on Wednesday, after [Trump] said Tuesday that he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agreed on as many as five 'major points.' Trump did not specify these trade issues."
— Sec. Ross criticizes the Fed, too. Bloomberg's Brendan Murray: "U.S. Commerce Secretary Wilbur Ross said the Federal Reserve’s December interest-rate increase was 'at best premature' and urged the central bank to reconsider whether that move was necessary because it was based on faulty assumptions about inflation. 'Where most economists have been wrong, particularly the Federal Reserve staff economists have been wrong, is they have been believers in the idea that as unemployment goes down, inherently inflation will become a problem,' he said in an interview Wednesday on Bloomberg Television."
— Trump: No deadline for China talks. Bloomberg's Josh Wingrove and Justin Sink: "Trump said he had no deadline for China to return to trade talks, other than the one in his head. 'I have no deadline,' Trump told reporters at a news conference Wednesday at the White House. 'My deadline is what’s up here,' he added, pointing to his head."
Trump added he's optimistic about a deal: “I think we’ll end up making a deal with China," he said. "We have a very good relationship, although it’s a little bit testy right now, as you would expect.”
— Navarro's influence rises. The Post's Josh Dawsey and Damian Paletta: "The showdown with Mexico marks a high point in [White House trade adviser Peter] Navarro’s tumultuous tenure in the White House as Trump’s increasingly aggressive actions on trade, including toward China, mirror policies that the man he calls 'my Peter' has pushed since the beginning of the administration. Navarro, along with White House adviser and immigration hawk Stephen Miller, helped devise the proposed Mexican tariffs and beat back arguments from other aides that Trump did not have the legal authority to implement the trade penalties, and that the fight could derail the new trade deal with Mexico and Canada, according to White House aides."
— China is lowering tariffs for other countries. Chad Bown, Euijin Jung and Eva Zhang of the Peterson Institute for International Economics find that the Chinese aren't just making life tougher for American exporters; they're also easing trade barriers for other countries. "Beijing has repeatedly cut its duties on imports from America’s commercial rivals, including Canada, Japan, and Germany," they write. "China has increased tariffs on US exports to an average 20.7 percent. But also striking for American farmers, companies, and workers is that China has reduced tariffs on competing products imported from everyone else to an average of only 6.7 percent."
— Nintendo is moving some production out of China: “Nintendo Co. is shifting some production of its Switch video game console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, said people who work on Nintendo’s supply chain,” the Wall Street Journal’s Takashi Mochizuki reports.
“It is another example of manufacturers adapting to the tariff threat. Taiwan’s Foxconn Technology Group said Tuesday that it was ready to move assembly of Apple Inc.’s iPhones out of China if necessary, and Japan’s Sharp Corp., which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam. Kyoto-based Nintendo has traditionally relied on the Chinese factories of contract assembly companies to make its video game hardware.”
— Huawei presses Verizon over patents: “Huawei Technologies Co. has told Verizon Communications Inc. that the carrier should pay licensing fees for more than 200 of its patents, according to people familiar with the matter, further escalating tensions between the Chinese company and the U.S.,” the Wall Street Journal’s Sarah Krouse reports.
“A Huawei intellectual property licensing executive wrote to the U.S. wireless carrier in February, telling Verizon it should pay to ‘solve the patent licensing issue,’ according to the people. Verizon isn’t a Huawei customer” and declined to comment to the Journal.
— Google axes lobbyists: “Google has fired about a half-dozen of its largest lobbying firms as part of a major overhaul of its global government affairs and policy operations amid the prospect of greater government scrutiny of its businesses,” the Wall Street Journal’s Brody Mullins and Ted Mann report. “In the past few months, the company has shaken up its roster of lobbying firms, restructured its Washington policy team and lost two senior officials who helped build its influence operation into one of the largest in the nation’s capital, according to people familiar with Google’s Washington strategy.”
“People familiar with the matter say the revamp is part of a continuing modernization of the influence operation Google built over the last 15 years, but it comes as Google faces a number of government investigations into its affairs. The Wall Street Journal reported recently that the Justice Department is gearing up to conduct an antitrust investigation into the tech giant. Congress and state attorneys general are also reviewing Google’s practices, while on the campaign trail, some Democratic presidential candidates are calling for the company to be broken up.”
— Facebook uncovers emails that could damage Zuckerberg: “Facebook Inc. uncovered emails that appear to connect Chief Executive Mark Zuckerberg to potentially problematic privacy practices at the company, according to people familiar with the matter,” the WSJ's John D. McKinnon, Emily Glazer, Deepa Seetharaman and Jeff Horwitz report.
“Within the company, the unearthing of the emails in the process of responding to a continuing federal privacy investigation has raised concerns that they would be harmful to Facebook — at least from a public-relations standpoint — if they were to become public, one of the people said.”
The company's stock took a 1.72 percent hit on Wednesday.
— Foxconn says it will make more than just TVs in Wisconsin: “Foxconn said this week that it planned to make servers, networking products and automotive central controls at its factory in Wisconsin, according to a report in Nikkei,” CNBC’s Katie Schoolov reports. “The plant, which is not operational yet, was originally focused on next-generation LCD displays for televisions and other similar products.”
“The announcement, which was made at Foxconn’s first-ever investor day, underscores the controversy at the $10 billion Wisconsin plant, which is heavily subsidized by government programs in exchange for creating 13,000 jobs.”
— Budget gap balloons to $739 billion: “The U.S. budget deficit widened to $738.6 billion in the first eight months of the fiscal year, a $206 billion increase from a year earlier, despite a revenue boost from [Trump’s] tariffs on imported merchandise,” Bloomberg News’s Sarah McGregor reports. “The shortfall was 38.8% more than the same period a year ago, the Treasury Department said in its monthly budget review released on Wednesday. So far in the fiscal year that began Oct. 1, a revenue increase of 2.3% hasn’t kept pace with a 9.3% rise in spending.”
“As Trump ratcheted up the trade war with China with higher levies on imports from the Asian nation, the U.S. recorded $4.9 billion in customs duties in May, bringing the total to $44.9 billion in the first eight months of the fiscal year — almost double the same period a year earlier.”
— Sanders pushes back on Jamie Dimon’s knock on socialism: “[Sen.] Bernie Sanders lashed out at Jamie Dimon on Twitter after the chief executive officer of JPMorgan Chase & Co. criticized socialism during an appearance in Washington,” Bloomberg News’s David Scheer and Shawn Donnan report.
“Dimon, speaking at a Business Roundtable event on Wednesday, said giving the government control of companies allows them to be used for political purposes, leading to deterioration. He said it would be a ‘huge mistake’ for the U.S. to go down that path.”
Sanders responded on Twitter:
— Mulvaney: Infrastructure's toast. CNBC's Jacob Pramuk: "White House acting chief of staff Mick Mulvaney thinks efforts to strike an infrastructure deal with congressional Democrats are probably 'done' after talks blew up last month. Still, he said Tuesday that [Trump] and House Speaker Nancy Pelosi will have to cooperate on pressing issues in the coming months — from passing a budget to approving trade agreements. 'But we will have to work with them on the spending matter. So there’s a bunch of stuff we’ll do. It’s just the infrastructure,' Mulvaney told CNBC’s Eamon Javers at the Peter G. Peterson Foundation Fiscal Summit."
— Warren, Jones press regulators on lending discrimination. American Banker's Neil Haggerty: "Sens. Elizabeth Warren, D-Mass., and Doug Jones, D-Ala., are calling on regulators to ensure that algorithms used by financial technology platforms don’t result in discriminatory lending. In a letter to the heads of the Federal Reserve Board, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. and the Consumer Financial Protection Bureau, the senators highlighted research from the University of California, Berkeley that found algorithmic lending can make it easier to apply for mortgages but can also lead to higher interest rates for African-American and Hispanic borrowers."
Inside the race to beat 'deepfakes' in 2020: