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The Finance 202: Trump administration gets earful on tariffs from New Balance to toilet maker


American companies, from video game makers to tractor manufacturers, are lining up this week to give the Trump administration an earful about the damage its proposed tariffs on $300 billion of Chinese imports will do to their businesses. Whether President Trump is listening remains to be seen. 

But the diversity of businesses converging on Washington to weigh in should send a signal to the White House about the breadth of the pain consumers will feel if Trump presses forward with the next round of import taxes. 

Just on Monday — as the U.S. Trade Representative kicked off seven days of hearings on the tariffs that will feature testimony from hundreds of people — the administration heard from interests as disparate as Best Buy, the sport fishing industry, toilet maker American Standard, and a group representing museum directors. 

Retailers in particular are raising hackles about import duties they say will either bite into their bottom lines or force price hikes on consumers. 

Jason Bonfig, Best Buy’s chief merchandising officer, told the administration in Monday testimony that the proposed tariffs would raise consumer prices on smartphones, laptops, tablets, smartwatches, gaming consoles and televisions. The levies “will only serve to maximize the pain on U.S. consumers, workers, businesses and the economy at large, with minimal impact on China,” he said, according to his testimony.

Other big-name retailers are making similar complaints, since they were largely spared from earlier rounds of tariffs that targeted industrial goods and components in an attempt to shield consumers. “Even for healthy chains, like Walmart and Costco, the new duties threaten the business formula that helped speed their rapid rise over the last few decades: Import cheap products from Asia and sell them at rock-bottom prices,” the New York Times’s Nelson D. Schwartz and Sapna Maheshwari write. “The National Retail Federation estimates that China supplies 42 percent of all apparel, 73 percent of household appliances and 88 percent of toys sold in the United States.”

From CNBC producer Stephanie Dhue: 

In a new twist, footwear maker New Balance is adding its voice to the chorus. The company caught widespread heat on the left for aligning itself with Trump’s trade offensive back in 2016 — a position the sneaker company said it took because unlike its top competitors, it makes its shoes domestically.

But in comments posted online last week, Monica Gorman, the company’s vice president of global compliance, said the new tariffs would hit shoe parts it sources from China. The import taxes, she wrote, would “not just translate into higher costs, but jeopardize our ability to maintain production levels and continue investing in our domestic factories.” 

The sneaker company’s about-face (first noted by CNN Business) lines up with a broader shift by the business community, which is registering new urgency about Trump’s tariff plans now that a deal with China that seemed imminent last month looks remote.

My colleague David Lynch notes that USTR has already received more than 1,600 written comments on the proposed tariff escalation, and the “overwhelming majority” warn of damage to consumers, jobs, and production. “The avalanche of complaints suggests that industry patience with the president’s tariff-heavy trade policy is evaporating,” Lynch writes. "His sudden threat last month to impose tariffs on Mexican imports in a dispute over border security coupled with fading prospects for a comprehensive trade deal with China explain the increasingly vocal opposition, according to trade analysts and executives.”

American Standard presented itself to USTR as an iconic, 150-year-old brand with operations in Illinois, Kentucky, Michigan, New Jersey, New York, Ohio and Texas. Troy Benavidez, the company’s vice president of corporate affairs, warned that the tariffs would hit its global supply chain, creating a potential public health risk. “At a time when our nation has continued to underinvest in its water and plumbing infrastructure, and with over 1.7 million U.S. citizens lacking access to acceptable plumbing, it is crucial that the cost of the basic toilet and faucet that every American deserves remains accessible,” he said, according to his testimony. 

The fishing industry is likewise arguing tariffs on its goods will do harm to the broader public interest. Glenn Hughes, president of the American Sportfishing Association, noted in Monday testimony that the industry already pays an excise tax that supports state fish and wildlife agencies. “Fewer fishing equipment purchases means less revenue into the trust fund, which ultimately means less funding for programs important to the Trump Administration's priorities to improve public access to the outdoors,” he said. 

The parade of interests on Monday ranged from the pastoral — Hughes called fishing a sport as “American as mom and apple pie” — to the precious. Stephen Knerly, a lawyer representing the Association of Art Museum Directors, said the tariffs would injure the American art market, “the largest in the world. Auction houses, dealers and galleries are unlikely to want to import Chinese origin works to sell in the United States because of the tariff and the increased cost. That business may well shift to the other art markets of the world – including the number two auction art market – China.”

Both weekend fisherman and art collectors point to important, if distinct, pillars of Trump’s base. As Lynch writes, “If the president does follow through with his threat, he will be risking not only a clash with business groups but also consumer unease as he begins his reelection campaign.”


Fed unlikely to cut in the immediate term. AP's Martin Crutsinger: "Jerome Powell has tantalized the financial world with the prospect that the Federal Reserve he leads may soon cut interest rates for the first time in over a decade. Probably not quite yet, though. When the Fed issues a policy statement Wednesday and Powell holds a news conference, the message will likely echo the theme the chairman struck in a speech early this month: That the Fed will act if it thinks the Trump administration's trade conflicts are threatening the U.S. economy...

"Yet economists say when — or even whether — the Fed eases credit this year will depend on a host of factors that are hard to predict. Will Trump's trade wars be resolved before they inflict real damage on the economy? Will the job market remain resilient? Will inflation finally edge close to the Fed's target level? ... Many economists... think the Fed will wait until September at the earliest to announce its first drop in its benchmark short-term interest rate since 2008 and might not cut again in 2019."

Manufacturing skids, survey shows. CNN Business's Lydia DePillis: "A key indicator of the health of the manufacturing sector tanked in June, suggesting that business sentiment around new tariffs is starting to bite. The Empire State Manufacturing Survey, which measures how factories in New York State view the state of their business, fell much more than expected in June: a record 26 points, to the lowest level since October 2016. The figure, -8.6, is the first negative number in more than two years.

"A reading below zero indicates that the sector is actually contracting. It had been growing — albeit at a slower pace — for more than a year. The dip was driven by a decline in employment, the length of the workweek and new orders. And it's not the only indicator showing a turn for the worse: Others, including the Federal Reserve Bank of Philadelphia's Manufacturing Business Outlook Survey, have also been sinking steadily."

And homebuilder sentiment drops. Bloomberg's Ryan Haar: "Sentiment among U.S. homebuilders unexpectedly posted the first decline this year, suggesting lower mortgage rates are failing to give the housing market a sustained boost amid property prices that remain out of reach for many buyers. The National Association of Home Builders/Wells Fargo Housing Market Index fell two points to 64 in June, according to a report Monday that was below all estimates in a Bloomberg survey predicting a gain. All three components declined, with sales expectations hitting a four-month low."

Investors at their most bearish since 2008. Bloomberg's Ksenia Galouchko: "Investors haven’t been this pessimistic since the global financial crisis of 2008. That’s according to a Bank of America Merrill Lynch survey of money managers with $528 billion between them. Equity allocations saw the second-biggest drop on record, while cash holdings jumped by the most since the 2011 debt-ceiling crisis, the June poll showed. Concerns about the trade war, a recession and “monetary policy impotence” all contributed to the bearish sentiment, Bank of America said."



Trump faces major test. The Post's Damian Paletta and Heather Long: "Trump faces a number of major decisions on trade and the budget in the coming months just as the U.S. economy faces the biggest head winds of his tenure, forcing him to decide whether to recalibrate as recession fears mount for next year. Trump has threatened to escalate trade conflicts with China, Mexico, the European Union and Japan, spooking business leaders and leading some to pull back investment. Similarly, budget and debt-ceiling talks with congressional leaders from both parties have sputtered, raising the possibility of another government shutdown in October.

"The uncertainty — and a cooling global economy — led JPMorgan Chase on Monday to predict that there was a 45 percent chance the U.S. economy would enter a recession in the next year, up from 20 percent at the beginning of 2018."

Lighthizer faces Hill grilling. Bloomberg's Jenny Leonard: "Trump’s top trade envoy will be in the congressional hot seat for two days this week, giving lawmakers the chance to grill him about the prospects for a deal with China, as well as various punitive measures threatened by his boss. U.S. Trade Representative Robert Lighthizer is up before the Senate Finance Committee on Tuesday, for the first time since trade talks with Beijing collapsed in early May... Lighthizer will testify before the House Ways and Means Committee on Wednesday."

China drops WTO suit. Reuters's Tom Miles: "China has halted a dispute at the World Trade Organization over its claim to be a market economy, a panel of three WTO adjudicators said on Monday, meaning Beijing must accept continued EU and U.S. 'anti-dumping' levies on cheap Chinese goods. One trade official close to the case said so much of the ruling had gone against Beijing that it had opted to pull the plug before the result became official."

Huawei Chief Predicts Sales Will Flatline After Trump Crackdown (NYT)

Trump Tariffs Are Set to Affect Fireworks, And No One’s Happy About It (Bloomberg)


Sotheby's to go private, reshaping art market. Bloomberg's Katya Kazakina, Angelina Rascouet, and Devon Pendleton: "Like masterpieces by Van Gogh, Picasso and Rothko, the storied auction house Sotheby’s is slipping into wealthy private hands, in a $2.7 billion deal that will reshape the global art market. Billionaire Patrick Drahi agreed to buy the 275-year-old firm, ending Sotheby’s three decades as a public company. Drahi, a disciple of media mogul John Malone, is seizing on the upheavals that have shaken the centuries-old auction model.

"The deal announced Monday pulls the inner workings of the art market even deeper into the shadows. As a private company, Sotheby’s will no longer be required to disclose quarterly results, which had put it at a competitive disadvantage compared with arch-rival Christie’s, owned by another French billionaire, Francois Pinault. Those periodic reports also provided a 'public bellwether' for the art market with insight into margins, executive compensation, strategy, capital allocation and the stock’s reaction to major economic and political forces, said Evan Beard, an art-service executive at Bank of America Corp."

Banks to consider climate change in new shipping loans. WSJ's Costas Paris: "Eleven banks, including Citibank, France’s Société Générale SA and Norway’s DNB AS A, say they will take climate considerations into account when extending new shipping loans. The goal is for the ship financing sector to support an industry target to cut greenhouse gas emissions by half in 2050. The banks, which have a combined shipping portfolio of around $100 billion, or about a fourth of the global ship finance market, have signed onto an industrial framework known as The Poseidon Principles, which seeks to direct new money for shipping toward environmentally friendly oceangoing vessels."

MBA students pile up debt. Bloomberg's Shahien Nasiripour: "New data from a Bloomberg Businessweek survey of more than 10,000 MBA graduates from the class of 2018 at 126 schools around the world suggest that nearly half the students at some of the best business schools are borrowing at least $100,000 to finance their master’s degree in business administration... At least 40% of survey respondents who got MBAs at Duke University’s Fuqua School of Business, Tuck School of Business at Dartmouth College, University of Michigan’s Ross School of Business, SC Johnson Graduate School of Management at Cornell University, and University of Chicago Booth School of Business reported incurring six-figure debt loads for their programs, data show.

Facebook’s Answer to Bitcoin Poses a Double Threat (Lionel Laurent | Bloomberg)


Biden says he's raised nearly $20 million. NYT's Shane Goldmacher: "Former Vice President Joseph R. Biden Jr. said at a fund-raiser in New York on Monday night that he had already amassed 360,000 donors with an average contribution of $55 — a disclosure that appeared to reveal he has raised $19.8 million for his presidential bid. That is more than any other candidate raised in the first quarter of the year, when Senator Bernie Sanders paced the Democratic field and raised $18.2 million from more than 500,000 donors, and there are still two weeks remaining in the second quarter for Mr. Biden.

"The revelation came at an unusual moment. Campaigns typically guard their financial hauls closely, only releasing figures at strategic moments to maximize their impact. Mr. Biden made the declaration at the Upper East Side home of the hedge fund manager Jim Chanos."

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