The Finance 202: Trump's farmer bailout is backfiring among Republican lawmakers

Republican criticism reached a new pitch in the wake of the White House announcement that it would tap a Depression-era program to extend aid to farmers caught in the crosshairs of its own policy. But there was no outward indication Tuesday of a new willingness on Capitol Hill to rally behind a legislative check on the administration. Until there is, even the sharpest talk of insurrection from Trump’s congressional foot soldiers remains just that.

Here was Sen. John Thune of South Dakota, the third-ranking Republican in the chamber, per Politico: “Taxpayers are going to be asked to initial checks to farmers in lieu of having a trade policy that actually opens and expands more markets. There isn’t anything about this that anybody should like.” 

And Sen. Ron Johnson (R-Wis.): “This is becoming more and more like a Soviet type of economy here: Commissars deciding who’s going to be granted waivers, commissars in the administration figuring out how they’re going to sprinkle around benefits… I’m very exasperated. This is serious.”

Sen. Ben Sasse (R-Neb.) said the administration is offering farmers a return to 1929: 

Sen. Rand Paul (R-Ky.) called for the removal of the tariffs: 

Sen. Pat Toomey (R-Pa.) called the bailout a “band-aid on a self-inflicted wound”: 

Sen. Lisa Murkowski (R-Alaska) framed the move as proof that tariffs are failing and urged Trump to shift course: 

From Sen. Jeff Flake (R-Ariz.):

Sen. Orrin Hatch (R-Utah), who chairs the Senate Finance Committee, added his voice to the chorus: 

Sen. Bob Corker (R-Tenn.), who has mounted a so-far unsuccessful bid to force congressional approval of Trump’s tariffs, expressed exasperation Tuesday — at both the president’s new policy and his colleagues for swallowing it. “You have a terrible policy that sends farmers to the poorhouse, and then you put them on welfare, and we borrow the money from other countries,” he said. “It’s hard to believe there isn’t an outright revolt right now in Congress over what is happening.”

But the closest the retiring Republican has gotten to forcing a vote on the measure  — with backing from fellow short-timer Sen. Jeff Flake (R-Ariz.), Toomey, and others — was a toothless resolutionasserting a “role for Congress” in setting trade policy. And when it has counted, Senate Republicans have folded, including in recent days as they backed off language to restore a stiff penalty on Chinese telecom giant ZTE over the president’s objection. 

And top Senate leaders signaled they are no closer to confronting Trump on the matter: Senate Majority Leader Mitch McConnell (R-Ky.), said he needs to examine the bailout before commenting; Senate Majority Whip John Cornyn (R-Tex.) suggested the president deserves more time to secure better trade deals. 

The White House said farmers will start to see payments in September, per The Washington Post's Damian Paletta and Caitlin Dewey: “It would include direct payments to farmers, efforts to promote U.S. goods abroad and an expansion of a program that purchases surplus farm output and distributes it to food banks and other anti-hunger programs. Administration officials said the program aims to compensate farmers for how much they would lose as a result of the trade war, in part because of lost sales and lower prices. Trump ordered Agriculture Secretary Sonny Perdue several months ago to begin work on the plan.”

Trump urged Republicans to back him up in a pair of tweets this morning: 

He also called out China: 

And he made a direct appeal for more time, asking supporters gathered yesterday for a rally in Kansas City, Mo., to “be a little patient,” per The Washington Post's Phil Rucker. The agriculture industry has “some of the  greatest lobbying teams ever put together,” the president said ... But he said farmers “will be the biggest beneficiary” of his trade offensive. In the meantime, he admonished the crowd not to trust news coverage: “Just remember, what you’re seeing and what you’re reading is not what’s happening.”

That better describes those GOP lawmakers generating more light than heat in their opposition to Trump's trade push. They will have an opportunity to press their case directly to senior administration officials this week, publicly and privately. U.S. Trade Representative Robert E. Lighthizer is set to testify Thursday morning before a Senate Appropriations subcommittee. At the same time, across the Capitol, top White House economic adviser Larry Kudlow and trade czar Peter Navarro will meet behind closed doors with the House Republican Conference.

TRADE FLY-AROUND:

— Europeans arrive with offers. The New York Times's Ana Swanson: "European negotiators on Wednesday will present several ideas to the Trump administration for easing a trade clash with the United States, including forging a new deal among the world’s biggest automobile exporters. But these offers may fall short of appeasing [Trump], who has expressed skepticism at past trade pacts and branded the European Union as a 'foe.' As the president of the European Commission, Jean-Claude Juncker, meets with Mr. Trump in Washington on Wednesday, the two sides are pushing agendas that are increasingly at odds, threatening to turn allies into adversaries... 

"During his visit, Mr. Juncker is prepared to discuss two options for the trading relationship... both of which the Europeans have floated with the United States before. The first is an agreement that would have all major global auto exporters slash their tariffs on foreign cars. The second calls for a limited trade deal between Europe and the United States centered on industrial goods."

And a $20 billion threat. AP: "The European Union says it’s ready to retaliate against the United States with tariffs on products worth $20 billion if [Trump] puts duties on cars and auto parts from Europe. EU Trade Commissioner Cecilia Malmstrom said Thursday in an interview with Swedish newspaper Dagens Nyheter that she hoped a solution is found and 'things wouldn’t go that far'. If not, she said the EU would slap tariffs on a range of U.S. products including agricultural and high-tech products and machinery. She said specific U.S. states would not be targeted."

— Harley suffers. The Wall Street Journal's Austen Hufford and Bob Tita: “Harley-Davidson Inc. ... said its profit would take a hit this year as tariffs compound a long sales slump for the motorcycle maker. Harley said its costs would increase by up to $55 million this year as the Milwaukee-based manufacturer pays more for steel and aluminum used to make its motorcycles in the U.S. and pays higher duties on Hogs it exports from the U.S. to Europe. 'We are working with the administration and all the governments we can to do the best we can to get these tariffs removed,' Harley Chief Financial Officer John Olin told investors on Tuesday.”

And so does Whirlpool. CNBC's Michael Sheetz: “Shares of Whirlpool, the U.S. based washing machine giant who was once in favor of stricter trade controls for its own industry, posted their worst day in over 30 years after executives blamed rising steel and aluminum costs for diminished quarterly earnings. 'Global steel cost has risen substantially and, particularly in the US, they have reached unexplainable levels,' Whirlpool CEO Marc Bitzer told shareholders during a conference call Tuesday. Whirlpool stock fell 14.5 percent Tuesday, its worst day since October 19, 1987. The U.S. company was a major advocate for legislation to protect against what Bitzer last year called a 'long story of dumping' by foreign competitors LG and Samsung in the washing machine business. Bitzer said during the company's fourth-quarter earnings call that the White House had 'put an end' to this alleged dumping, saying it was 'encouraging that finally trade laws are being enforced.'”

— Businesses voice concerns. The Hill's Vicki Needham: “Business groups are expressing strong opposition to [Trump's] plans to hit China with more tariffs and are calling for a comprehensive strategy to address Beijing's trade practices. The National Retail Federation and 65 organizations representing U.S. retailers, manufacturers, farmers and technology companies joined together to tell U.S. Trade Representative Robert Lighthizer that tariffs won't work to open China's market to more U.S. imports. 'Imposing tariffs on Chinese imports will not have the effect that the administration desires,' the coalition wrote in submitted comments to Lighthizer.”

— Deficits will expand. WSJ's Josh Zumbrun: “The U.S. remained by far the largest driver of global current-account imbalances in 2017, running the world’s largest deficit and adopting policies — mainly a shift toward much larger fiscal deficits — that are likely to increase its imbalances in coming years. The U.S. ran a $466 billion current-account deficit, meaning the nation imported far more than it exported. The U.S. has become an increasingly large driver of global deficits, accounting for 43% of all global deficits last year, up from 39% in 2016, according to the International Monetary Fund’s annual assessment of the state of global imbalances. Washington’s shift toward major deficit spending will move the U.S. trade deficit 'further from the level justified by medium term fundamentals and desirable policies,' the IMF said.”

— Mexico wants a quick conclusion. Reuters's Dave Graham: “The revamp of the North American Free Trade Agreement (NAFTA) between the United States, Mexico and Canada ought to be concluded in the next few months, a top adviser in the incoming Mexican administration said on Tuesday. Jesus Seade, the designated NAFTA negotiator of president-elect Andres Manuel Lopez Obrador, said while some contentious issues still had to be resolved, he believed it was almost 'inevitable' a deal would be reached. 'What I see ... to be a very feasible expectation is that we’ll be concluding the negotiation in the next two months if possible, or in the next few months a bit further down the road,' Seade told Mexican radio.”

MELTDOWN WATCH:

• “Transcript of Cohen tape suggests Trump knew about model’s deal to sell story of alleged affair.” The Post’s Carol D. Leonnig and Robert Costa. 
• “Judge greets potential Manafort jurors: ‘Put what you’ve read and learned aside.’” The Post's Rachel Weiner.
• “Mueller plans to call IRS, FBI, FinCen witnesses at Manafort trial.” Politico's Darren Samuelsohn.

— Ivanka closes shop. The Post's Abha Bhattarai and Drew Harwell: “Ivanka Trump is shutting down her namesake clothing brand because of her work in Washington, she said Tuesday, a rare acknowledgement by a Trump family member about the challenges of holding an influential White House position while owning a global business. In doing so, the president’s daughter and White House senior adviser has gone further than other Trump family members, who have remained active in both business and politics. She handed over day-to-day operations after her father won the election but continued to own the company — which raised ethical concerns that have dogged enterprises across the Trump empire. But her brand, founded as a carefree fashion and lifestyle brand for young, professional women, has suffered from how polarizing it became during the campaign and her father’s move into the Oval Office, enduring boycotts, lost sales and controversies that saw its goods yanked from retailers' shelves.”

Flashback: Ivanka Inc. relies on foreign workers. From The Post's Matea Gold and others, last June: “While President Trump has chastised companies for outsourcing jobs overseas, an examination by The Washington Post has revealed the extent to which Ivanka Trump’s company relies exclusively on foreign factories in countries such as Bangladesh, Indonesia and China, where low-wage laborers have limited ability to advocate for themselves. And while Ivanka Trump published a book this spring declaring that improving the lives of working women is 'my life’s mission,' The Post found that her company lags behind many in the apparel industry when it comes to monitoring the treatment of the largely female workforce employed in factories around the world.”

— Trump narrows chief of staff search. Politico's Nancy Cook: "Trump loves to crowdsource staffing advice from outside advisers and current or former White House aides, and lately he’s been asking: 'What do we think about Mick?' 'Mick' is Mick Mulvaney, the former Republican congressman from South Carolina who now oversees both Trump’s Office of Management and Budget and the Bureau of Consumer Financial Protection. A favorite of Trump’s since last winter’s federal shutdown and the earlier unsuccessful effort to repeal Obamacare, Mulvaney has emerged as one of the two leading candidates to succeed John Kelly as Trump’s chief of staff, according to interviews with a dozen current and former administration officials and Republicans close to the administration."

— Earnings vs. tariffs. Bloomberg's Dani Burger and Sid Verma: "Battle-lines are being drawn across markets as bears fret the brewing trade war and higher borrowing costs -- while bulls relish the banner corporate earnings season. As a result, the winners and losers across asset classes and geographies are becoming ever-more pronounced... One clear consequence is the outperformance of businesses tied to the U.S. economy. S&P 500 Index stocks with the highest domestic-revenue exposure are firmly beating those with the most international sales, according to baskets compiled by Goldman Sachs Group Inc. Since the start of June, domestically focused companies have gained 5.8 percent compared to their internationally oriented brethren, which are little changed."

— Europeans go their own way. WSJ's Tom Fairless: “The European Central Bank is expected to signal its intention to keep its key interest rate below zero for at least another year on Thursday, underscoring a widening gap with the Federal Reserve which is moving steadily toward higher interest rates. The divergence between the world’s top two central banks, reflecting a division in economic fortunes, received renewed attention last week after [Trump] said on CNBC that he wasn’t happy with the Fed’s recent decisions because every time the economy strengthens 'they want to raise rates again.'"

— Chinese investors are selling. WSJ's Esther Fung: “Chinese investors have become net sellers of U.S. commercial real estate for the first time in a decade, reversing a yearslong trend when these buyers spent tens of billions of dollars and helped boost the market for hotels and other properties. Chinese insurers, conglomerates, and other investors sold $1.29 billion worth of U.S. commercial real estate in the second quarter, while purchasing only $126.2 million of property, according to data firm Real Capital Analytics. This marked the first time that Chinese investors were net sellers for a quarter since 2008. The more than $1 billion in net sales reflects how much the Chinese government’s attitude toward investing overseas has changed in recent months.”

— Sergo Marchionne dies. WSJ's Chester Dawson: "Sergio Marchionne, who engineered a merger of the auto industry’s weakest companies—Fiat and Chrysler—and turned the combination into a cash-generating machine, died at the age of 66. Mr. Marchionne was treated at Zurich’s University Hospital for complications after undergoing what Fiat Chrysler Automobiles NV said was a surgical procedure on his right shoulder in July. The health issues forced the company to unexpectedly remove him as CEO on Saturday, speeding up a departure planned for early 2019 after a decade at the helm of the Italian-American auto maker."

Challenges ahead for Fiat. AP's Colleen Barry: “Fiat Chrysler’s second-quarter earnings presentation was meant to celebrate long-time CEO Sergio Marchionne’s achievement of eliminating all debt for the formerly troubled company. Instead, it will be overshadowed by his early and sudden exit... and the debut of his replacement, Mike Manley. Credited with the turnaround of the Jeep subsidiary, Manley faces his first big test as the group CEO on Wednesday, when he lays out the Italian-American automaker’s earnings and takes questions from analysts likely to focus on how he will manage hard-earned growth and profitability.”

— China keeps Qualcomm guessing. Reuters: "Qualcomm Inc is yet to win China’s nod to buy Dutch chipmaker NXP Semiconductors even as a deadline for the offer to expire is just hours away, raising the prospect the deal could be scuppered amid Sino-U.S. trade tensions... Qualcomm, the world’s biggest maker of chips for mobile phones, and NXP said in April they would call off the deal if they were unable to win Chinese regulatory approval by July 25... China was the only hold out from eight of the nine global regulators required to approve the deal. If the deal collapses, it is likely to aggravate tensions between Washington and Beijing."

As Facebook eyes China expansion. The Post's Elizabeth Dwoskin and Emily Rauhala: “Facebook has obtained a license to set up an office in China — a first for the company, which has been shut out of China’s lucrative market for years despite many attempts to break in. The $30 million subsidiary in the southern city of Hangzhou would be set up as a start-up incubator, making minor investments and advising small businesses... Facebook is currently blocked in China.”

And American Airlines buckles to Chinese pressure. "Under pressure from the Chinese government, American Airlines has wiped Taiwan from its website — an edit the Trump administration has urged U.S. carriers to resist," The Post's Danielle Paquette reports. "The move came about three months after Beijing ordered dozens of foreign airlines to refer to the island as a Chinese territory or face consequences in the world’s second-largest aviation market.

Steve Bannon is creating a 'deplorables' cryptocurrency to reward political activism (Wired)

— House approves medical device tax repeal. The Post's Felicia Sonmez: "The House voted Tuesday to repeal the excise tax on medical devices, with nearly five-dozen Democrats joining all but one Republican in backing the bill. The measure was approved on a 283-132 vote that comes before lawmakers leave Washington for their summer recess at the end of the week. The 2.3 percent tax on some devices sold by medical manufacturers was created under the Affordable Care Act. It is not set to take effect until 2020, following a move by lawmakers to include its postponement as part of the deal that ended a government shutdown in January. But lawmakers of both parties have long sought to repeal the tax, arguing that its enactment could lead to higher prices for consumers as well as the loss of tens of thousands of manufacturing jobs."

As House GOP outlines tax plan. Bloomberg's Laura Davison: “House Republicans unveiled a broad outline Tuesday for their next phase of tax code changes, which steered clear of correcting technical mistakes from last year’s overhaul. The so-called Tax Reform 2.0 legislation was seen as a possible vehicle for technical fixes that would address errors in the 2017 bill. Keeping those corrections out of the proposal underscores how GOP leaders are using it as a messaging tool and want to avoid highlighting problems with the law. The two-page outline, which seeks to make cuts for individuals and some business owners permanent, was released now so Republicans can use it as a talking point as they head back to their districts at the end of the week for August campaigning.”

Warren: Roll back the tax cuts. Sen. Elizabeth Warren (D-Mass.), in an interview with CNBC's John Harwood, said she wants to repeal the Republican corporate tax cut, though she declined to specify what corporate rate she prefers. On individual rates, she said, "Look, there was a time in a very prosperous America — an America that was growing a middle class, an America in which working families were doing better generation after generation after generation — where the top marginal rate was well above 50 percent."

— Trump blasts FCC's Sinclair decision. The Post's Tony Romm: "Trump came to the defense of Sinclair Broadcast Group’s proposed merger with Tribune Media, days after the Federal Communications Commission raised 'serious concerns' about the deal and began legal proceedings to challenge it on grounds the companies had misled regulators. Trump said Tuesday it was 'so sad and unfair' that the FCC, an independent agency, did not approve the merger, a $3.9 billion transaction that would create a conservative television giant that originally hoped to reach roughly 70 percent of U.S. households... Last week... FCC Chairman Ajit Pai — a Republican whom Trump appointed to lead the telecom agency — found that Sinclair and Tribune had exhibited a 'lack of candor,' seeking to skirt the U.S. government’s restrictions on media ownership by divesting key stations in cities like Chicago to allies of Sinclair."

Trump's tweet: 
 

Today

• House Agriculture Committee hearing on the agenda for the Commodity Futures Trading Commission.
• House Small Business Committee hearing about the effect of the tax overhaul on small businesses.
• Liam Fox, Britain's international trade secretary, delivers a speech on free trade at the Heritage Foundation in Washington.

Coming soon

• U.S. Trade Representative Robert E. Lighthizer appears before a Senate Appropriations subcommittee tomorrow.
• Senate Finance subcommittee hearing on “improving tax administration” tomorrow.

From the New Yorker's Peter Kuper:

What was said on the Trump-Cohen tape:

How to win a trade war:

Fish for flour? Barter is Venezuela's new currency: