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THE BIG DEAL: The U.S.-China trade war showed tentative signs of easing Tuesday as Chinese President Xi Jinping renewed his promise to “significantly lower” import tariffs and open up the country’s financial markets, including taxes on automobiles.
Xi’s pledge reflected long-promised reforms that haven’t yet materialized, but Trump praised the Chinese president for his “kind words.”
“Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together,” Trump tweeted Monday morning.
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Xi’s announcement spurred stock futures to rapid gains, but the pledge is but one concession in a complex showdown between the U.S. and China over their tightly integrated economies.
Xi’s remarks mostly reiterated pre-existing commitments and contained few new initiatives, raising doubts among some observers that it would be enough to defuse tensions.
Sen. Marco Rubio
Marco Antonio RubioOvernight Finance: Trump thanks Xi for promises on trade | McConnell urges GOP to call Trump about tariffs | China files WTO case against tariffs | GOP dismisses report tax law will add .9T to debt | What to expect from Mulvaney hearing on CFPB Trump thanks Xi for ‘kind words’ on trade amid tensions Scott bid boosts GOP Senate hopes MORE (R-Fla.) called Xi’s pledge “a total farce” and “unbelievable” after the Chinese president has ramped up state control of the internet.
The announcement comes as Republican senators scramble to figure out if Trump has an endgame in the escalating trade fight with China. Prices for soybeans, corn and wheat dropped in anticipation that China will hit U.S. exports hard if Trump goes through with a plan to impose tariffs on another $100 billion in Chinese imports.
Senate Majority Leader Mitch McConnell
Addison (Mitch) Mitchell McConnellTrump to meet with GOP leaders at White House on Wednesday: report McConnell sees GOP’s spending claw back plan as unlikely to pass The Memo: Fears rise of Trump move against Mueller MORE (R-Ky.) is urging his colleagues to call Trump and express their opposition to tariffs amid growing worries that a trade war with China could hurt Republican Senate candidates in the midterm elections.
Chinese retaliation on such crops would strike deep in states like North Dakota, Missouri and Montana that are crucial Senate battlegrounds this fall. The GOP is banking on a strong economy to boost their November efforts to protect their narrow congressional majority.
“This is a big deal. In South Dakota we can’t afford to have that kind of loss in the markets just on speculation we might end up in a trade war,” said Sen. Mike Rounds
Marion (Mike) Michael RoundsOvernight Energy: Dems release docs questioning Pruitt’s security | GOP pushes back on calls to investigate Pruitt | Pruitt’s chief takes responsibility for controversial raises Overnight Finance: Trump thanks Xi for promises on trade | McConnell urges GOP to call Trump about tariffs | China files WTO case against tariffs | GOP dismisses report tax law will add .9T to debt | What to expect from Mulvaney hearing on CFPB GOP senators push back on calls to investigate Pruitt MORE (R-S.D.).
Worse, from the point of view of Rounds and others, is that it’s not clear where the fight is headed.
“My question, very respectfully, to the president is, ‘What’s your game plan? What’s your endgame on this?’ ” said Rounds. “I think the administration needs to be able to explain their logic on why they’re doing it this way and whether there’s any logic to it.” The Hill’s Alexander Bolton dives into the GOP concerns here.
Meanwhile, China has filed a trade case at the World Trade Organization (WTO) over Trump’s steel and aluminum tariffs.
Beijing has requested dispute consultations over the tariffs — 25 percent on imported steel and 10 percent on aluminum — that Trump instituted last month over national security concerns under Section 232 of the Trade Expansion Act of 1962.
China, which has requested 60 days of consultations with the United States, argues that the tariffs are inconsistent with WTO rules and has said that the United States imposed the duties as a safeguard measure that countries use to counter export restrictions by other nations.
On tap tomorrow
What to watch for during Mulvaney’s debut hearing as CFPB chief: Mick Mulvaney will testify before Congress on Wednesday for the first time in his role as acting chief of the Consumer Financial Protection Bureau. While he’s testified before in his capacity as White House budget director, this is the first chance lawmakers will get to press Mulvaney on his plans for the CFPB.
Mulvaney has already drawn extensive criticism from Democrats and consumer rights groups formerly aligned with the CFPB who say he’s hijacked the agency to protect banks and special interests.
Republicans and lenders subject to CFPB oversight have sung his praises, lauding Mulvaney reeling in an agency they’ve insisted has overstepped its mandate and the law to penalize lenders.
The CFPB has long been the focal point of partisan battles, and Mulvaney’s proposal to drastically limit the power of the bureau will spur several more this week. Here are five issues on where you can expect lawmakers to grill the acting director.
Transforming the CFPB: Mulvaney asked Congress to strip much of the CFPB’s power and independence in his first semiannual report on the bureau’s activities. A staunch conservative who has opposed the bureau’s existence, Mulvaney has called on Congress to take control of the bureau’s funding, make his successors fireable at will by the president, install an inspector general and give lawmakers the sole power to finalize the bureau’s rules.
Republicans have been widely supportive of such proposals, which were included in the House GOP’s 2017 effort to gut the Dodd-Frank Act, the bill that established the CFPB. Democrats have fiercely opposed such efforts, which they insist would weaken the bureau to the point of uselessness. This issue is the foundation of the debate over the CFPB, and should be a major point of contention on Wednesday.
Payday lending: One of the CFPB’s final regulatory actions under former director Richard Cordray
Richard Adams CordrayOvernight Finance: Trump thanks Xi for promises on trade | McConnell urges GOP to call Trump about tariffs | China files WTO case against tariffs | GOP dismisses report tax law will add .9T to debt | What to expect from Mulvaney hearing on CFPB Mulvaney blasts leaks from within consumer bureau Watchdog agency must stop being foe of consumer finance MORE was the finalization of a rule on short-term, high interest or “payday” loans. The rule was intended to prevent vulnerable consumers from ending up in cyclical debt, but Republicans say the measure is an overreaching, misguided constraint on essential financial products.
Republicans in both chambers have introduced measures to void the rule, and Mulvaney had unsuccessfully tried to find a way to revoke it himself. Democrats have seized on his opposition to the rule, his moves to end pre-existing lawsuits against payday lenders and debt collectors for those loans, and his receipt of campaign contributions from such firms.
CFPB enforcement actions: Mulvaney often expresses fear over the immense power he has to unilaterally approve lawsuits and fines against lenders as the bureau’s acting chief. He’s promised to take an easier approach to firms in the bureau’s crosshairs, which has enraged Democrats skeptical of his interest in policing financial fraud. The Associated Press reported Tuesday that Mulvaney hasn’t initiated an enforcement action against a lender since he took charge of the bureau in November. That won’t sit well with Democrats, but will likely be welcome news to Republicans.
Wells Fargo and Equifax: The San Francisco megabank and the credit agency are perhaps the two most reviled financial services companies in the U.S. at the moment. The CFPB issued a record-breaking fine to Wells Fargo in September 2016 after the bank opened millions of unauthorized user accounts, and began a probe of Equifax last September after the company revealed a massive cyber breach.
Both scandals drew bipartisan scorn and are expected to stretch several more months, if not longer. Mulvaney can expect questions on the CFPB’s role in handling those two companies.
How long will he stay? Mulvaney said Monday that his clock as acting director runs out on June 22. However, if Trump nominates his replacement before Mulvaney’s time expires, the acting director will stay on until the Senate confirms a new permanent chief. Republicans and the financial sector have fawned over Mulvaney’s work at CFPB, while Democrats hold out for their next chance to replace the bureau’s chief.
LEADING THE DAY
What, me worry? Republican lawmakers on Tuesday brushed aside a report from the nonpartisan Congressional Budget Office (CBO) that found their signature tax law would add $1.9 trillion to deficits by 2028.
The Republicans in their budget resolution allowed for the tax law to add $1.5 trillion to deficits, but insisted throughout the process that the impact on the debt would be minimal. They stood by that take on Tuesday, saying the CBO is wrong to estimate that the tax law will actually boost deficits by nearly $2 trillion.
“I just totally disagree with their analysis on this. A very modest increase in growth is going to result in more revenue than we would otherwise have. A blowout spending bill is going to cause a problem, which is why the omnibus was terrible,” said Sen. Pat Toomey
Patrick (Pat) Joseph ToomeyWH backpedals on Trump’s ‘due process’ remark on guns Top GOP candidate drops out of Ohio Senate race Newly declassified memos detail extent of improper Obama-era NSA spying MORE (R-Pa.). The tax bill, he asserted, would end up adding to government revenue. The Hill’s Niv Elis explains why the GOP has turned on the CBO.
Bank of America cuts off gunmakers: A Bank of America executive announced Tuesday that the bank will stop lending money to companies that manufacture “military-style” rifles that are available for civilians to purchase.
Anne Finucane, Bank of America’s vice chair, told Bloomberg TV that the bank doesn’t want to “underwrite or finance military-style firearms” and has told a number of gun manufacturers that it will no longer do business with them.
The bank has lent to the gunmakers Vista Outdoor, Remington and Sturm Ruger, CNBC reported.
Bank of America had said that after the shooting in Parkland, Fla., in mid-February it was exploring ways it could contribute to stemming gun violence. The confessed gunman in that shooting used an AR-15-style rifle. The Hill’s Luis Sanchez has more here.
MARKET CHECK: Stocks soared on slightly easing trade tensions between the U.S and China. The Dow Jones Industrial Average gained 428 points, a 1.79 percent jump, while the Nasdaq and S&P 500 increased by 2 percent and 1.6 percent each.
GOOD TO KNOW
- Key Republican Senators have raised doubts that a rescission bill canceling some government spending would be able to pass the Senate. Senate Majority Leader Mitch McConnell (R-Ky.) also threw cold water on the idea.
- Foreign direct investment between the U.S. and China fell by 28 percent in 2017, according to a report released Tuesday, amid growing economic tensions between the two countries.
ODDS AND ENDS
- Blue Apron said Tuesday it will no longer advertise on Laura Ingraham’s show, joining more than 20 other sponsors that have cut ties with the Fox News host after she posted a critical tweet about a Parkland, Fla., student.
Write us with tips, suggestions and news: slane@thehill.com, vneedham@thehill.com, njagoda@thehill.com and nelis@thehill.com. Follow us on Twitter: @SylvanLane, @VickofTheHill, @NJagoda and @NivElis