On The Money: Trump weighs emergency declaration for Mexico tariffs | GOP senators look to rein in Trump on trade | Powell says Fed may cut rates if trade war hurts economy

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THE BIG DEAL—Trump, Congress headed for clash on tariffs: President Trump on Tuesday insisted he will follow through with new tariffs on Mexico if it does not do more to curb illegal migration and said it would be “foolish” for congressional Republicans to try and stop him.

“We are going to see if we can do something, but I think it’s more likely that the tariffs go on,” Trump said during a joint press conference with British Prime Minister Theresa May.{mosads}

Addressing deliberations by Republicans on a measure that could limit his tariff power, Trump said, “I don’t think they will do that. I think if they do, it’s foolish.” The Hill’s Jordan Fabian has more here.

The background: Trump’s proposed tariffs on Mexican imports are scheduled to take effect on Monday. A 5 percent tariff on all goods would be imposed, and it could grow to 25 percent by October unless Trump is satisfied with steps taken by Mexico on immigration.

A team of Mexican diplomats is in Washington this week seeking to convince the administration to back away from the plan, which has also unsettled U.S. businesses. Secretary of State Mike Pompeo is scheduled to break off from Trump’s European trip to attend the meetings.

Trump floats new emergency resolution: As Mexican officials met with congressional leaders, Trump administration aides told GOP senators that Trump may declare a second national emergency to implement the new tariffs.

GOP senators emerged from a closed-door lunch with White House deputy counsel Pat Philbin and Justice Department officials saying the issue was discussed during the meeting, but that the administration indicated it had not yet reached a resolution on whether or not it would need to take the controversial step.

• Sen. Ron Johnson (R-Wis.) told reporters that Republican senators pressed administration officials during the lunch on whether or not there would need to be a new national emergency declaration.
• Sen. Mike Rounds (R-S.D.) said that the administration is still “working through” if Trump would need to declare a national emergency in order to move forward with the tariffs.
• Sen. John Kennedy (R-La.) said that a new national emergency declaration was discussed during the lunch, while Sen. Tim Scott (R-S.C.) told reporters that the White House indicated it would need a new declaration.

High stakes: A new emergency declaration would set up another fight between Trump and Congress on an issue where he has far less Republican support. GOP senators are already mulling ways to stop Trump’s tariffs on Mexico, and said that a second emergency declaration would spur another disapproval vote from lawmakers.

• The Senate passed a previous resolution of disapproval earlier this year to block Trump’s emergency declaration along the U.S.-Mexico border. Trump, however, vetoed the measure and Congress didn’t have the votes to override him.
• A GOP senator who attended the meeting said that roughly a half dozen senators spoke during the closed-door lunch, none of whom were supportive of new tariffs against Mexico.
• “I think it’s fair to say … that every senator who spoke, and there were probably a half dozen, generally had the same point of view,” the senator said. “Nobody was supportive, who spoke.”

Even so, Senate Majority Leader Mitch McConnell (R-Ky.) says Senate Republicans are hoping to avoid a direct confrontation with Trump over tariffs and that a deal with the Mexican government will be reached this week.

ON TAP TOMORROW

• The Senate Banking Committee holds a confirmation hearing for six nominees to the Treasury Department, Federal Reserve Board, Commerce Department, Export-Import Bank, and Securities and Exchange Commission, 10 a.m.
• The Securities and Exchange Commission holds a meeting on whether to approve the Regulation Best Interest rule for broker-dealers, 10 a.m.
• The Consumer Financial Protection Bureau hosts its Summer 2019 advisory board meetings, 12:30 p.m.
• The American Enterprise Institute hosts a conversation on the global economy with Christine Lagard, managing director of the International Monetary Fund, 3 p.m.

LEADING THE DAY

Powell indicates openness to rate cut to fight effects of Trump trade wars: Federal Reserve Chairman Jerome Powell said Tuesday that the central bank is ready to respond if President Trump’s trade wars with China and Mexico hinder the U.S. economy.

Powell said that the Fed is “closely monitoring” the impact of new and proposed tariffs on China and Mexico and may be forced to respond if they harm employment or price stability.

“We do not know how or when these issues will be resolved,” Powell said at a Fed policy conference in Chicago.

“We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

Why it’s important: Powell’s comments come as Fed-watchers and investors see rising odds of the central bank cutting rates to buffet economic headwinds from Trump’s trade wars

• The president rattled markets last Thursday when he announced he would impose a 5 percent tariff on all Mexican imports until it halts illegal immigration and drug trafficking into the U.S. The tariff would take effect on June 10 and increase monthly by 5 percentage points until it reaches 25 percent.
• Trump’s tariff threat on Mexico came just weeks after he increased tariffs on $200 billion in Chinese goods from 10 to 25 percent and threatened to impose import taxes on roughly $300 billion more in products from China.
• The impending risks of Trump’s tariffs, along with persistently low inflation, have boosted Wall Street’s expectations of a Fed rate cut. James Bullard, president of the Federal Reserve Bank of St. Louis, said in a Monday speech that “a downward policy rate adjustment may be warranted soon.”

The trade blowback: Consumers are likely to face higher costs for hundreds of basic necessities and household products due to Trump’s proposed tariffs on Chinese and Mexican goods. Import taxes on Mexican products would also raise prices for groceries and gasoline, stressing low- and middle-income household budgets.

The U.S. also faces economic risks from retaliation to Trump’s tariffs. China on Saturday finalized higher tariffs on $60 billion in U.S. agricultural goods, squeezing the already ailing American farm sector.

GOOD TO KNOW

• Senate Finance Committee ranking member Ron Wyden (D-Ore.) sent a letter to the IRS commissioner Wednesday about a confidential memo that reportedly contradicts the Trump administration’s reasons for not complying with a congressional subpoena for President Trump’s tax returns.
• Organizations including major progressive groups and tax experts are urging Congress not to codify the IRS’s Free File program, which requires that tax preparation companies offer free services to low- and moderate-income users.
• Two app developers sued Apple on Tuesday, alleging the company’s Apple Store is anticompetitive.
• Sen. Elizabeth Warren (D-Mass.) rolled out proposals for a green manufacturing sector that the 2020 presidential candidate said would be a first step in implementing the Green New Deal.
• The Senate on Monday easily rejected a plan by Sen. Rand Paul (R-Ky.) to balance the budget in roughly five years.

ODDS AND ENDS

• A top Huawei executive on Tuesday said the Chinese telecommunications giant would be willing to sign a “no-spy agreement” with the U.S. in response to intelligence officials raising concerns that the company may be sharing information with China’s government, according to NPR.
• ‘Jeopardy James’ will likely have to pay $1.2 million in taxes on his winnings.