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THE BIG DEAL — China accuses US of ‘trade bullyism’ as new tariffs kick in: China chastised the U.S. on Monday for engaging in what it deemed “trade bullyism” as $200 billion worth of tariffs went into effect, ratcheting up a trade war between the world’s two largest economies.
Reuters reported that China’s State Council blasted the Trump administration, saying it “has brazenly preached unilateralism, protectionism and economic hegemony, making false accusations against many countries and regions, particularly China, intimidating other countries through economic measures such as imposing tariffs.”
The statement came shortly after U.S. tariffs on $200 billion in Chinese imports went into effect Monday, to which Beijing responded with tariffs on $60 billion in American goods.
Chinese officials on Saturday canceled planned trade talks with the U.S. after the Trump administration announced its latest round of tariffs targeting $200 billion worth of Chinese goods with a 10 percent duty that is slated to rise to 25 percent next year.
China left the door open to negotiations moving forward, as long as they were “based on mutual respect and equality,” according to Reuters.
What comes next: No talks are on the agenda following Beijing’s decision to cancel negotiations next week, and Trump hasn’t promoted future talks even as Cabinet members like Mnuchin try to reach out to Beijing. Any resolution appears off in the distance, meaning businesses and consumers will likely be dealing with uncertainty heading into 2019.
The Hill’s Vicki Needham and I break down the five key things you need to know about the growing trade war between the U.S. and China.
Tariffs haven’t had a big effect on American jobs and the U.S. economy — at least not yet: U.S. businesses, especially farmers and smaller firms, say the tariffs are already affecting them by requiring them to pay more for the same goods. Those extra costs, they say, will eventually need to be passed on to consumers.
Walmart sent a letter this month to U.S. Trade Representative Robert Lighthizer saying the company will have to raise prices if Trump keeps imposing tariffs on Chinese imports.
Despite the threat of a prolonged trade war, the U.S. economy has powered through the mounting tensions: job growth is solid; the unemployment rate is near a record low; Wall Street is chugging along and the economy grew at a 4.2 percent annual rate in the second quarter.
Business groups overall oppose tariffs, but they don’t want to spook consumers: Most companies have sounded the alarm on tariffs by mobilizing their trade associations to oppose Trump’s trade strategy. Some small manufacturers are already laying off workers as supply costs rise, and family farms have lost crucial contracts to foreign competitors in key markets. Retailers, meanwhile, are raising prices to protect their bottom line.
U.S. raw materials have shot up in price, and imported metals now cost at least 25 percent more than they did before the trade war began.
Still, business groups have tried to stay optimistic. U.S. Chamber of Commerce President Tom Donohue said he has faith in the White House and believed Trump would abandon tariffs once their costs slow the economy.
Tariffs “appear from time to time and they get to be a real drag on the economy and governments fix them,” Donohue said on Wednesday. Donohue agreed that the administration has serious issues to resolve with China, but said there are less harmful ways to achieve better trade.
Trump has shown no interest in backing down, however, and U.S. firms have become increasingly concerned that the trade war’s end is far from sight. The Federal Reserve said this month that many American businesses have scrapped plans to expand or invest in equipment amid the trade uncertainty, even as the economy grows.
Read more on the implications of the trade war here.
Despite that public optimism, there are signs the tariffs could be taking a toll on business leaders….
CEOs confidence slips over tariffs: Business leaders are growing more worried about President Trump’s trade policies as another $200 billion in tariffs on Chinese goods took effect on Monday.
The Business Roundtable’s CEO Economic Outlook declined 1.8 points in the July to September quarter from 111.1 over the summer.
The nation’s top executives expressed concerns about the tariffs despite their optimism about the economy and the positive effects of the Republican tax cuts and regulatory rollbacks.
Overall, economic growth hit 4.2 percent in the second quarter. But the drop in the CEOs’ forecast reflects fears tariffs could derail businesses’ plans to hire and make capital investments over the next six months. It also reflects growing frustration among executives who have urged the White House to find other ways to address trade issues with foreign nations. The Hill’s Vicki Needham breaks down the numbers.
- Nearly two-thirds of responding CEOs said that recently enacted tariffs — along with other changes to trade policy and uncertainty about future trade actions — will have a moderate or significant negative effect on their companies’ capital investment decisions over the next six months.
- Plans for capital investment fell 4.4 points to 103.2 in the latest survey.
- CEO plans for hiring declined 2.9 points to 92.6, while expectations for sales increased to 132.3, up 2 points from the previous quarter.
ON TAP TOMORROW
- House Financial Services Committee: Hearing entitled “HUD Office of Inspector General Report: HUD’s Oversight of the Alexander County (Illinois) Housing Authority,” 4 p.m.
LEADING THE DAY
GOP set to move $854B spending bill despite Trump criticisms: The House this week is expected to pass an $854 billion spending bill that will prevent a shutdown, despite complaints from President Trump and the right that in doing so, their party is busting the budget and betraying its fiscally conservative credentials.
Trump called the bill “ridiculous” on Thursday and called on Republicans to “finally get tough.”
Conservative organizations are urging lawmakers to vote “no,” and conservative GOP lawmakers such as Rep. Warren Davidson (R-Ohio) have voiced their own complaints.
“We spent a massive amount more and we abandoned frankly nearly all of the promises we campaigned on,” Davidson said. “You may as well call it the broken promises act of 2018.”
- What’s in the bill? A full year of funding for defense, a top Republican priority, and the Labor, Health and Human Services and Education bill, a top Democratic priority. It also includes a funding extension to keep the government open until Dec. 7, past the Sept. 30 deadline and the midterm elections.
- Why are conservatives mad? “This bill funds things we said we wouldn’t, like Planned Parenthood, but doesn’t fund things we said we would, like the border security wall. That’s unacceptable. Republicans need to actually do what we said,” said Rep. Jim Jordan (R-Ohio), who is running for Speaker.
- Why it won’t change anything: There’s been little organization behind the opposition and critics of the bill are outgunned against the powerful force of unified GOP and Democratic leaders and appropriators. The bill passed the Senate last week on a 93-7 vote, and Trump can’t do much more than threaten to shut down the government, risking an electoral bloodbath in November.
How the Trump tax law passed: Breaking the gridlock: Over the past several months, The Hill has interviewed dozens of Trump administration officials, lawmakers, aides and stakeholders to report the behind-the-scenes stories of the most sweeping changes to the tax codes in decades.
The tax cuts are both Trump’s biggest legislative achievement to date and the most important bill passed during the retiring Ryan’s Speakership. But the overhaul has not paid big political dividends for Republicans so far, and there’s mounting evidence that suggests Democrats are winning the current political debate over the measure.
The Hill’s first installment looks into how lawmakers were able to get the massive tax bill through Congress and onto Trump’s desk after initial gridlock and infighting.
THE HILL EVENT
Join us Thursday, Sept. 27 for “The Hill’s Newsmakers Series” as Treasury Secretary Steven Mnuchin sits down for a one-on-one interview with Editor-in-Chief Bob Cusack to discuss the state of the economy, the new tax law, trade issues and other news of the day. RSVP Here.
GOOD TO KNOW
- Congress is expected to pass this week a bipartisan overhaul of the federal government’s development aid agency through crucial funding legislation due before the end of the month.
- The Trump administration’s new tariffs will add to the cost of rebuilding after natural disasters like Hurricane Florence, homebuilders and contractors say.
- The global economy is looking shaky and the economics chief at the Bank for International Settlements says central banks may be powerless if it all goes awry, according to Bloomberg News.
- The U.S. reliance on China for obscure imports like fluorine salts and carbine esters exposes a strategic vulnerability for America in the trade war, according to The Wall Street Journal.
- Repealing the GOP tax law’s $10,000 cap on the state and local tax (SALT) deduction would largely benefit wealthy taxpayers, estimates released Monday by the Urban-Brookings Tax Policy Center found.
- CNBC looks at why other central banks sound ready to end the easy money as the Fed gets ready to raise rates again.
- The AP looks into why the “gig” economy might not be the workforce of the future for the U.S.
- The European Union has failed to design a workable legal shield for its companies in Iran to beat the global reach of the U.S. financial system and defy President Trump, according to Reuters.
ODDS AND ENDS
- Airlines are attempting to give coach passengers restaurant-grade meals, according to The Wall Street Journal.
- The average FICO credit score in the U.S. has hit an all-time high.
- Walmart will mandate the use of blockchain technology by a chunk of its U.S. suppliers, one the biggest commercial applications of distributed ledger systems, according to Bloomberg.
- Op-Ed: Christine McDaniel, a former senior economist in the White House Council of Economic Advisors and deputy assistant Treasury secretary, argues why the Trump administration “wildly underestimated the costs of tariffs.”