On The Money: Markets roiled by trade tensions | Rally on hopes of Fed pause on rate hikes | Senate sends two-week spending measure to Trump | Consumer bureau pick confirmed | Trade deficit at highest level since 2008

Happy Thursday and welcome back to On The Money. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL–Markets roiled by trade tensions, then buoyed by hopes of Fed pause: The Dow Jones industrial average plunged more than 500 points early Thursday, the first day of trading after U.S. authorities secured the arrest of a Chinese technology company executive, fueling fears that the trade war with China is heating up.

News broke late Wednesday that Canadian law enforcement had arrested Meng Wanzhou, chief financial officer of Huawei Technologies, a major Chinese tech firm that has been linked to the Chinese military.

U.S. officials have requested her extradition, citing a suspected sanctions violation.

A Chinese Foreign Ministry official on Thursday demanded Meng’s release and called her detention a possible human rights violation.

The incident sparked fears that China could retaliate and that relations between the two economic superpowers will deteriorate despite what appeared to be progress between President Trump and Chinese President Xi Jinping at the Group of 20 summit (G-20) in Argentina over the weekend.

China’s commerce ministry spokesman Gao Feng even praised the meeting on Thursday and expressed confidence that a trade deal can be reached within the 90-day time frame, according to Reuters.

But stocks slowly gained ground throughout the afternoon, and shot higher soon after The Wall Street Journal reported that the Federal Reserve was considering holding off on further interest rate hikes after one final increase in December.

The Dow closed with a 79-point loss. The Standard and Poor’s 500 index fell 0.15 percent while the Nasdaq Composite closed with a 0.4-percent gain after both fell sharply Thursday morning.

Stocks have taken heavy losses throughout the end of 2018, due in part to rising interest rates triggered by Fed rate hikes. Rising borrowing costs tend to narrow corporate profit margins and slow stock market activity. 

Analysts pinned Thursday’s slide on fears of growing U.S.-China trade tensions and an impending economic slowdown.

The U.S. trade deficit rose nearly $1 billion in October, reaching the highest level in a decade as imports outpaced declining exports, according to federal data released Thursday.

The gap in value between what the U.S. sells to and buys from foreign nations rose to $55.5 billion in October, the fifth consecutive monthly increase in the country’s trade deficit in goods and services, according to the Commerce Department.

October’s trade deficit was the biggest since the gap reached $60.1 billion in October 2008. The deficit, a crucial focus of Trump’s protectionist trade agenda, has risen 11.4 percent since October 2017.

The Trump administration is also asking Beijing to drop tariffs on U.S. autos, open up markets to foreign investors and halt intellectual property theft from U.S. manufacturers and tech firms.

LEADING THE DAY

Trump runs into GOP opposition with NAFTA threat: Congressional Republicans are warning President Trump not to withdraw from the North American Free Trade Agreement (NAFTA) with Mexico and Canada as he attempts to push through an updated version of the deal.

“I hope he doesn’t do that. I think that’d be a big mistake,” said Sen. John Thune (R-S.D.), who will become the No. 2 GOP senator in the next Congress. 

“The president does not have the legal authority to unilaterally withdraw the United States from NAFTA,” Sen. Pat Toomey (R-Pa.) said, adding that “there would be significant negative repercussions if he attempts to.”

Trump threatened to withdraw from the decades-old free trade deal in a tweet on Saturday that served as a form of pressure on the Democratic House to agree to the updated agreement, known as the U.S.-Mexico-Canada Agreement (USMCA).

“I’ll be terminating it within a relatively short period of time,” Trump said Saturday of NAFTA.

If Trump did so, old trade rules and tariffs from before NAFTA was implemented would go back into place, likely raising costs for businesses and consumers in the United States. The Hill’s Niv Elis explains why here.

What’s going on?

• Trump has previously threatened to rip up NAFTA, alarming Republicans, some of whom said it would go beyond Trump’s presidential powers.
• Toomey wrote a Wall Street Journal op-ed in May telling Trump not to “blackmail” Congress with a NAFTA withdrawal, saying it would be “economically harmful and unconstitutional.” 
• Those complaints also undermine Trump’s strategy for using the threat as leverage against Democrats, who are demanding changes to the deal to win their approval. Democrats will control the House in January and there is virtually no chance that lawmakers will approve implementing legislation for the NAFTA replacement in the lame-duck Congress over the next two weeks.

What might happen?

• Other Republicans are less certain on Trump’s authority, but fear the presidents’ cancellation of the deal would derail the economy by plunging the world into legal uncertainty.
• The economic worries are another reason some observers don’t believe that Trump would follow through on this threat, though he has often followed through on fiery trade rhetoric with actions.
• “You wanna tank the stock market and knock a point or two off of [gross domestic product], you just get rid of NAFTA,” said Sen. John Kennedy (R-La.).

Senate confirms Kraninger to lead consumer bureau in partisan vote: The Senate on Thursday confirmed Kathy Kraninger to be director of the Consumer Financial Protection Bureau (CFPB), granting her a five-year term to lead the polarizing watchdog agency.

Senators voted 50 to 49 along party lines to approve the nomination of Kraninger, an associate director at the White House Office of Management and Budget. The Senate ended debate on Kraninger’s nomination last week by the same 50-49 margin.

As CFPB director, Kraninger will wield immense power and influence over U.S. banks, lenders and credit card companies. The agency’s chief has sole control of the CFPB’s budget and can unilaterally decide the bureau’s enforcement of fair lending and consumer protection laws. I’ve got more here on the fierce partisan debate over her confirmation.

The fight:

• Republicans have sought to curb the power of the CFPB, a politically polarizing agency, while Democrats have tried to defend its broad authority to crack down on predatory lending and other abusive behaviors.
• Kraninger is seen as close to White House budget chief Mick Mulvaney, who’s drastically curtailed the CFPB’s oversight powers as its acting director since November 2017. Trump nominated Kraninger in June to succeed Mulvaney, who quickly rallied GOP senators in support of her confirmation.
• Senate Democrats have seized on Kraninger’s ties to Mulvaney and her lack of expertise in financial rules in their unanimous opposition to her nomination. Democrats across the political spectrum have blasted Kraninger as an unqualified crony determined to derail the consumer watchdog.

Reactions:

• “I call on Director Kraninger to put consumers first by rolling back the anti-consumer actions taken by her predecessor and allowing the Consumer Bureau to resume its work of protecting hardworking Americans from unfair, deceptive or abusive practices.” — Rep. Maxine Waters (D-Calif.), the ranking Democrat on the House Financial Services Committee.
• “The American consumer and our economy’s financial sector will benefit from her commitment, expertise, and professionalism.” — Acting CFPB Director and full-time White House budget director Mick Mulvaney.
• “The mission of the CFPB is far too important to be put in the hands of someone who lacks candor and experience at such a fundamental level.” — Karl Frisch, executive director of Allied Progress, a liberal non-profit.
• “I am confident that with her experience and knowledge of budget management, Kathy will excel as Director.” — Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee.
• “Kathy Kraninger’s inexperience and endorsement of Mulvaney’s destructive policies are gifts to bad financial actors who are hell-bent on using their predatory business model to rip off vulnerable consumers, especially consumers of color.” — Yana Miles, senior legislative counsel at the Center for Responsible Lending.
• “Kraninger’s management experience, her years of work on Capitol Hill and leadership roles in the executive branch will help her run the Bureau efficiently and hold it accountable to the American people.” — Rob Nichols, president and CEO of the American Bankers Association.

Senate sends two-week funding measure to Trump: The Senate approved a two-week government funding bill on Thursday, sending the measure to the White House and pushing a fight over the U.S.-Mexico border wall up against the holidays.

The Senate passed the continuing resolution by a voice vote hours after it was approved in the House. President Trump will need to sign it by the end of the day Friday to prevent a partial government shutdown.

The resolution punts the funding deadline from Dec. 7 to Dec. 21, a week after Congress’s initial get-out-of-town date of Dec. 14. The Hill’s Jordain Carney tells us what comes next here.
 

GOOD TO KNOW

• Fiat Chrysler Automobiles NV plans to convert an abandoned engine production plant in Detroit into a new factory to produce sport utility vehicles, according to reports.
• The top consumer protection official at the Federal Trade Commission (FTC) is barred from handling cases involving more than 100 different companies due to conflicts of interest from his prior work as a private sector attorney, according to documents obtained by the consumer group, Public Citizen.
• The push to pay congressional interns $15 an hour is catching on with House progressives, with proponents arguing the move is necessary to ensure opportunities for people regardless of their socioeconomic status.

ODDS AND ENDS

• Lyft has confidentially filed for an initial public offering (IPO), pulling out ahead of its ride-sharing competitor Uber in the race to go public.
• Hotel chain Marriott says it will reimburse victims of a massive data breach at the company who had their passports and other personal information obtained by hackers.