Happy Thursday and welcome back to On The Money, the tariff-free financial newsletter. 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–New tariffs on China pose major risk for Trump: Punishing tariffs ordered by President Trump are set to go into place Friday on Chinese goods, escalating a high-stakes battle with major risks for the economy and his reelection.
GOP lawmakers have been pressuring Trump to get a deal with China that would lower tariffs hurting U.S. farmers and manufacturers, but their complaints have failed to move the president or yield progress in talks with Beijing.{mosads}
Republicans have been broadly in favor of Trump’s crackdown on China’s alleged theft of U.S. intellectual property, market manipulation and other trade barriers.
But some GOP lawmakers are growing impatient and frustrated by the steep toll of Trump’s trade war, more than a year after the president called such conflicts “good and easy to win.”
- Several Republican senators warned Vice President Pence in a Tuesday lunch that Trump’s inability to close trade deals with China, along with Canada and Mexico, is hurting rural economies.
- Beijing has pledged to retaliate if Trump follows through with Friday’s tariff hike and could increase or expand import taxes on U.S. crops.
- American farmers have been hit with huge losses from previous tariffs in the trade war, and further import taxes on their China-bound goods could compound the harm of plunging commodity prices and falling foreign orders.
“The president’s got the right fight going on,” said Rep. Mike Conaway (R-Texas), ranking member on the House Agriculture Committee.
“My only advice to the president and [U.S. Trade Representative Robert] Lighthizer and others is, get this done as quickly as you can because we’ve got real Americans suffering daily.”
The political gamble: Washington’s battle with Beijing is also more popular in industrial states like Ohio, Michigan, Pennsylvania and Wisconsin that swung the 2016 election to Trump. Those states are key to his reelection strategy.
Stephen Myrow, managing partner at Beacon Policy Advisors in Washington, said Thursday that Trump’s aggressive stance toward China reflects the split in Trump’s base between industrial states with Democratic roots and deep-red agricultural states.
“If you look at the states that he cares most about in the election, these are places where beating up on China plays well,” Myrow said.
“There’s a difference between the Farm Belt and the Rust Belt,” he said. “The Farm Belt ends up feeling the pain of the trade war the most because it’s easy for China to hit back against our commodities.”
LEADING THE DAY
Senators sound alarm over looming budget, shutdown battles: Alarm bells are starting to go off on Capitol Hill over a looming fight to fund the government and prevent a shutdown later this year.
Though Congress has until the end of September to pass legislation preventing another funding lapse, lawmakers are sending up warning signs to their colleagues and the White House that they are heading toward a fall train wreck, with deadlines for raising the debt ceiling and preventing across-the-board budget cuts and the second shutdown of the year all in the same month.
Senate Appropriations Committee Chairman Richard Shelby (R-Ala.) on Wednesday said he highlighted the deadlines, and the consequences for failing to get a budget deal, during a GOP lunch this week with Vice President Pence and in a phone call with acting White House chief of staff Mick Mulvaney.
“That’s what I told our caucus — that this will be draconian,” he said, referring to the looming cuts. “They probably haven’t thought about it much because they think we’ll take care of it.”
The Hill’s Jordain Carney explains why.
- The growing concern about the chances of getting agreements to raise the budget caps and fund the government comes as Congress and the administration have struggled for months to strike a smaller deal on a stalled package of disaster recovery aid.
- The disaster aid bill stalemated more than a month ago after Trump criticized Puerto Rico’s handling of recovery money during a closed-door Republican lunch.
- Even so, that conflict pales in comparison to the months-long process for preventing an October shutdown — budget deals in Congress followed by passing 12 appropriations bills.
- “If we can’t work this out, we’re going to have a bleak winter,” Shelby told reporters. “You guys will be here a long time. So, don’t plan any vacations.”
One bit of slightly optimistic news: The deadline for Congress to lift or suspend the debt limit will likely not hit until October or early November, according to a Bipartisan Policy Center (BPC) analysis, a timing tweak that could help ease along a deal.
Ocasio-Cortez says bill would ‘destroy’ payday loan industry: Rep. Alexandria Ocasio-Cortez’s (D-N.Y.) team said the Loan Shark Prevention Act she unveiled Thursday alongside Sen. Bernie Sanders (I-Vt.) would “destroy” the payday loan industry.
“The bill will officially cap all interest rates on consumer loans at 15% — lowering the credit card rates of millions of Americans, and functionally destroying the predatory ‘payday’ loan industry,” her team said in an email to supporters.
“Predatory lending and our credit rating system targets lower income Americans and people who are living paycheck to paycheck with manipulative practices and hidden fees — trapping millions in a cycle of systemic poverty as their hard-earned money is funneled into exorbitant bonuses for Wall Street executives,” the email also said.
The lawmakers on Thursday announced in a livestream video that they would introduce the legislation.
Dems highlight NYT article on Trump’s business losses in ‘tax gap’ hearing: Democrats at a hearing on Thursday raised questions about the fairness of the tax system by highlighting a recent New York Times article on President Trump’s business losses.
Democrats asked current and former IRS officials about the article, which said Trump’s tax papers show that he reported more than $1 billion in business losses from 1985 to 1994 and only paid income taxes in two of those years.
- Trump responded to the article’s publication by saying on Twitter that “you always wanted to show losses for tax purposes….almost all real estate developers did — and often re-negotiate with banks, it was sport.”
- “What words from the president, when we want confidence in our tax system, to declare it ‘sport’ to underreport, to dodge your taxes,” said Rep. Lloyd Doggett (D-Texas) at Thursday’s hearing.
- Rep. Bill Pascrell (D-N.J.) said that Trump “may not have paid taxes he owed” since the president appears to have deducted losses from borrowed money and that he didn’t pay taxes on loan amounts that weren’t repaid. He predicted that if Trump did avoid taxes on unreported income, “Mr. Trump’s base is going to be very angry when they find out that, yeah, they probably have been had.
GOOD TO KNOW
- President Trump’s latest budget proposal would not lower the federal deficit as a share of gross domestic product (GDP), according to an analysis published Thursday by the nonpartisan Congressional Budget Office (CBO).
- Uber announced Thursday that its initial public offering (IPO) of 180 million shares of its common stock would be priced at $45 per share.
- House Democrats on Thursday released a $56.4 billion spending bill funding the State Department and foreign operations for fiscal 2020, casting aside President Trump’s request to slash spending at State by 21 percent.
- Facebook is pushing back after one of the company’s founders called for it to be broken up Thursday, saying it would be better for lawmakers to instead impose new rules on the social network.
- Businesses are turning to K Street to push Congress to pass legislation curtailing robocalls.
ODDS AND ENDS
- The Federal Communications Commission (FCC) on Thursday voted to block China Mobile, one of the largest telecom companies in the world, from U.S. markets due to national security concerns.