Overnight Finance: Trump hits China on currency manipulation, countering Treasury | Trump taps two for Fed board | Tax deadline revives fight over GOP overhaul | Justices set to hear online sales tax case

Happy Monday and welcome back to Overnight Finance, which has never requested legal advice from Michael Cohen. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@digital-stage.thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

 

THE BIG DEAL: President Trump is at odds (again) with his own administration when it comes to China and its manipulation of currency.

Trump on Monday criticized China for devaluing its currency days after the Treasury Department said Beijing was not manipulating the value of its money.

{mosads}

Trump said on Twitter that both China and Russia “are playing the Currency Devaluation game as the U.S. keeps raising interest rates.

“Not acceptable!” the president tweeted.

Here’s where things get tricky. Trump’s comments came just three days after the Treasury Department declined to label China a currency manipulator despite the president’s repeated campaign promises to do so.

Treasury’s twice-yearly report on foreign currency exchange, released Friday, rebuked China for not doing enough to balance its trade surplus with the U.S. But Treasury did not find that China was devaluing its currency, called the renminbi, to give it an advantage in trade.

 

Why it matters: Trump had promised throughout his campaign that China would be labeled a currency manipulator under his watch, but this is the third Treasury report issued under his watch that doesn’t do that.

Trump has routinely accused China of manipulating its currency, undercutting American manufacturers, violating trade laws and cheating U.S. politicians and companies. The president has announced $50 billion in tariffs against Chinese imports to the U.S. and has threatened to impose another $100 billion.

China has promised to fight back with its own tariffs on U.S. goods. That makes investors fearful that trade tensions with China and rising Federal Reserve interest rates could suppress economic growth and let more steam out of the volatile stock market.

 

Fed angle: It’s unclear whether Trump’s tweet was meant to criticize Fed Chairman Jerome Powell. The tweet mention’s the bank’s efforts to raise interest rates. It wouldn’t be the first time Trump has weighed in on the Fed chairman’s monetary policy or expressed his preference for lower interest rates.

Either way, it helps to look at Trump’s history of comments about Powell’s predecessor Janet Yellen for guidance.

As a candidate, Trump griped that Yellen’s preservation of low interest rates was an “obviously political” ploy to juice the stock market and make former President Obama look good. But when Trump took office, he showered praise on Yellen for doing more or less the same thing she had done under Obama, which Trump criticized as political cover for his predecessor.

Powell voted in lockstep with Yellen on monetary policy, so there’s little reason to think the Fed’s interest trajectory would be dramatically different if Trump renominated Yellen. Both Powell and Yellen had supported a slow, steady increase in interest rates that would quicken as inflation approached the Fed’s target.

Raising rates too quickly could cut off job gains and economic growth, while waiting too long could risk overheating the economy and rampant inflation.

The Fed is expected to raise rates at least two more times for a total of three hikes in 2018. But a growing number of Fed officials and analysts expect a fourth rate hike as inflation begins to reach the Fed’s ideal target.

If the Fed quickens the pace of rate hikes and the stock market continues its recent volatility, keep an eye on how Trump responds.

 

What comes next: Randal Quarles, the Fed’s vice chairman of supervision, will testify before the House Financial Services Committee on Tuesday. While financial regulation will be the main focus of his hearing, we’ll see if any lawmakers ask him to weigh in on the Fed’s interest rate path.

We previewed what to expect from Quarles’ comments on financial regulations and the Fed’s efforts to tailor them in Friday’s newsletter.

 

On tap tomorrow

• House Financial Services Committee: Hearing on the semi-annual testimony on the Federal Reserve’s supervision of the financial system, with Fed Vice Chairman of Supervision Randal Quarles, 10 a.m.

• House Ways and Means Committee: Hearing on federal perspectives on the jobs gaps, 10 a.m.

• Federal Deposit Insurance Corporation: Meeting on interagency capital rule, 10 a.m.

• Senate Banking Committee: Hearing on the nominations of Thelma Drake to be Federal Transit Administrator, Department of Transportation, Jeffrey Nadaner to be an Assistant Secretary of Commerce, and Seth Daniel Appleton to be an Assistant Secretary of Housing and Urban Development, 10 a.m.

• House Small Business Committee: Hearing entitled “Small Business Retirement Plans and the IRS’ Employee Plans Fee Change,” 10 a.m.

• House Financial Services Committee: Hearing on housing choice vouchers, 2 p.m.

• House Judiciary Committee: Hearing on protecting trade secrets in the U.S., 2 p.m.

• Brookings Institution: Event entitled “Digital currencies: Implications for central banks,” 2 p.m.

• Brookings Institution: Event entitled “How to reform the global monetary system: A pathway to action,” 4 p.m.

 

LEADING THE DAY

Tax Day rekindles partisan fight over 2017 overhaul: Elected officials and outside groups are marking Tuesday’s tax-filing deadline by stepping up their messaging efforts over the new tax law.

Tuesday is the due date for people to file their 2017 tax returns, the last returns they’ll file under the old tax code.

Supporters of the tax law are touting the benefits of the new measure, arguing that the new code allows people to keep more of their money and makes the U.S. business climate more competitive. But opponents are calling attention to the new law’s large benefits for corporations and the wealthy. The Hill’s Naomi Jagoda looks at those efforts.

 

Trump nominates Fed vice chair, governor: Trump announced two new nominees to the Federal Reserve board on Monday.

Richard Clarida, a Columbia University Republican economist and monetary policy specialist, will be nominated to serve as vice chairman to Fed Chairman Jerome Powell.

Clarida has taught at Columbia since 1988 and is a managing director at Pacific Investment Management Co. He is well regarded by both conservative and liberal economists.

Clarida is a moderate Republican in line with Trump’s previous Fed nominees. He’d become the highest ranking academic on the Fed board and would serve as the deputy to Fed Chairman Jerome Powell. His decades of teaching and research is seen as a compliment to Powell, the first Fed chairman in more than three decades without a doctorate. 

The other nominee, Michelle Bowman, has been Kansas’s bank commissioner since the beginning of last year. Bowman was previously a vice president at Farmers & Drovers Bank, a Kansas bank that reported $181 million in assets in 2017. She would fill one of the Fed board’s seven-member seats reserved for community bankers.

Bowman has also served as counsel or adviser to several lawmakers and congressional committees, followed by stints with the Department of Homeland Security and Federal Emergency Management Agency (FEMA) during the administration of former President George W. Bush. Here’s more on the state of the Fed nominees from me and The Hill’s Luis Sanchez.

 

Trump holding off on Russian sanctions: Trump has reportedly put a stop to plans to impose additional sanctions on Russia for its alleged role in a recent suspected chemical weapons attack in Syria, according to the Washington Post.

The Post reported that Trump spoke with his national security advisers on Sunday after U.S. Ambassador to the United Nations Nikki Haley said on CBS’s “Face the Nation” that additional sanctions were forthcoming.

While additional economic sanctions were under consideration, the president had not given the approval to put them in place, the newspaper reported. Instead, the White House is in a “holding pattern,” and Trump will likely levy further sanctions only if Russia is involved in another event that threatens U.S. interests.

Supreme Court to hear internet sales tax case: The justices are poised to hear a landmark case tomorrow, and The Hill’s Naomi Jagoda has the preview…

The Supreme Court is slated to hear oral arguments Tuesday in a case about states’ authority to require internet businesses to collect their sales taxes.

The case, South Dakota v. Wayfair, centers around a South Dakota online sales tax law.

The details: A 1992 ruling from the court prevents states from requiring remote sellers to collect their sales taxes unless the business has a physical presence in the state. But South Dakota is hoping that the Supreme Court replaces its “physical presence” standard to an “economic presence” one.

The stakes: The case has attracted a great deal of interest from state and local governments, conservative groups, retailers, and elected officials. Lawmakers in both parties are divided on the online sales tax issue.

The Trump administration, state and local government groups and major retail groups have all issued friend-of-the-court briefs in support of the South Dakota law. So have senators including Lamar Alexander (R-Tenn.) and Heidi Heitkamp (D-N.D.).

Stakeholders supporting South Dakota argue that the physical presence standard is unfair for brick-and-mortar retailers and states.

But a number of prominent conservative groups and groups representing e-commerce businesses want the Supreme Court to uphold its 1992 decision. Lawmakers including Rep. Bob Goodlatte (R-Va.) and Sen. Ron Wyden (D-Ore.) also are supporting Wayfair.

Those backing Wayfair are concerned that a ruling in favor of South Dakota could lead to states’ having unfettered power to tax interstate commerce.

Check back at The Hill tomorrow for a recap of the oral arguments.

 

MARKET CHECK: Investors took comfort as fears eased of escalating U.S. involvement in Syria and after strong corporate earnings. The Dow Jones Industrial Average closed 212 points higher Monday, a 0.87 percent increase, while the Nasdaq and S&P 500 increased 0.8 percent and 0.7 percent each.

 

GOOD TO KNOW

• David Stewart, staff director for Republicans on the House Ways and Means Committee, is leaving Capitol Hill to join lobbying firm Squire Patton Boggs.

• Michael Froman, the former top trade official in the Obama administration, is taking a job at Mastercard where he will deploy his years of trade experience to direct the firm’s global business approach.

• Bloomberg View explores how rising U.S. interest rates could set off a “debt bomb.”

• Brian Knight, a senior research fellow at the libertarian-leaning Mercatus Center, writes on how banks’ efforts to weigh in on the national gun control debate differ from other those of other businesses.

 

ODDS AND ENDS

• Coinbase is set to buy Earn.com, which lets users transmit digital currency for completing tasks, for $100 million.

• The U.S. Department of Commerce has banned American firms from selling components to the Chinese phone maker ZTE for seven years for violating sanctions.