Happy Friday and welcome back to On The Money, where we’re ready to recover from two nights of testy debates with a #USWNT victory over France this afternoon. 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–Trump under pressure for China trade breakthrough: President Trump is under intense pressure to make progress toward a trade deal with China at this weekend’s Group of 20 summit in Japan, as lawmakers and businesses anxiously wait for an end to damaging tit-for-tat tariffs. {mosads}
Trump is set to meet Saturday with Chinese President Xi Jinping in a bid to revive negotiations that fell apart in May. The summit is the latest attempt to cement a deal to lift U.S tariffs on Chinese goods in exchange for structural reforms meant to curb alleged Chinese trade abuses and technology theft.
- The trade war between the world’s two largest economies has hindered economic growth in both nations over the past 12 months.
- U.S. tariffs on $250 billion in Chinese goods have strained China’s slowing manufacturing sector, while Beijing has targeted the ailing U.S. agricultural sector with levies on $60 billion in American crops and livestock.
Those tensions will come to a head this Saturday as Trump and Xi sit down with pressure to break the deadlock in trade negotiations.
- If the two make progress, it could clear the path toward an eventual deal to eliminate tariffs.
- But if Trump emerges unsatisfied or empty-handed from his meeting with Xi, that could risk escalating a trade war with severe economic and political costs.
I’ve got more on the risks and potential rewards here.
The path forward: The first step toward a broader deal is likely an agreement to halt further tariffs while negotiations continue, which Xi reportedly demanded as a condition for meeting with Trump.
But the president still faces several other economic and political challenges in securing broader agreement.
- Trump has demanded stricter protections for U.S. intellectual property technology, along with greater U.S. access to Chinese financial markets.
- That would require China to overhaul its economy in ways long resisted by Beijing, raising doubts about the viability of a larger deal.
- China has also insisted that Trump lift the tariffs he imposed on Chinese goods, which Trump has ruled out doing on several occasions. And Trump’s blacklisting of Huawei, a Chinese tech firm with purported ties to the country’s intelligence agencies, has also become entangled in talks.
Political cover now, risks ahead: Republican lawmakers have given the president unequivocal support in his battle with China, even as farmers in their states and districts suffer under retaliatory tariffs.
- “He’s using the tools at his disposal to get a good deal for the American farmer. Is it painful? Yes, it is very painful. But if we can get a good deal out of this pain right now, we can endure,” said Sen. Joni Ernst (R-Iowa).
- “This is not just about a trade war. This is about whether or not China is going to participate in the world economy,” said Sen. John Kennedy (R-La.).
2020 ramifications: But If Trump is unable to come away with even a moderate victory against China, it could damage his standing in states like Ohio, Michigan, Wisconsin and Pennsylvania that have lost industrial jobs for decades. Those states were crucial to Trump’s victory in 2016 and could make or break his reelection bid.
Higher tariffs on Chinese goods and the expected retaliation against American farmers could also hamper the U.S. economy, which is already expected to slow over the next 18 months.
“I worry that even if there’s a trade agreement, that from a Kansas point of view, that we will now have a lot of work to regain the markets that we’ve lost,” said Sen. Jerry Moran (R-Kansas).
“China is a hugely important market, and particularly in regard to soybeans, which we raise a lot of. So there’s a lot of challenges in the absence of trade, in the short term, but even in the long term,” he continued. “One of the goals in our country is to get our sons and daughters to return to family farms. Nobody would look at the family farm today and think this is a good time to return home and when our kids can choose other careers.”
The latest: China’s foreign ministry has indicated that it hopes the U.S. can meet halfway on trade after the countries failed to reach an agreement earlier this year.
LEADING THE DAY
Dem candidates rip Trump on China ahead of crucial trade summit: Democratic presidential candidates criticized President Trump’s trade war with China during Thursday’s primary debate in Miami, arguing that his use of tariffs is the wrong weapon in the president’s rightful battle with China.
Trump’s Democratic challengers agreed with his concerns about anti-competitive trade policy from China and the authoritarian regime’s efforts to expand its global influence.
But they criticized Trump for using tariffs on billions of Chinese goods to push Beijing into negotiations, creating immense economic costs for both nations.
“The China challenge really is serious. This is not something to dismiss or wave away,” said South Bend, Ind., Mayor Pete Buttigieg. “But their fundamental economic model isn’t going to change because of some tariffs.”
Democrats argued that Trump’s tariffs addressed real concerns but created unnecessary economic harm for U.S. farmers, manufacturers and consumers.
- Sen. Michael Bennet (D-Colo.) said Trump should instead unite global allies to curb China’s alleged practice of intellectual property theft, steel dumping and currency manipulation.
- Andrew Yang, a tech entrepreneur, added “They do pirate our intellectual property and it’s a massive problem. But the tariffs and the trade war are just punishing businesses and producers and workers on both sides.”
- Buttigieg said that the only way to defeat China as they use “technology for the perfection of dictatorship” is to focus on sprawling domestic investments, “not the export balance on dishwashers.”
- “The biggest thing we’ve got to do is invest in our own domestic competitiveness. If we disinvest in our own infrastructure, education, we are never going to be able to compete,” Buttigieg said.
Tax policy also took center stage in the opening questions of Thursday’s Democratic presidential debate.
The first question moderators asked in the Thursday’s 2020 Democratic presidential debate went to Sen. Bernie Sanders (I-Vt.), asking him if he would raise taxes on the middle-class to pay for his proposals.
- Sanders said that he has a plan to pay for every proposal he’s offered, such as canceling student debt with a tax on Wall Street trades.
- Former Vice President Joe Biden said that the country has “massive income inequality” and can reduce tax loopholes. He added he wants to eliminate President Trump’s tax cuts for the wealthy.
- Sen. Kamala Harris (D-Calif.) touted her proposal to give low- and middle-class household a tax credit of up to $6,000, or $500 per month.
ON TAP NEXT WEEK: Congress will be in recess until the end of the July 4th weekend.
GOOD TO KNOW
- The Trump administration on Friday announced sanctions against the son of Venezuelan President Nicolas Maduro amid questions over whether its push to oust the embattled leader has stalled.
- “American companies that spent years trying to build a foothold in Europe are being torpedoed by the EU’s retaliatory tariffs,” according to the Wall Street Journal.
- Wall Street emerged from the first Democratic presidential debate unscathed–for now, at least.
- Former Sen. Heidi Heitkamp (D-N.D.) writes in an op-ed that Republicans have abandoned free trade to support Trump’s ‘radical and reckless’ policies.
- Apple is shifting production of the Mac Pro, one of the few devices that had been manufactured in the U.S., to China amid an ongoing trade battle between the two countries, according to The Wall Street Journal.
- Trump’s demands for Fed Chairman Jerome Powell to weaken the dollar are going unanswered, according to Bloomberg News.
ODDS AND ENDS
- Former Food and Drug Administration (FDA) Commissioner Scott Gottlieb will join the board of directors of Pfizer, the company announced Thursday.
- Mayors from across the country are committing to buying more than 2,100 electric vehicles — including school buses — by 2020 to fill out local government fleets.
Recap the week with On The Money:
- Monday: Sanders unveils plan to wipe $1.6T in student debt | How Sanders plan plays in rivalry with Warren | Treasury watchdog to probe delay of Harriet Tubman $20 bills | Trump says Fed ‘blew it’ on rate decision
- Tuesday: Powell asserts Fed’s independence amid new Trump attacks | House approves $383 billion spending package | CBO projects ‘unprecedented’ debt levels by 2049 | Democrats struggle with Trump tax law provision
- Wednesday: Senate passes $4.5B border bill, setting up fight with House | 2020 Democrats spar over socialism before first debate | Ex-Im deal in peril amid Dem backlash
- Thursday: House sends Trump border aid bill after Pelosi caves | McConnell dismisses one-year stopgap floated by White House | Mnuchin pushing Trump to put Secret Service under Treasury control