Trump to face heat on China deal Presented by U.S. Bank

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Trump will face heat on China deal — Even if President Trump gets everything currently on the table in trade talks, some China hawks will hit him for failing to get more. MM spoke with Steve Bannon, Trump’s former senior adviser and advocate of a tough line on China, about the current status of the talks.


Bannon: “Trump has done what everyone said was impossible — catch the Chinese off guard — they never thought he would use the weapons at hand. Now Wall Street is convincing him 'he needs a win' – that's the insidious nature of this.” (More from Bannon below)

Status of the China deal — The WSJ on Sunday picked up on some of MM’s previous reporting on how close the two sides are to a final deal with over 100 pages drafted. They also note a couple new details including China agreeing to reduce auto tariffs below 15 percent and buy $18 billion in natural gas form Cheniere Energy of Houston.

A final deal still hinges on Chinese President Xi Jinping agreeing to enforcement terms including the ability of the U.S. to impose tariffs if China is found to be in violation with a promise from the Chinese not to retaliate. The Chinese could balk at that provision. Then the question will be if Trump decides to walk.

CHINA’S TOP ASK — Via our Morning Trade colleagues: A source with knowledge the talks told POLITICO that China’s chief negotiator, Wang Shouwen, has made clear to the U.S. delegation that there can be no agreement “unless all the tariffs go away.”

GOOD MONDAY MORNING — Email me on [email protected] and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on [email protected] and follow her on Twitter @AubreeEWeaver.

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Katy O’Donnell on HUD’s approval of an $8.2 billion plan for Puerto Rico. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or [email protected].

DRIVING THE WEEK — President Trump on Wednesday attends a meeting of The American Workforce Policy Advisory board … House Financial Services has a CFPB hearing on Thursday at 10:00 a.m. …

Fed Chair Jay Powell speaks Friday at 10:00 p.m. EST on monetary policy normalization at a Stanford event … February jobs report on Friday at 8:30 a.m. expected to show a gain of 185K with unemployment down a tenth at 3.9 percent and wages up 0.3 percent.

... SEC Chair Jay Clayton, Treasury’s Craig Phillips and SEC trading and markets director Brett Redfearn speak at a panel in NYC on equity markets at 9:00 a.m. Friday

More Bannon on Trump and China: “Trump gets the nature of these massive negotiations — 'better to do it right than do it fast'. You can't do this quickly given the complexity. It will take as long as it takes, could be till the end of the year. You literally could have a restructured world economy and a basis for genuine peace at the end of it — those are the stakes and that's how close Trump is to pulling it off.”

Tallying the trade impact — Tariff supporters like to argue that Chinese firms cover some of the costs by accepting lower prices. A new paper argues that is not happening and that Trump is entirely wrong when he suggests China is paying us billions in tariffs.

From the paper: “[D]omestic purchasers of imports have born the full cost of the tariffs … Overall, purchasers of imports are paying an additional $3 billion per month in import taxes, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018.”

TOUGH RE-ELECT NUMBERS FOR TRUMP — Part of the reason Trump is under such pressure to get a China deal and avoid auto tariffs and big fiscal fights is that his re-election campaign will be tough under the best of circumstances. And markets and the economy taking big hits in the coming months could make it impossible (depending on the Democratic nominee.)

The latest NBC/WSJ poll finds that “approximately four out of 10 voters would re-elect … Trump. … 41 percent of registered voters said they would definitely or likely vote for Trump in 2020, with 48 percent saying they would definitely or likely vote for the Democratic nominee instead.

TRUMP THE DEFICIT HAWK?? — From the can’t make it up department, our Andrew Restuccia and Nancy Cook: “The self-described ‘king of debt’ is about to get religion. In the next several months, the Trump administration faces several big spending and budget showdowns with Congress.

“And after mostly brushing off deficit concerns while pushing through a costly tax-cut plan, the White House now plans to reposition itself as an unlikely enforcer of fiscal responsibility led by its new top budget official, a veteran of the conservative group Heritage Action.” Read more.

MM SIDEBAR — Under Trump so far, the debt has risen around $2 trillion following the tax cut bill and higher defense and non-defense spending. Public debt is now around 78 percent of US GDP, the highest level since 1950. The idea that this White House can try to position itself as fiscally responsible is … amusing.

TRUMP VS TRUMP ON 5G — Our Margaret Harding McGill: “Trump's campaign on Sunday sought to downplay its support for government intervention in 5G wireless networks after getting blowback from Trump administration officials who favor an industry-led approach.

“The campaign told POLITICO on Friday it backs a ‘wholesale’ 5G network, which would see the government making 5G airwaves available through a sharing system with wireless providers. … That position put the campaign at odds with the view of key Trump administration figures like White House economic adviser Larry Kudlow and members of the Federal Communications Commission” Read more.

HUAWEI EXEC SUES CANADA — Our Lauren Gardner: “Huawei CFO Meng Wanzhou is suing Canada and two of its federal agencies, alleging that authorities detained and interrogated her before declaring her under arrest.

“Canada decided Friday to move forward with proceedings to extradite Meng to the U.S. on charges of violating U.S. sanctions against Iran by deliberately misleading banks about the company's business dealings there. Extradition could be a long process, and Meng's lawsuits could draw it out further.” Read more.

The 2020 Election. The new Congress. The Mueller investigation. … Keep up with POLITICO Playbook. Be in the know. Sign up today here.

STOCK REIGN MAY NOT LAST OVER OTHER REGIONS — Reuters’ Lewis Krauskopf: “U.S. stock prices are outpacing those in most other regions to start 2019, but the gap is narrow and some investors are eyeing potential catalysts to tip the scales to the rest of the world.

“Investors say several factors could sway performance in favor of other developed or emerging markets, including slowing U.S. profit growth, a weaker U.S. dollar, improving economies in China and Europe and resolution of global trade tensions.” Read more.

INVESTORS SCALE BACK INFLATION BETS — WSJ’s Akane Otani: “Bets on a pickup in inflation are falling out of favor, underscoring investors’ skepticism that the U.S. economy will be able to turn stronger after a soft start to the year.

“The growth outlook has dimmed over the past year as measures of manufacturing activity, consumer spending and business confidence have waned. The cool-down in the economy helped keep inflation from running past the Federal Reserve’s 2 percent target for a seventh straight year in 2018.” Read more.

TRUMP BACK TO FED BASHING — Bloomberg’s Saleha Mohsin: “Trump’s attempts to blame Federal Reserve Chairman Jerome Powell for any hiccups in the U.S. economy have made a comeback — this time directed at his conservative base as he gears up for a tough 2020 reelection campaign. And many investors and economists listening in are learning to tune out the complaints.

“Trump may be lining up his hand-picked choice to lead the Fed as a scapegoat in case his trade and tax policies don’t succeed: firing off a series of tweets, interviews and off-the-cuff remarks — unprecedented for an American president — that have at times shaken financial markets.” Read more.

BUSINESS LEADERS SET A.I. AGENDA — NYT: “If you were 18 and graduating from high school today, what would you do to be as employable as possible? Larry Summers: ‘I believe that the ability to manipulate, comprehend, analyze, collect and refine data of all kinds will be central to the success of individuals and organizations in the 21st century. It is absurd that high school students are taught trigonometry but not statistics, and physical science but not social science. Coding is important, but understanding the data handling that is the reason for coding is even more important.’” Read more.

THE PROBLEM FOR SMALL-TOWN BANKS — WSJ’s Rachel Louise Ensign and Coulter Jones: “Big banks have boosted profits in recent years by focusing on the largest U.S. cities, which are densely populated and more affluent. The community banks trying to fill the gaps they leave behind, meanwhile, are struggling.

“The 4,600 U.S. banks with $1 billion or less in assets — small community banks — today hold 6.6 percent of all bank assets combined. Three decades ago, around the time new laws spurred industry consolidation, they held 31.5 percent.” Read more.

NEW FRO THE ICBA — On Monday, “ICBA will unveil—Community Focus 2020: The Community Bank Agenda for Expanding Economic Opportunity—our new legislative and regulatory platform for the new Congress.” Live at 6:00 a.m. here.

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