Trump's 'ironic' Wisconsin trip amid trade war concerns Presented by Semiconductor Industry Association

With help from Adam Behsudi and Megan Cassella

TRUMP’S ‘IRONIC’ WISCONSIN TRIP AMID TRADE WAR CONCERNS: President Donald Trump will be in Wisconsin today to tout Taiwanese tech giant Foxconn’s year-old commitment to build a $10 billion production facility in the state. But concerns about his brewing trade war with China, Europe and North American neighbors will largely overshadow his visit.

Wisconsin dairy farmers are worried about retaliatory tariffs from Mexico that threaten to disrupt sales to their biggest foreign market, while Milwaukee-based manufacturer Harley-Davidson just announced this week it would move part of its production out of the U.S. to avoid retaliatory tariffs on its motorcycles.

Trump’s visit today also comes after his announcement this week that he’ll rein in foreign investment in the U.S. that carries potential security risks.

“It’s ironic to say the least,” said Bill Reinsch, a senior adviser at the Center for Strategic and International Studies. “It’s another mixed signal about investment that will leave everybody confused.”

The bigger picture: To date, Trump has only succeeded in persuading other countries to raise tariffs on U.S. exports, rather than lower them. The administration also hasn’t launched talks on any new free trade agreements, and talks with China on reducing trade barriers are currently suspended as the two countries prepare to slap duties on $34 billion of each other’s goods next week. Doug Palmer has more here.

IT’S THURSDAY, JUNE 28! Welcome to Morning Trade, where your host is on her way to Mexico City to cover the Mexican presidential elections (and enjoy Mexico’s next World Cup game) over the next few days. Got any CDMX recommendations? Comments on the elections? Let me know: [email protected] or @sabrod123.

WHITE HOUSE SOFTENS PLAN TO RESTRICT CHINESE INVESTMENTS: The Trump administration confirmed Wednesday that it will use the Committee on Foreign Investment in the United States to crack down on investments from China. The more moderate approach comes after concerns that Trump would invoke emergency presidential powers to bar Chinese investment in certain high-tech sectors.

“For those who want to say, ‘Is this us being weak on China?’ The answer is no,” Treasury Secretary Steven Mnuchin told reporters. “On the other hand, this is not intended to target China. The president felt very strongly we should be protecting technology, if there are issues, no matter who we’re dealing with.”

Congress’ part: Lawmakers are currently working on legislation to expand CFIUS’s ability to block deals that could transfer critical technology to China or other potentially hostile nations. Trump said in a statement that his administration will “implement it promptly and enforce it rigorously,” once it’s enacted to ensure critical U.S. technology does not fall into the wrong hands.

Senate Republicans back Trump: Senate Finance Committee Chairman Orrin Hatch welcomed Trump’s decision as part of a “joint commitment” to address China’s unfair intellectual property practices and forced technology transfers.

“Both the president and Congress are determined to combat China’s discriminatory and market-distorting activities, and today’s action is another step in that joint commitment,” Hatch said. “China must change the policies underlying its technology transfer regime.”

Trump’s tug-of-war: Meanwhile, Senate Minority Leader Chuck Schumer expressed concern over the chaotic nature of the administration’s trade policy toward China and frustration over Trump’s decision to take the less confrontational course this time.

“Why are we waiting to impose real pressure on China for its efforts to undermine our nation’s economic wellspring? It’s another example of President Trump starting down a tough path with China, and then just veering off course for reasons unexplained, sometimes for whims,” Schumer said on the Senate floor.

“It appears there is a tug-of-war in the administration over just how strong the president should be with China. One week he’s pulled one direction, the next, the opposite. But if we’re going to convince China’s government we’re serious, the United States must but strong, tough, and consistent,” Schumer added.

Sigh of relief for business: Business groups were relieved to see the administration follow the CFIUS route rather than a China-specific approach. Still, any national security restrictions on investment “should be as narrowly applied as possible and tied to credible, identified security risks,” U.S.-China Business Council President John Frisbie said.

A message from Semiconductor Industry Association: Want to strengthen America’s economy, national security, and supply chains? Then we must invest in domestic manufacturing of semiconductors, the brains of technology. The Boston Consulting Group projects federal incentives would spur billions in private investment and create 19 chip manufacturing plants and 70,000 high-paying jobs. Learn more at www.semiconductors.org.

BROWN BLOCKS CORKER BILL, WANTS TARIFF EXEMPTIONS FOR CANADA, MEXICO: Sen. Sherrod Brown (D-Ohio) on Wednesday said he was working with U.S. Trade Representative Robert Lighthizer to find a way to exempt Canada and Mexico from Trump’s steel and aluminum tariffs.

He made the remark on the Senate floor, after blocking a vote on an amendment offered by Sen. Bob Corker (R-Tenn.) to the farm bill that would allow Congress to overturn tariffs imposed by the president under Section 232 of the 1962 Trade Expansion Act. Trump used that authority to impose tariffs on steel and aluminum imports.

"I know my colleague from Tennessee opposes the president’s trade agenda, but that is not justification for completely undoing a decades-old statute that is one of the few tools we have to defend our national security interests against distortions in the global market," Brown said.

Brown said Trump's tariffs were necessary to protect U.S. steel and aluminum producers from the damaging effect of Chinese excess capacity. But he said he shared the concern of many senators about Canada and Mexico being covered by the tariffs.

"I am working with the administration to reach a solution through negotiations. I encourage my colleagues to do the same, Brown said. "I talked to Ambassador Lighthizer last night. We are in a holding pattern with the NAFTA talks until Mexico’s election on July 1. But soon after that election, the NAFTA talks will pick right back up and steel and aluminum tariffs will be part of that dialogue."

HATCH HUNTS FOR A WAY FORWARD: With the chances of attaching the Corker amendment to the farm bill appearing less than likely after Brown’s block, attention now turns to Hatch, who is considering whether to hold hearings and work up a standalone bill on the issue.

“I am leading conversations with colleagues on and off the Finance Committee on a path forward, including potential legislative options,” Hatch said Wednesday in an emailed statement to Morning Trade. “My goal is to arrive at an outcome that has sufficient consensus for the committee to take action.”

Senate Majority Leader Mitch McConnell said earlier Wednesday that there might be a way for Congress to reassert some of its authority over tariffs, which he acknowledged are “a matter of some concern” to Republicans in the chamber.

"There are various concerns, and we've all discussed this with the president a lot," McConnell said. "There may be a legislative solution to it, and Orrin is working on that, and I'll take a look at it."

Corker plods on: The Tennessee Republican made no secret of his dismay on Wednesday about his amendment being blocked, saying on the Senate floor that he felt the farm bill was “absolutely” the right place for a measure meant to reverse a harmful trade policy that is hurting American farmers.

But he pledged that he and Sen. Pat Toomey (R-Pa.), who is co-leading the push to get a vote on the tariff measure, would press on with their effort.

“Tariffs are a tax on the American people, and as additional retaliatory measures take effect on July 1 and July 6, the harm being done to the U.S. economy, businesses and consumers will only get worse,” Corker said. “We will continue to fight for a vote on the Corker-Toomey tariff amendment and are hopeful we will be able to secure a vote in the near future.”

LAWSUIT CHALLENGES CONSTITUTIONAL BASIS OF STEEL TARIFFS: An industry group representing steel importers and traders and two of its member companies aren’t just going after Trump’s steel tariffs but will attack the constitutionality of the underlying law that gave the president those powers in a new case filed at the Court of International Trade.

The complaint from the American Institute for International Steel, Sim-Tex LP and Kurt Orban Partners LLC argues that Section 232 of the Trade Expansion Act of 1962 violates a constitutional prohibition against Congress delegating its trade powers to the president without any “intelligible principle” on which to base any action. The case also faults Congress for not providing for any judicial review of the president’s actions.

“This absence of meaningful checks, coupled with the open-ended discretion that Section 232 gives the president means that we have a violation of the doctrine of separation of power and the absence of any checks and balances that our Constitution insists be protected,” said Alan Morrison, lead counsel on the case and a law professor at George Washington University.

An uphill battle: The case could take away a powerful tool Trump has used to hit imports of steel and aluminum with tariffs of 25 percent and 10 percent, respectively, and disrupt his plans to use the same authority to impose tariffs on imports of automobiles. At a press conference, Morrison argued that the Section 232 statute presents a unique opportunity for a challenge against congressional delegation powers, which have rarely been successful. Adam has the full story here.

EVERY STORY HAS A TRADE ANGLE: News on Wednesday afternoon that Justice Anthony Kennedy will retire from the Supreme Court at the end of next month rocked Washington circles, as Senate Republicans vowed to hold a vote on a new nominee as soon as possible and Senate Democrats braced themselves for a bruising fight as they try to prevent any confirmation before November’s midterms.

But from a trade perspective, news of the retirement also set the stage for a potential showdown in the coming months over tariffs. Sen. Jeff Flake (R-Ariz.), a moderate Republican who has emerged as one of the loudest GOP critics of the administration’s trade policy, said earlier this week that he would block any of Trump’s judicial nominees until the chamber holds a vote on Corker’s tariff measure. Flake is a member of the Senate Judiciary Committee, which will host the forthcoming nominee’s confirmation hearing.

Flake’s office did not respond to a request for comment Wednesday on whether Flake will stand by those comments when it comes to a Supreme Court nominee. But choosing to hold firm could give Flake a huge amount of leverage in pushing McConnell — who will be laser-focused on getting another SCOTUS nominee approved this year — to hold a vote on tariff legislation.

CHINA WELCOMES BRITISH BEEF AHEAD OF TARIFFS ON U.S. BEEF: China has lifted its import ban on U.K. beef, a move that comes just over a week before Beijing is expected to slap 25 percent tariffs on American beef.

The U.K. Department of Environment, Food and Rural Affairs said in a statement on Wednesday that the new export market will be worth some $330 million for U.K. farmers over the first five years. This would give British producers access to Beijing’s expanding $2 billion market, which they were banned from after a series of mad cow disease outbreaks in Britain in 1996. China also signed a deal to lift a ban on French beef earlier this week.

New roadblocks for U.S. beef: China is expected to impose duties on U.S. beef producers as part of its retaliation against Trump’s decision to go ahead with tariffs on $34 billion worth of Chinese goods. The tariffs, expected to go into effect July 6, would be a blow to U.S. beef producers, who only last year resumed exports to China after a 13-year ban. Beijing previously barred U.S. beef purchases after a scare over mad cow disease in 2003.

MNUCHIN CALLS FOR TALKS WITH EU, CHINA: Mnuchin urged on Wednesday for both the European Union and China to engage in talks with the United States to reduce trade barriers.

“The president went to the G-7,” Mnuchin said. “For anyone who doesn’t think the president is a free-trader, the president said, ‘Let’s have a free trade agreement. No tariffs. No tariff barriers.’ OK? Europe wants to have free trade. Let’s see them respond, OK, with a genuine offer.” More here.

TAXES, CHINA ON THE BRAIN: Tax reform was mentioned far more than trade, and China was the most talked-about country during first-quarter earnings calls of major U.S. publicly traded companies, according to an analysis of 3,319 transcripts by Hamilton Place Strategies.

While tax reform was the most popular subject of discussion, talk about trade increased 43 percent from last quarter. Among trade issues, tariffs were mentioned almost four times more than the next most common issue, NAFTA. Read the full report here.

INTERNATIONAL OVERNIGHT

–– Senate farm bill stalled by Sen. Marco Rubio’s demand to drop a provision that would promote agricultural trade with Cuba, POLITICO Pro reports.

–– China’s Liu He has an unenviable task as Beijing’s point man in trade talks with the U.S., but he’s sticking through it, South China Morning Post reports.

–– Mnuchin says Trump’s economic team understands the causes of trade deficits, POLITICO Pro reports.

THAT'S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected] and @abehsudi; [email protected] and @mmcassella; [email protected] and @tradereporter; [email protected] and @sabrod123; [email protected] and @jmlauinger; and [email protected] and @pjoshiny. Also follow us @POLITICOPro and @Morning_Trade.

Follow us on Twitter Pradnya Joshi @pjoshidc



John Yearwood @john_yearwood



Megan Cassella @mmcassella



Doug Palmer @tradereporter



Sabrina Rodriguez @sabrod123