Nobody wants the auto tariffs Presented by U.S. Bank

NOBODY WANTS THE AUTO TARIFFS — I write at some length here on the extent to which President Trump is out on a lonely island when it comes to slapping up to 25 percent tariffs on all imported autos and auto parts. Most of his top advisers, including US Trade Representative Robert Lighthizer are largely opposed to the idea, senior administration officials tell me. NEC Director Larry Kudlow and Treasury Secretary Steven Mnuchin are strongly opposed, fearing the tariffs will raise car prices, hurt U.S. manufacturers and generally make a lot of people angry just before the midterm elections.

The issue will come to a head this week with a high-stakes visit to the White House from European Commission President Jean-Claude Juncker, who is expected to bring with him some kind of concessions from the European Union designed make it easier on Trump to declare victory and back off.


Here’s what one senior White House official told me: “There is not a lot of support for the auto tariffs internally. There are many people who don’t want to see it go through.”

And a second senior WH official: “On the auto issue it’s pretty lopsided inside the administration against doing this. It’s pretty much just the president and [trade adviser Peter] Navarro who are in favor.”

WHAT WILL JUNCKER OFFER? Juncker visits the White House on Wednesday and administration officials and European diplomats all have different ideas on what he might offer. Some inside the White House are hopeful that Juncker will agree to lift E.U. tariffs on American automobiles for two or three years in return for Trump dropping the investigation into whether auto imports into the U.S. present a national security threat.

Juncker may have other demands of his own including a reduction in U.S. tariffs on European automobiles, especially a 25 percent levy on trucks. For the moment, it remains unclear how much time Juncker — who is not technically a head of state — will get with the president. Some White House officials say the face time could be severely limited, especially since Trump tweeted angrily at the E.U. this week after it slapped a $5 billion fine on Google for allegedly abusing its dominant position in mobile.

The first senior official who described opposition to the auto tariffs within the White House said Juncker’s face time with the president will depend on what kind of offer he brings with him “He’ll get all the time he needs but only if he has something interesting to say,” this person said.

HERE COMES BIG SECOND QUARTER GROWTH — Pantheon’s Ian Shepherdson on Friday’s big Q2 GDP report: “Our view on the composition of growth in Q2 has changed a bit… with consumption likely to make a bigger contribution than we initially expected, offsetting a smaller boost from net foreign trade. We'll find out Friday if our view was correct, but right now our forecast is 5.0%.

“As always, we've had to fill in some quite big gaps in the data, but we'd be amazed if growth turns out to be less than 4%, and we can't rule out 5½%-plus. Cue much crowing from the administration, presumably. … [W]e can say with some confidence that growth won't be sustained anywhere near 5% in the third quarter, because the confluence of factors at work in Q2 will not be repeated.”

EUROPE REBUFFS WHITE HOUSE — Reuters/Buenos Aires: “The United States sought to woo Europe and Japan with free trade deals on Saturday to gain leverage in an escalating tariff war with China but its overtures faced stiff resistance from France at a G20 finance ministers meeting dominated by trade tensions.

“French Finance Minister Bruno Le Maire said the European Union would not consider launching trade talks with the United States unless Trump first withdraws the steel and aluminum tariffs and stands down on a car tariff threat. ‘We refuse to negotiate with a gun to our head,’ Le Maire told reporters on the sidelines of the G20 meeting.” Read more.

BUTINA MET WITH TREASURY/FED OFFICIALS — Reuters Sarah N. Lynch: “Accused Russian agent Maria Butina had wider high-level contacts in Washington than previously known, taking part in 2015 meetings between a visiting Russian official and two senior officials at the U.S. Federal Reserve and Treasury Department.

“The meetings, revealed by several people familiar with the sessions and a report from a Washington think tank that arranged them, involved Stanley Fischer, Fed vice chairman at the time, and Nathan Sheets, then Treasury undersecretary for international affairs.

Butina traveled to the United States in April 2015 with Alexander Torshin, then the Russian Central Bank deputy governor, and they took part in separate meetings with Fischer and Sheets to discuss U.S.-Russian economic relations” Read more.

HOW WATERS AND HENSARLING GOT TO YES — POLITICO’s Zachary Warmbrodt: “When Maxine Waters was sparking outrage among .. Trump's allies by calling for the public shaming of his advisers, one key conservative was quietly courting her: Waters' old adversary, Jeb Hensarling of Texas. What emerged from their talks over the past few weeks surprised many in Washington: a wide-ranging and broadly bipartisan bill that would ease financial regulations and protect investors. The House passed it this week in a 406-4 vote.

“The bill is a milestone for Hensarling and Waters, who have been at odds for nearly six years as the top Republican and top Democrat on the often deeply partisan House Financial Services Committee.” Read more.

Jean-Claude Juncker heads to the White House on Wednesday. | Virginia Mayo/AP Photo

GOOD MONDAY MORNING — Big happy birthday to Ann White, aka MM’s mom. 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 — Victoria Guida on how Federal Reserve Chairman Jerome Powell prepared for President Donald Trump’s criticism. 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 Monday at 3:00 p.m. delivers remarks at the Made in America Product Showcase … Trump heads to Kansas City on Tuesday

for the VFW national convention … Trump meets with European Commission President Jean-Claude Juncker on Wednesday and travels to Dubuque, Iowa, and Granite City, Illinois on Thursday … House Ag holds a hearing Wednesday at 10:00 a.m. on the CFTC agenda ..

Joint Economic Committee holds a hearing Wednesday at 10:00 a.m. on capital access … First read on Q2 GDP on Friday at 8:30 a.m. expected to show a gain of 4.2 percent … Univ. of Michigan Consumer Sentiment at 10:00 a.m. Friday expected to dip to 97.1 from 98.2 …

MM INBOX: TIME TO PREPARE 3 ENVELOPES? — A Morning Money reader emails: “It is times like these that remind me of this classic joke: A new president arrives at the White House, and the outgoing President hands him 3 envelopes and says open these if you get in trouble. Soon enough, he gets in trouble and opens the first envelope. It says ‘blame your predecessor.’ So he blames his predecessor.

A bit later, he gets in trouble again and opens the second envelope. It says ‘blame the Fed.’ So he blames the Fed. Then, later, he gets in trouble a third time and opens the third envelope. It says ‘prepare three envelopes.’”

U.S. OPEN TO LIFTING SANCTIONS ON RUSAL — Reuters David Lawder: “The U.S. Treasury is open to removing Russian aluminum producer Rusal from a U.S. sanctions list, Treasury Secretary Steven Mnuchin said on Friday, adding the objective was ‘not to put Rusal out of business.’ Mnuchin’s comment was the latest indication the Trump administration was trying to aid sanctions-hit Rusal, which has taken a series of steps to try to appease the U.S. government and get the restrictions lifted.

“The U.S. Treasury in April imposed sanctions against billionaire Oleg Deripaska and the eight companies in which he is a large shareholder, including Rusal, in response to what it called ‘malign activities’ by Russia. But the sanctions caused havoc in the global aluminum market, prompting several countries and companies to successfully lobby Treasury for a softening of the terms on Rusal” Read more.

FRENCH HIT U.S. “LAW OF THE JUNGLE” — POLITICO’s Laurens Cerulus: “French Finance Minister Bruno Le Maire called on the U.S. to ‘be reasonable’ and stop waging a trade war on the EU and China. ‘World trade cannot base itself on the law of the jungle and the unilateral increase of tariffs is the law of the jungle,’ Le Maire told AFP. ‘The law of the jungle will only turn out losers, it will weaken growth, threaten the most fragile countries and have disastrous political consequences.’

“Le Maire was speaking during a meeting of finance ministers of G20 countries in Buenos Aires this weekend. German Finance Minister Olaf Scholz also called on the U.S. to protect the rules-based trade order ahead of the meeting. U.S. Treasury Secretary Steven Mnuchin told counterparts Saturday: ‘If Europe believes in free trade, we’re ready to sign a free trade agreement with no tariffs, no non-tariff barriers and no subsidies. It has to be all three.’” Read more.

DEMS LAUNCH TRADE SCORECARD — Democratic group American Bridge launched a new web site aimed at keeping track of negative impacts of Trump’s tariffs. Via American Bridge’s Andrew Bates: “Trump’s disastrous trade war is killing jobs, pounding farmers, and hurting small businesses from coast to coast - but Republicans in Congress are refusing to take action to protect their home states and districts from the mounting economic damage.

“Meanwhile, voters are only growing angrier at the GOP’s tax giveaway to the rich as real wages fall for ordinary Americans and healthcare costs rise. Republican candidates everywhere will rapidly find that this pain is fueling hunger for change in Washington.”

MNUCHIN DOESN’T SEE CURRENCY WAR — Bloomberg’s Saleha Mohsin: “Mnuchin says there’s no chance of a currency war erupting. When asked whether investors should be concerned about the prospects of one, he said ‘no,’ declining to elaborate during a press conference in Buenos Aires on Sunday. He was in the Argentine capital attending the Group of 20 nations summit.

“In a series of comments late last week that shook financial markets, President Donald Trump attacked the Federal Reserve for raising interest rates and for undercutting his efforts to slash the U.S. trade deficit.” Read more.

THE $600T MARKET THAT STILL HAS REGULATORS BOGGLED — NYT’s Emily Flitter: “In the maze of subsidiaries that make up Goldman Sachs Group, two in London have nearly identical names: Goldman Sachs International and Goldman Sachs International Bank. Both trade financial instruments known as derivatives with hedge funds, insurers, governments and other clients.

“United States regulators, however, get detailed information only about the derivatives traded by Goldman Sachs International. Thanks to a loophole in laws enacted in response to the financial crisis, trades by Goldman Sachs International Bank don’t have to be reported. A decade after a financial crisis fueled in part by a tangled web of derivatives, regulators still have an incomplete picture of who holds what in this $600 trillion market.” Read more.

BOND LIQUIDITY SLUMP RATTLES MARKETS — WSJ’s Riva Gold and Christopher Whittall: “Many bonds around the globe are becoming harder to trade, prompting some investors to shift to other markets and raising concerns about a broad decline in liquidity.

“The median gap between the price at which traders offer to buy and sell, a proxy for the ability to move in and out of markets quickly, has widened this year across European corporate debt and emerging-market government and corporate bonds, according to data from trading platform MarketAxess. Trading in some derivatives has picked up as traders pull back from bond markets they view as increasingly unruly and expensive” Read more.

ICYMI: ALL THE WAYS TRUMP CAN INFLUENCE THE FED — Bloomberg’s Jeanna Smialek: “Trump isn’t happy that the Federal Reserve is raising interest rates. There’s not much he can do about it. The central bank is intentionally insulated from day-to-day U.S. politics, with officials’ terms lasting as long as 14 years. The president appoints members to the Board of Governors in Washington, including the Fed chairman, and can only fire governors ‘for cause.’

“The Senate must sign off on replacements, so remaking the central bank by removal is an inherently risky strategy. That leaves the president with a more primary tool when it comes to influencing the Fed: complaining. Trump seems to be taking that route.” Read more.

CHINESE BLIND SPOT IN U.S. COMPANIES’ FINANCIALS — WSJ’s Michael Rapoport: “There’s a blind spot in U.S. regulators’ oversight of audit firms--and it could mean investors in companies like Walmart Inc., Pfizer Inc. and 3M Co. are vulnerable. Big Four accounting firms use their Chinese and Hong Kong affiliates to do significant work on the yearly audits of dozens of U.S. companies doing business in China, including Walmart, Pfizer and 3M, according to regulatory disclosures the auditors recently made for the first time.

“That’s a potential problem, because the Chinese government has for years blocked U.S. regulators from inspecting the Chinese and Hong Kong firms, which are separate entities from their U.S. counterparts - even though the regulators routinely inspect U.S. audit firms and others involved in auditing U.S.-traded companies.” Read more.

TRANSITIONS — Wells Fargo “announced … that Dan Archer will be moving into to a new role as Head of Federal Government Relations … which is a new leadership position. As Head of Federal Government Relations, Dan will lead the federal lobbying team and coordinate Wells Fargo’s relationships and lobbying efforts with Members of Congress and their staffs. Dan will start in his new GRPP role on July 23 and report to David Moskowitz, Head of GRPP.”

GOP AGREES TO WATER DOWN ZTE BILL — POLITICO’s John Hendel: “Republicans have agreed to water down legislation designed to punish Chinese telecom company ZTE, delivering a victory to … Trump, according to a person close to negotiations in Congress. Lawmakers reconciling House and Senate versions of a must-pass defense bill, H.R. 5515 (115), chose to go with the House approach of excluding ZTE from U.S. government contracts but leaving it free to do business with private companies in the United States.

“The Senate-passed version of the defense bill would have restored a full U.S. ban on ZTE that the Trump administration imposed but then lifted. … Trump personally lobbied Republicans on the issue, gathering GOP lawmakers in June for a closed-door White House meetingto request that they tone down the Senate’s approach. ZTE, which relies on U.S.-made components, has warned that an all-out ban would put it out of business.” Read more.

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