Manufacturing keeps slowing: More tariffs! Presented by U.S. Bank

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Quick Fix

Manufacturing slides: More tariffs! — Monday brought a double shot of bad news for markets sending the Dow down a couple hundred points. First the ISM manufacturing index showed another month of contraction, coming in worse than expected. Then President Trump tweeted that he would slap steel tariffs on Brazil and Argentina.


MM spoke with top trade lawyer Scott Lincicome about the connection between trade wars and manufacturing: “There were two theories when manufacturing went south. One was just backlog inventory … The other was the Fed pushed rates too high. You can scratch both off the list. What’s that leave us with? …

"When the biggest economy in the world is dropping bombs every day and launching trade wars by tweet … at some point no one can deal with the uncertainty. … It’s not hard to point the finger straight at the White House …

"The whole point of Trump’s economic plan was to bolster manufacturing and the Rust Belt and it seems manufacturing and in particular the Midwest are getting hit the hardest.”

A rosier view — Leuthold’s Jim Paulsen emails: “Is there still a manufacturing contraction? I know the US NAPM PMI was below 50 again … but other indicators … US Markit PMI up now for 3 months and never went below 50, China PMI now back above 50 and even Germany – the manufacturing epicenter -- is showing signs of renewal.”

GOOD TUESDAY MORNING — Email me at [email protected] and follow me on Twitter @morningmoneyben.

Driving the Day

WH WHISPERS: There is some hope that Trump will just forget about the latest steel tariff tweet. But don't count on it.

USTR PROPOSES RETALIATION OVER FRENCH DIGITAL TAX — Via USTR: “USTR … concluded that France’s Digital Services Tax (DST) discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies. …

“The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of $2.4 billion. The value of any U.S. action through either duties or fees may take into account the level of harm to the U.S. economy resulting from the DST.” More from our Doug Palmer here.

TRUMP CONQUERS GOP ON TRADE — Our Burgess Everett and Marianne LeVine: “Trump is winning at least one trade war: The one with his own party. Free-trading Republicans have feuded with the president for years now, and his decision on Monday to reimpose tariffs on Brazil and Argentina brought new criticism from GOP senators — right as he needs them to fend off the impeachment inquiry threatens his presidency.

“Yet despite the complaints from Senate Republicans that Trump is eroding his party’s free trade bona fides, the GOP seemingly can’t — or won’t — rally the votes to handcuff the president. Competing proposals that would give Congress more sway over certain tariffs have been languishing in the Senate Finance Committee, leaving more establishment-minded Republicans little option but to sit back and gripe and wonder what just hit them.”

BLOOMBERG UP TO 5 PERCENT — Via Morning Consult: “Former New York City Mayor Michael Bloomberg has grown his national support among Democratic primary voters to five percent, a week-over-week increase of three percentage points, according to the latest edition of Morning Consult's 'Political Intelligence: The State Of The Democratic Primary.

"' The report also shows former Vice President Joe Biden with his lowest support yet (29 percent), down 11 points from his highest support in May (40 percent).”

MAXINE WATERS’ NEW CHALLENGE: AOC AND FROSH UPSTARTS — Our Zachary Warmbrodt: “California Democrat Katie Porter fought with her over committee procedures. Alexandria Ocasio-Cortez and other members of the Squad of progressive female lawmakers withheld their support from her over the Export-Import Bank.

“Their staffs have pressed her team to give them more time to weigh in on bills. The target of these progressive freshmen: not some conservative Republican. It’s liberal icon Maxine Waters, chair of the House Financial Services Committee, who is facing growing dissatisfaction — and at times outright rebellion — from high-profile, left-leaning lawmakers who joined the panel earlier this year.”

GARY COHN: NO ONE HOME TO BABYSIT TRUMP — Our Abbey Marshall: “Gary Cohn, Trump’s former chief economic adviser, expressed concerns about the fierce loyalism among the president's current aides, saying he is worried that no one is left in the White House to challenge Trump.

“‘I am concerned that the atmosphere in the White House is no longer conducive or no one has the personality to stand up and tell the president what he doesn't want to hear,’ Cohn, the former director of the National Economic Council, said in an hour-long interview on The Axe Files podcast. ‘We were not bashful,’ he said of the initial group of White House staffers following Trump’s inauguration.”

BLOOMBERG PRESS BANNED FROM MAGA-LAND — Via Brad Parscale: “The decision by Bloomberg News to formalize preferential reporting policies is troubling and wrong. Bloomberg News has declared that they won't investigate their boss or his Democrat competitors … [T]he Trump campaign will no longer credential representatives of Bloomberg News for rallies or other campaign events.”

CNN'S @oliverdarcy: “Bloomberg EIC John Micklethwait responds: 'The accusation of bias couldn't be further from the truth. We have covered Donald Trump fairly and in an unbiased way since he became a candidate in 2015 and will continue to do so despite the restrictions imposed by the Trump campaign.”

Tariff react fly around —

Via WP: “In Brazil, the news of steel tariffs stunned officials, who for nearly a year have sought to develop closer ties with the United States, particularly Brazilian President Jair Bolsonaro. ...

“[O]n Monday, Bolsonaro appeared taken by surprise. 'I'm going to speak with Paulo Guedes,' he told several reporters outside the presidential palace, referring to the country's finance minister. 'Aluminum? I'm going to speak with Paulo Guedes now ... If necessary, I'll call Trump. I have an open channel with him.'”

WHAT THE PRESIDENT SAID AS HE LEFT FOR LONDON ... Trump was asked if the Hong Kong bill hurts the trade talks with China: "Well, it doesn't make it better, but we'll see what happens." ... He suggested that Democrats lined up the impeachment talks to coincide with his NATO trip to London. According to everything we know, this is not true.

Ted Bauman, senior research analyst and economist at Banyan Hill Publishing: “Trump has clearly never taken — or didn't pass — Economics 101. He gets a failing grade on three counts in his latest tariff actions against Brazil and Argentina.

“First, both countries allowed their exchange rates to float freely on global markets. Unlike China, for example, they don't manipulate their currencies to make their exports cheaper. The recent decline in the relative value of their currencies is due to negative sentiment towards their economies and political leadership”

ROSS ON CHINA — Our Adam Behsudi: “Commerce Secretary Wilbur Ross said the chances of reaching a preliminary trade deal with Chinese officials ‘depends on their behavior’ between now and a Dec. 15 deadline for imposing more tariffs on Beijing. ‘If nothing happens between now and then, the president has made clear he'll put the tariffs in,’ Ross said on Fox Business on Monday.

“‘It's great that he has the hammer of Dec. 15,’ Ross said. He added that the tariffs, which will hit a wide range of consumer goods like laptops and smartphones, won't affect the Christmas shopping season as most retail inventory is already stocked for the year.”

Via the Competitive Enterprise Institute: “Trump wrongly believes these new steel and aluminum tariffs will help American farmers. Trump should instead remove the tariffs that sparked the trade war and shrank farmers’ export markets in the first place.

“Today’s new tariffs will have little effect on agriculture but will harm other industries and consumers. More than three-quarters of steel goes to construction and automobiles, for example.”

For Your Radar

BIPARTISANSHIP ON ECON GOALS — A broad bipartisan group of economists executives as part of the Aspen Economic Strategy Group from Greg Mankiw to Austan Goolsbee issued a joint statement on goals going forward:

“The public and private sectors need to do more to distribute economic opportunity as widely as possible and, where necessary, supplement the wages of hard-working low and middle income Americans.

HOW BLOOMBERG COULD WIN — Our David Freedlander: “To understand how Bloomberg can become president, it is worth considering how he first became mayor—by executing, and succeeding with, a plan no less unlikely than running for president and skipping Iowa and New Hampshire.”

TRANSITION — Luke Hornblower is now a corporate attorney at market data vendor ICE Data Services. He previously was compliance counsel at MarketCounsel.

ENGAGED — Chris Martin, an associate at Cooley LLP, proposed to Taylor Williams, a VP at Goldman Sachs. The couple, who have been together for a little over 5 years, met on Hinge, and Martin proposed at the Belvedere in Vienna.

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