President Trump Expected to Sign a Border Funding Deal

Posted on 02/13/2019 6:10 AM

China leader Xi expected to meet top-level U.S. trade delegation in Beijing


You can be “extremely unhappy” and still sign a measure into law, and that is what President Donald Trump is expected to do relative to the congressional agreement reached earlier this week on border spending and other funding to keep the government opened during the remainder of fiscal year 2019, which ends Sept. 30. The measure would provide $1.375 billion for fencing at the border with Mexico. Trump has demanded $5.7 billion for a steel or concrete wall, and said he would find “other methods” to pay for it. The House could vote on the package as early as today.
     China leader Xi Jinping is expected to make a goodwill gesture greeting to the high-level U.S. trade delegation during their Thursday-Friday talks in Beijing. Trump commented Tuesday on facets of the negotiations, including possibly extended the U.S.-imposed March 2 deadline for completion of a comprehensive agreement with unambiguous enforcement. While U.S. trade negotiators begin working on the outlines of an eventual framework agreement, Trump said, “At some point, I expect to meet with Xi, adding that the two leaders could potentially “make the parts of the deal that the group is unable to make.” Trump also said he would consider delaying a March 2 deadline to reach a trade deal with China, and that he might not impose higher tariffs on Chinese goods if talks with Beijing were going well.
     An extension to the lapsed biodiesel tax incentive is not in the pending gov’t funding agreement, but biodiesel supporter Sen. Chuck Grassley (R-Iowa) isn’t giving up on the topic.   
     Grassley said the USMCA might not be approved in any of the three nations if there is no resolution on U.S. steel and aluminum tariffs on Canada and Mexico.

 


 

— Trump ‘extremely unhappy’ with spending accord, but still predicts no shutdown.  Congressional leadership appears on board with the deal, though President Trump on Tuesday would not commit to signing it. “I have to study it,” Trump said of the agreement ahead of a Cabinet meeting on Tuesday. “I'm not happy about it. It's not doing the trick.”

But Trump said he did not expect to see a repeat of the 35-day lapse in appropriations that ended last month. “I don’t think you’re going to see a shutdown,” Trump said, while seeking to pass any blame for such an event on to Democrats. “I accepted the first one and I’m proud of what we accomplished.”

Trump suggested he may accept the bill because he will reprogram other appropriations toward construction of the wall. “We’re supplementing things,” Trump said, noting he would transfer funds from “far less important areas.”

Sen. Lindsey Graham (R-S.C.) says he thinks Trump will reprogram money and also declare a national emergency. "Absolutely,” Graham said when asked if he thinks Trump will declare a national emergency, “because he's well short of what he needs.” Reports note Trump will shift money from two Army Corps of Engineers’ flood control projects in Northern California, as well as from disaster relief funds intended for California and Puerto Rico. The plan will also tap unspent Department of Defense funds for military construction, like family housing or infrastructure for military bases.

Senate Majority Leader Mitch McConnell (R-Ky.) praised the agreement and expressed optimism his chamber would move the legislation quickly. “It provides new funds for miles of border barriers and it completes all seven outstanding appropriations bills, so Congress can complete a funding process for all the outstanding parts of the federal government with predictability and certainty,” McConnell said on the Senate floor Tuesday, adding he hoped to bring it up for a vote “in short order.”

Senate Minority Leader Chuck Schumer (D-N.Y.) called the deal “welcome news.”

House Minority Leader Kevin McCarthy (R-Calif.) said on CNBC on Tuesday that he still wanted to look at the details of the bill but spun the agreement as Democrats backtracking on border wall funding and ICE detention capacity.

House Speaker Nancy Pelosi (D-Calif.) previously vowed to support any agreement struck by the bipartisan negotiators.

— U.S./China trade policy update:

  • Chinese President Xi Jinping to meet top U.S. trade delegation on Friday in a move seen as a goodwill gesture, according to the South China Morning Post.  
  • Liu He, President Xi Jinping's top economic adviser, is heading the Chinese side in the talks and will meet Thursday and Friday with U.S. Trade Representative Bob Lighthizer and Treasury Secretary Steven Mnuchin. Reports note that a banquet would be hosted for the U.S. delegation in “a Chinese cuisine restaurant” in downtown Beijing later this week. Lighthizer and Mnuchin landed in Beijing on Tuesday, with a lower-level delegation, led by deputy trade representative Jeffrey Gerrish, holding preparatory talks in the Chinese capital since Monday.
  • Issues being negotiated include the trade imbalance in China’s favor, cybertheft, currency controls, market access and an enforcement mechanism for any agreements made — American negotiators want to create a mechanism that would automatically raise tariffs on Chinese goods if its exports to the United States keep rising, the New York Times reported. Thursday and Friday work will begin preparing a draft outline of a framework agreement that would be the topic of a possible meeting ahead between Trump and Xi, at a place yet to be determined. “At some point, I expect to meet with Xi,” Trump said, noting that the two leaders could potentially “make the parts of the deal that the group is unable to make.”
  • Trump said he wanted any agreement “to be a real deal, not just a deal that looks cosmetically good for a year.”
  • China continues to push for later deadline to reach comprehensive agreement and President Trump said he would consider. “If we're close to a deal where we think we can make a real deal, and it's going to get done, I could see myself letting that slide for a little while,” Trump said. “But generally speaking, I'm not inclined to do that.” Unless extended, the two countries face a March 2 deadline, after which President Trump has threatened to increase by more than double the tariffs the administration imposed last autumn on $200 billion a year on Chinese imports.
  • Chinese and U.S. talks this week are aimed at setting terms that the presidents of the two countries could clinch at a possible summit, the Wall Street Journal reports (link). If the two sides don’t agree on a deal or to extend the deadline, tariffs on $200 billion of Chinese goods will jump to 25% from 10% at 12:01 a.m., Saturday March 2. That could have a bigger impact than last year’s sharp shifts in cargo flows, the article details, including a big bump in U.S. imports as companies sought to get ahead of new tariffs. The latest Global Port Tracker report says the inbound volume remains strong to start 2019, suggesting U.S. importers are still are trying to get more shipments across the Pacific.
  • Big gains were seen in Asia equities overnight, with Shanghai climbing 1.8%, as President Trump said he was willing to "let slide" a March 2 deadline for resolving the U.S.-China trade conflict if negotiations were progressing well. The softer tone suggests the two sides are making headway on key issues like intellectual property theft and force technology transfers.

— Biodiesel tax incentive extension not in pending spending measure to keep government open. Senate Finance Chairman Chuck Grassley (R-Iowa) said Tuesday he would continue pushing the language to extend the lapsed incentive program either before the spending measure reaches the House and Senate floor later this week or absent that, push it another way. A spokesman for the National Biodiesel Board said the continued expiration of the credit leaves biodiesel producers who use it “exposed, and we’re likely to see reductions in production capacity, delays in capital investments, and lower feedstock purchases – likely job losses.” The failure to include the tax incentive language in the spending package means the topic might be left for dead with tax filing season already underway.

— USMCA (NAFTA 2.0) faces a partisan split on enforcement. The White House is preparing for a potential fight to get its new U.S.-Mexico-Canada Agreement (USMCA) deal through Congress. The Democrats want the administration to add provisions to last year’s pact with Canada and Mexico that will ensure Mexico enforces environmental protections and allows its workers to form unions freely. Link to Wall Street Journal article.

Meanwhile, Senate Finance Chairman Chuck Grassley (R-Iowa) is warning the Trump administration that it needs to lift steel and aluminum tariffs on Canada and Mexico if it wants the USMCA to be approved in any of the three North American countries. “It’s very, very important that the White House get on board with doing away with these tariffs so we can get this thing not only before the Congress of the United States but before the Mexican Senate and before the Parliament, the House of Commons in Canada,” Grassley told reporters during a weekly press call on Tuesday. Grassley called the metals duties the “biggest impediment” to getting the U.S.-Mexico-Canada trade agreement passed.

Grassley said there was a narrow legislative window in Canada that could further complicate approval. Canadian lawmakers would need to begin considering ratification by March 1 to allow time for passage before Canada’s election season kicks off, he said. Observers expect it will take several months to debate the USMCA bill, and Canada’s Parliament adjourns in June until the fall election.

— EPA refutes Reuters report of separating E15, RIN reform plans. EPA officials Tuesday refuted a report that the agency was poised to separate the proposed rules for year-round sales of E15 from its plan to reform the market for Renewable Identification Numbers (RINs), countering a Reuters report that suggested the split strategy. "When we came back from the shutdown...we had a conversation about whether we needed to split E15 RVP waiver from the RIN market reform," Bill Wehrum, Assistant Administrator for Air and Radiation, said in an interview with Reuters. "[Acting EPA Administrator Andy] Wheeler said the President had instructed us to keep it together and we are going to keep it together."

EPA has pledged to finalize the E15 rule before the summer driving season, and Wehrum told Reuters that is still the goal with the RIN reform as part of the plan. "We intend to keep them together for proposal and for final action," he said. He did not say when the proposed rule would be released.

Other items of note:

  • Senate vote coming to confirm president Donald Trump’s attorney-general nominee. William Barr is expected to win confirmation as early as today, despite Democrats’ concern on how he might handle special counsel Robert Mueller’s probe into Russian interference in U.S. elections.

  • Norfolk Southern detailed its plan to implement precision scheduled railroading (PSR) Monday at an investor conference at the railroad's new headquarters in Atlanta. The plan includes centralizing operations, reducing staff, running fewer, heavier, faster trains and optimizing the network in order to increase efficiency. To achieve an operating ratio of 60% by 2021 (currently at 65.4%) the railroad will cut reduce headcount by 500 people in 2019 and 3,000 by 2021.

  • McConnell to set up votes on green new deal. The Senate will hold a vote on the Green New Deal, an environmental and energy plan touted by progressives, Senate Majority Leader Mitch McConnell (R-Ky.) said on Tuesday. "We'll give everybody an opportunity to go on record and see how they feel about the Green New Deal," McConnell said. He did not say when the vote would occur. The Green New Deal, unveiled last week, envisions shifting away from fossil fuels and other sources of emissions that cause global warming within 10 years. The resolution calls for “working collaboratively with farmers and ranchers… to remove pollution and greenhouse gas emissions from the agricultural sector as much as is technologically feasible.” Specific goals include additional support for sustainable and family farming, healthier soil and a “more sustainable food system.” Trump on Monday night at his Texas rally criticized the Democrats’ Green New Deal as extreme, impractical and unaffordable.

  • American Farm Bureau Federation President Zippy Duvall is calling on Congress to overhaul the H-2A visa program for foreign ag workers. In an op-ed in the Los Angeles Times (link), Duvall noted the Farm Bureau’s support for a Democratic proposal offering a path to citizenship for certain farm laborers already working in the country.

  • President Trump sent the Senate his nomination of Rodney Brown for a spot on the Farm Credit Administration Board on Tuesday. Brown was CEO of the California Bankers Association.

Markets. The Dow on Tuesday rose 372.65 points, 1.49%, at 25,425.76. The Nasdaq was up 106.71 points, 1.46%, at 7,414.62. The S&P 500 added 34.93 points, 1.29%, at 2,744.73.

Fed Chairman Powell acknowledges some rural areas not seeing economic strength. While the overall U.S. economy is performing well, Fed Chairman Jerome “Jay” Powell said Tuesday that not all areas are feeling the positive results, including many rural places. He ticked off several areas where Fed policies and actions help but said that still does not address the fact that 70% of the 473 "persistent poverty" counties in the U.S. are in rural areas. Their income disparities and the "rate of business start-ups in these areas is lower," he pointed out. "And their residents have less access to financial services. Many of these disparities have existed for generations, and in some places have roots in a history of discrimination." Some of the issues facing these areas come from a decline in traditional industries like timber, coal mining, tobacco and textiles. "Likewise, the number of jobs in agriculture and low-skilled manufacturing, mainstays of the Delta's economy, is decreasing as a result of automation and outsourcing," he noted. Education is another factor, starting from preschool to K-12 schools to post-secondary and/or workforce training. "Training and retraining programs tend to be centralized and concentrated in areas with a higher population density, which puts many rural areas at a disadvantage," Powell stated. While listing several "inspiring" stories of entrepreneurs that have taken actions in areas like Itta Bena, Mississippi, where Powell delivered his remarks at Mississippi Valley State University, he lamented those are "not as common as they should be." The Fed has researched the issue and identified that gaining access to solid financial services is one of the keys that could help. "People in rural communities who are struggling with persistent poverty need access to high-quality education from preschool through college," he concluded. "They need support for their aspirations to own their own businesses. And they need access to safe and affordable credit."

National debt jumps to $22 trillion. The U.S. national debt hit $22 trillion for the first time this week, less than a year after it first hit $21 trillion. Total government debt was $22.013 trillion on Monday, according to the Treasury Department.

The EU saw an annual fall of 2.7% in industrial production in the last month of 2018, according to Eurostat, marking the weakest pace since the financial crisis. Deteriorating demand is on investors' minds as the region finds itself squeezed between international and domestic drags.

U.S. oil production is anticipated to break records in the next two years — and prices are primed to increase slightly, according to an energy study released Tuesday. The Energy Information Administration (EIA) said crude oil production is expected to rise to an average of 12.4 million barrels a day in 2019 and 13.2 million barrels per day in 2020. That's up from January's average of 12 million barrels a day. The expected increases will come from the Permian region of Texas and New Mexico, according to EIA. The U.S. in September surpassed Russia and Saudi Arabia as the top crude oil producer. The report also found that the oil prices are expected to increase from January's average of $59 per barrel to an average of $61 a barrel in 2019 and $62 a barrel in 2020. This January's oil prices had increased $2 a barrel from the previous month but were still $10 a barrel less than last January's average.

EU agrees on controls for natural gas pipelines. The rules have divided the bloc, with Eastern European and Nordic countries worrying they will increase reliance on Russia. The regulations will delay, but not stop, the construction of Russia’s 760-mile Nord Stream 2 pipeline by adding more demands, such as allowing 10% of the capacity in the pipeline to be available to third parties.


 

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