Trump to address nation this evening, with Dems wanting equal airtime
— U.S./China trade update:
- The Trump administration expressed optimism it can reach a “reasonable” trade deal with China as President Xi Jinping sent a top aide to the first of two days of negotiations in Beijing. “There’s a very good chance that we’ll get a reasonable settlement that China can live with, that we can live with, and that addresses all the key issues,” Commerce Secretary Wilbur Ross told CNBC Monday. Such a deal could involve the Chinese buying more American soybeans and liquefied natural gas, while agreeing to deeper “structural reforms” on issues such as intellectual-property rights and market access, Ross said.
- Vice Commerce Minister Wang Shouwen is heading the Chinese delegation. If this week’s talks progress, Chinese Vice Premier Liu He, Xi's top economic policy aide, will reportedly visit Washington to meet with U.S. Trade Representative Robert Lighthizer, the lead U.S. negotiator with China.
- Chinese authorities planned to give a statement following the latest round of U.S. trade talks in Beijing. “The talks are still underway and I believe we will release a detailed readout after they are concluded,” Chinese foreign ministry spokesman Lu Kang told reporters at a regular briefing Tuesday in Beijing. No timing was given and it wasn’t immediately clear if the U.S. would release a statement.
- Key to U.S. talks with China thus far focused are guarantees that Beijing will follow through on its offers, the Wall Street Journal reported. For example, the U.S. wants China to be specific about what it will purchase, including U.S. farm and energy products, by specific dates. Also, if Beijing revises regulations to boost U.S. access to China’s markets, U.S. negotiators want assurance that it won’t use government authority over licensing, environmental regulation and other areas to hinder U.S. companies.
- U.S. officials also want China to list its subsidies, and to fulfill terms as part of its 2001 entry into the World Trade Organization (WTO).
- U.S. officials are also pressing China to deal with some longstanding structural issues such as subsidies to Chinese companies, especially state-owned firms in high-tech areas.
- The Trump administration may keep current tariffs on Chinese goods until Beijing carries out its pledges.
- China bought at least 180,000 metric tons of U.S. soybeans on Monday, though one commodity trader said the total was closer to 900,000 metric tons, Reuters reports (link). USDA has stopped announcing major export sales during the shutout.
- China approves five GMO crops for import. China announced it has approved five GMO crops for import, the first in some 18 months as the U.S. and China continued their trade discussions in Beijing. China approved the BASF's RF3 canola and Bayer-owned Monsanto's glyphosate-tolerant MON 88302 canola along with DowDuPont Inc's DP4114 corn and DAS-44406-6 soybean, as well as the SYHT0H2 soybean developed by Bayer CropScience and Syngenta SYENF.PK but now held by BASF. The two canola varieties had been pending approval for six years. However, five other products that have been awaiting approval have yet to be cleared. China also announced the extension of import approvals for 26 other GM crops by another three years.
— Partial gov't shutout update:
- President Trump announced he will address the country at 8 p.m. CT this evening about border security and the partial government shutdown, two days before he will travel to the southern border. Top congressional Democrats are demanding television networks give them the same amount of air time President Trump will get for his prime-time address on border security. The government shutdown is now in its 18th day.
- Trump administration would be willing to use emergency funds to pay for several "consensus items" produced by talks over the weekend and spelled out in a letter to congressional appropriators, Pence told reporters during a pen-and-pad briefing.
- Administration is seeking to avoid a delay in payouts of tax refunds to millions of Americans who are owed money. During a shutdown, the IRS typically doesn't perform audits, pay refunds or offer assistance to taxpayers if they have questions, especially outside of the filing seasons. The acting director of the Office of Management and Budget, Russell Vought, told reporters the Trump administration is working to make the "shutdown as painless as possible," adding that tax "refunds will go out." Final decisions were still being worked out, including how many people would be brought back to work at the IRS and when the tax filing season will begin. The IRS staff recalled to process tax returns will still not be paid during the government shutdown. From Jan. 29 through March 2, 2018, more than $140 billion in tax refunds were issued by the IRS. In previous shutdown contingency plans, the IRS would accept tax returns during the filing season, but refunds would be delayed until the government was funded. Vought said the administration is fixing what he called a problem faced by past administrations. The IRS said it would recall a "significant portion of its workforce" to process hundreds of billions of dollars in tax refunds. The IRS said it would begin processing tax returns Jan. 28 and "provide refunds as scheduled."
- Food stamp change as well? Trump administration lawyers are looking to see what powers they have to continue paying food assistance next month even as funding for the Supplemental Nutrition Assistance Program (SNAP/food stamps) is set to expire. A decision on this could come in the next few days. USDA officials have told appropriators that the agency is working on a plan to issue food stamp benefits to millions of low income people if the partial government shutout extends into February, but the agency provided no details. A spokesperson for Sen. John Hoeven (R-N.D.), chairman of the Senate Agriculture Appropriations Subcommittee, said “USDA told the subcommittee that they have provided all January SNAP benefits, and that USDA is looking at all options for the issuance of February benefits and will have a plan in place soon,” the spokesperson said. Appropriators included $3 billion in contingency reserve funds in the overall SNAP spending for fiscal 2018 that "are available for spending if the other SNAP appropriations are exhausted,'' according to a Dec. 11 Congressional Research Service report. But an analysis Monday by Dottie Rosenbaum of the Center on Budget and Policy Priorities noted that SNAP benefits are about $4.8 billion a month.
- Year-round E15 rollout impacted by shutout? A plan by the White House to boost sales of corn-based ethanol in gasoline by this summer could be delayed as the partial government shutout continue. The EPA last year said it planned to propose by February, and finalize by May, a rule that would open up year-round sales of gasoline containing 15% ethanol, known as E15, under the federal Renewable Fuel Standard (RFS). Sales of the higher ethanol fuel are restricted between June 1 and Sept. 15 under previous EPA determinations that it would add to smog compared to the common 10% blend. President Trump directed EPA to initiate the rulemaking. "With the government shutdown and unresolved trade discussions, America’s farmers and biofuel producers continue to struggle with the mounting pressures and uncertainties,” Leigh Claffey, spokeswoman at Growth Energy, said. “While the shutdown’s impact on the E15 year-round rulemaking remains unclear, we look forward to picking up where we left off when EPA continues its work to fulfill the president’s promise for year-round E15 by June 1, 2019.” The administration had also planned to concurrently write a rule to provide more transparency in how biofuel compliance credits called Renewable Identification Numbers (RINs) are traded after crude oil refiners and fuel importers complained about sometimes sharply fluctuating prices and raised concerns that prices were being manipulated. EPA uses the tradable credits to track compliance with the standard, which mandates minimum volumes of biofuels to be blended into the nation's motor fuels.
— Other items of note:
North Korean leader Kim Jong Un is in China for fourth summit meeting with President Xi Jinping: North Korean state media. State-run Korea Central TV reported today that Kim and his wife, Ri Sol Ju, are visiting China until Thursday, at Xi's invitation. The summit with Xi comes as Kim and President Trump are negotiating over a location for a second summit meeting.
WOTUS rule hearing postponed. The Environmental Protection Agency (EPA) and Army Corps of Engineers postponed a planned public hearing on the Trump administration’s proposal to reduce the waterways protected by the federal government (WOTUS). The agencies said in a statement that the ongoing partial government shutdown, which has furloughed most EPA employees, compels them to cancel the planned Jan. 23 hearing in Kansas City, Kan. The hearing is meant as an effort to gather more public input on the plan, which would cause some wetlands and streams to lose federal protections. The shutdown is also delaying publication of the proposal in the Federal Register. Although the administration released the proposal publicly in early December, it hasn’t been in the Federal Register yet, which will officially begin the 60-day public comment period.
American Petroleum Institute President Mike Sommers will give the group’s annual State of American Energy speech today, which is meant to set the policy agenda for the year.
WSJ investigation: China Offered to Bail Out Troubled Malaysian Fund in Return for Deals. The secret discussions show how China uses its political and financial clout to bolster its position overseas, especially for its “Belt and Road” infrastructure project. Malaysia’s new leader has since put the deal on hold. Link for details.
Global sugar prices have rallied on drought conditions in Brazil. On Monday, sugar for February delivery on the Intercontinental Exchange finished up 6% at 12.65 cents a pound. Areas in the south and northeastern portions of Brazil, where sugar cane is typically grown, have been afflicted with only a fraction of the precipitation normal for this time of year.
EU trade commissioner Cecilia Malmström today will meet US Trade Representative Robert Lighthizer in Washington, setting the stage for bilateral trade talks later this year. Lighthizer formally notified Congress in mid-October of the administration’s intent to initiate negotiations, though USTR has yet to release formal negotiating objectives. In July, President Trump agreed not to impose a threatened 25% tariff on European cars and both sides committed to work on reducing tariffs and other barriers to trade for industrial goods. The two trade officials are also expected to meet on Wednesday with their Japanese counterpart, Minister of Trade and Industry Hiroshige Seko, to discuss their trilateral initiative to rein in market-distorting practices (especially by China) like state-owned enterprises and forced tech transfers.
Justice Ruth Bader Ginsburg, who underwent cancer surgery last month, was missing from the bench on Monday for the first arguments since the Supreme Court returned from a four-week break.
— Markets. The Dow on Monday rose 98.19 points 0.42%, at 23,531.35. The Nasdaq gained 84.61 points, 1.26%, at 6,823.47. The S&P 500 moved up 17.75 points, 0.70%, at 2,549.69.
The dollar fell to its lowest level since October, and Treasury yields ticked higher. Meanwhile, mortgage rates have fallen to their lowest level in months. The average rate for a 30-year fixed mortgage fell to 4.51%, according to recent data.
Cleveland Fed’s Mester expects higher rates, but sees no urgency. Cleveland Fed President Loretta Mester said the central bank has more flexibility in how it paces future rate increases because inflation appears to be restrained, economic growth is decelerating, and interest rates have moved closer to a neutral setting designed to neither spur nor slow growth.
Fed’s Bostic projects one rate increase in 2019. Atlanta Fed President Raphael Bostic said the central bank should raise interest rates just once this year, but he didn’t say when and added he would keep an open mind about whether more or fewer moves might be needed.
Jim Yong Kim abruptly resigned as president of the World Bank more than three years ahead of schedule. Kristalina Georgieva, the lender’s second in command, will take over as interim president on Feb. 1, the Washington-based bank said in a statement. Kim said he will join a private firm focused on infrastructure investments in developing countries.
Fed nominee Nellie Liang withdraws from consideration. Nellie Liang, an economist and financial regulation expert nominated by President Trump for a seat on the Federal Reserve’s board of governors, had withdrawn her name from consideration, the White House said Monday. Liang, nominated in September, faced opposition from the banking industry and Senate Republicans sympathetic to Wall Street’s concerns that she favored overly stringent financial rules.