Trump Mulls National Emergency Declaration Following Collapse of Talks with Dems

Posted on 01/10/2019 6:41 AM

Some progress in U.S./China trade talks, but complex issues linger

U.S.-China talks ended with no reported resolution on Beijing trade and industrial practices that sparked tariffs from both countries. The U.S. Trade Representative's (USTR) Office said several issues were discussed over three days, but added the U.S. delegation will seek guidance on future action. USTR Bob Lighthizer wants any deal to include “ongoing verification and effective enforcement.”
     President Trump walked out as talks faltered over border wall funding. Negotiations on Wednesday cratered with White House officials saying an increasingly likely option is for the president to declare a national emergency over border security and try to use Pentagon funds to pay for construction of a wall on the U.S.-Mexico border — the president would be immediately challenged in court if he did that. Trump said when Nancy Pelosi (D-Calif.) and Chuck Schumer (D-N.Y.) said they would not approve funding for his border wall, he said “bye-bye”. Schumer accused the president of having a tantrum. Barring a last-minute change of heart by either side, 800,000 federal workers will miss their paychecks tomorrow. Meanwhile, Trump heads to the U.S.-Mexico border in McAllen, Texas today to rally support for building a wall, the central issue in the standoff over the partial government shutdown. He’s traveling today with Texas GOP Sens. John Cornyn and Ted Cruz. Trump will be in the area for three hours to participate in a roundtable discussion and a briefing.
     Federal Reserve Chairman Jerome “Jay” Powell will take questions on the economy and rate increases.
     Xi Jinping has accepted an offer to visit Pyongyang, North Korea said.
     President Trump will again speak at the American Farm Bureau Federation's annual meeting, with the speech slated for Monday in New Orleans. The trip was first reported by the New Orleans Advocate (link). "This year will mark the federation's 100th annual convention and President Trump looks forward to touting positive impacts of the recently-signed (United States-Mexico-Canada Agreement) as well as the recently passed Farm Bill," Judd Deere, a White House spokesman, told the Advocate in an email. "The President is committed to strengthening rural America and our Nation’s farmers."
     China's consumer price index dropped to 1.9%, well below the 3% upper limit set by the PBOC, and producer prices grew at the slowest pace in two years.
     Baby it's cold inside... the number of babies born in the U.S. in 2017 was the lowest in 30 years. Only South Dakota’s and Utah’s fertility rates reached the level needed to sustain the current population. The number of babies born in 2017, around 3.85 million, was the lowest since 1987. In order for the country’s population to essentially replace itself, researchers say that 2,100 babies should be born for every 1,000 women. In 2017, the total fertility rate — an estimate of the total number of children a woman will eventually have in her lifetime — was 1,765 births per 1,000 women, well below what is known as the replacement level.
     Trevor Noah took issue with Speaker Nancy Pelosi and Senator Chuck Schumer sharing a podium to respond to President Trump on Tuesday night: “You guys really are socialists.”


Talks between the U.S. and China focused on Beijing's pledge to buy a "substantial amount" of American agricultural, energy and other goods and services, the U.S. Trade Representative's office said in a statement about negotiations that concluded Wednesday. The statement also said officials discussed the need for a deal to provide verification and "effective enforcement." The U.S. delegation will now report back for guidance on next steps, the statement said. Link to statement.

The most difficult issues were bumped for higher-level talks, potentially involving U.S. Trade Representative Bob Lighthizer and Chinese Vice Premier Liu He, the top economic aide to President Xi Jinping. Issues ahead include efforts to keep Chinese firms and officials from pressuring U.S. companies into transferring technology against their will and reducing subsidies to Chinese companies in a bid to create a fairer competitive environment for foreign firms.

China’s Commerce Ministry today said the three-day negotiations “promoted mutual understanding and laid the foundation for solving problems of mutual interest.” It also said both sides had agreed to keep in close contact.

Timeline for the next U.S./China meeting is unknown at this time but will likely be in Washington. China watchers say a confab could be held the week of Jan. 22 at the earliest. There is growing speculation that a 4th Plenum (or another central meeting) may be held in the next 10 days or so. Bloomberg was the first to suggest it is coming. The next steps could also include a possible meeting between China Vice President Wang Qishan and President Trump at the World Economic Forum later this month. Wang, a long-time ally of Chinese President Xi Jinping, is leading China’s team to the annual forum in Davos, Switzerland, and will deliver a keynote address there. However, reports have surfaced that the White House is mulling canceling Trump's Davos trip if the partial government shutdown is not resolved by then. Treasury Secretary Steven Mnuchin would still go but the delegation would be significantly restricted, officials told the Wall Street Journal. China’s economic czar is expected to visit Washington sometime after that. The Trump administration has set a March 2 deadline to wrap up negotiations, after which it says it could raise tariffs.

As for this week's meetings, Chinese officials reportedly provided more details on the timing and quantities of coming purchases of energy and farm products. Beijing also announced it had approved imports of five new varieties of genetically modified crops.

The two sides might be moving toward a “narrow agreement,” but “U.S. trade hawks” want to “limit the scope of that agreement and keep the pressure up on Beijing,” Eurasia Group analysts Michael Hirson, Jeffrey Wright and Paul Triolo said in a report. “The risk of talks breaking down remains significant,” they wrote.

House Democrats are willing to "substantially increase" funding for border security via enhanced technologies, drones and satellites, Democratic Caucus Chairman Hakeem Jeffries (D-N.Y.) said, reiterating the party's view that a wall would be ineffective. The White House pushed for shutdown negotiations to resume to take a "piecemeal" approach by focusing individually on the parts of what President Trump called a "crisis" on Tuesday night, White House counselor Kellyanne Conway said. Negotiators should "start with just the drugs, or we start with just the kids," she said.

Trump looks at another FTA to alter. Now that the Trump administration has revamped the North American Free Trade Agreement, it is taking a look at kicking key countries out of its sister pact, the Central American Free Trade Agreement. "Trump officials are taking a very close look at the 2005 pact signed with six Latin American nations to see if they can block Nicaragua, the Dominican Republic and El Salvador from keeping preferential access to U.S. markets without disturbing the rest of the agreement. 'We are very concerned with Nicaragua's move toward authoritarianism, and El Salvador's and Dominican Republic's questionable ties with China,' the official said." Link to Miami Herald article.

Senate Finance Chairman Grassley supports nixing NAFTA to pressure Democrats. Should Democrats not help ratify the new U.S.-Mexico-Canada Agreement (USMCA), Sen. Chuck Grassley (R-Iowa) said he will recommend President Trump pull the U.S. out of the current North American Free Trade Agreement (NAFTA).

Democrats have said they are concerned with the new agreement's labor and environmental provisions. Grassley said side letters to clarify positions or provide more details on what the provisions will actually do or other steps could be used to remedy shortcomings in the pact.

Grassley said the six-month withdrawal process would put pressure on Democrats to either back the proposed agreement or leave the U.S. without a regional trade agreement that supports $1.2 trillion in business a year. “I don’t have any way of judging how hard-nosed certain Democrats that have said USMCA hasn’t done enough on labor or enough on environment. I’d want to sit down and talk to those Democrats and see what they have in mind,” Grassley said. “They surely can’t have in mind renegotiating... If they’re reaching the point where you got to go back to the negotiating table, I would encourage the president to pull out of NAFTA and hope that they are smart enough not to let that happen,” Grassley added.

On another trade policy matter, Grassley he said he would oppose any push by Trump to have Congress give the president more authority to impose tariffs on imported goods. Bloomberg News has reported that Trump could float the idea during his Jan. 29 State of the Union address to a joint session of Congress. “We aren’t going to give him any greater authority. We’ve already delegated too much,” Grassley said.

Grassley has questioned Trump’s imposition of aluminum and steel tariffs on most imported foreign-made products. Grassley said he planned to discuss the tariffs with the White House because he believes they should be lifted on Mexico and Canada. Both countries have slapped retaliatory tariffs on selected U.S. products. He said Mexican tariffs on pork products were hurting farmers in Iowa, a top pork producing state. Grassley said the Trump administration used the tariffs to prod Canada and Mexico to finish the NAFTA revisions and he does not see any reason to continue the duties. He said the president could build support among agriculture groups for the proposed NAFTA replacement by ending the tariffs on Canada and Mexico. He said agricultural support for any trade agreement is crucial because farm organizations are good at mobilizing lawmakers. That’s something Grassley said that the administration and the European Union should keep in mind as they prepare to launch trade talks this year.

Regarding U.S./EU trade agreement talks, EU Trade Commissioner Cecilia Malmstrom met with U.S. Trade Representative Bob Lighthizer this week in Washington. The EU delegation in Washington tweeted comments from Malmström that agriculture would not be part of the U.S.-EU negotiations. “We’re willing to include tariffs on all industrial goods [in trade talks with the U.S.] but we have been clear that from the EU side we won’t discuss agriculture, like the U.S. side won’t discuss public procurement & geographical indications,” the Malmström tweet said. Grassley, who met with Malmström Wednesday afternoon, said, "I don’t know how anybody in Europe that wants a free trade agreement with us can expect it to get through the United States Senate if you don’t want to negotiate agriculture.”

Trump as expected nominates Acting EPA Chief Wheeler to take role permanently. The White House announced Wednesday morning that President Donald Trump formally nominated current acting EPA Administrator Andy Wheeler to take the role on a permanent basis. The action was widely expected as Trump had signaled that late in 2018.

With Republicans holding a 53-to-47 margin in the Senate, Wheeler is fully expected to win confirmation. He has run EPA in an acting role since the departure of embattled EPA Administrator Scott Pruitt without any of the issues arising clouded Pruitt's tenure atop EPA and eventually led to his departure. The Senate Environment and Public Works Committee has set a January 16 confirmation hearing.

EPA insists it will meet goal for year-round E15. EPA is signaling that the current partial government shutdown will not cause the agency to miss its goal of finalizing a regulation to allow for year-round sales of E15 fuel by the start of the summer driving season.

The assurance came after the agency hard warned some lawmakers that the shutdown would delay its timeline on E15. "This is a priority for both President Trump and Acting Administrator [Andy] Wheeler. The ongoing partial shutdown will not impede EPA’s ability to keep to our deadline,” Michael Abboud said in an emailed statement to Reuters.

E-Verify system is down during partial government shutdown. Many U.S. employers are uncertain of their employees' authorization to work in the U.S. because the electronic E-Verify system that affirms their eligibility is shut down. The internet-based E-Verify system closed just days following the partial government shutdown, which began on Dec. 22, because of "a lapse in government appropriations," according to the government-run website.

U.S. Citizenship and Immigration Services spokesman Michael Bars said in a statement that the agency has taken several steps to minimize the burden on both employees and employers. The agency has recommended that employers continue to submit the required form I-9 for potential employees and verify those already hired once the system is back up and running.

Background. Under E-Verify, the I-9 form on each potential employee is submitted and then checked against Social Security and Homeland Security records to ensure that the person is legally allowed to work. Employers usually get a clearance, or a not-eligible message, in seconds. In some states, employers are not required to use the E-verify system while in other states such it is mandatory.

Other items of note:

  • Partisan spending measure clears House. The Democratic-controlled House voted 240-188 yesterday to reopen several federal agencies, with only eight Republicans voting for it. This is the first of several small spending bills House Speaker Nancy Pelosi (D-Calif.) plans to bring up this week, including USDA's funding bill today, all of which will not get action in the Senate. The White House announced preemptively that President Trump would veto the piecemeal spending legislation without wall money.

  • Moon Jae-in, South Korea’s president, said he believed a second summit between Donald Trump and Kim Jong Un, North Korea’s president, would happen “soon”. China’s president, Xi Jinping, also backed the idea of another meeting. Progress on the denuclearization of North Korea appears to have stalled; the Trump administration has said it wants movement on this before another summit. Meanwhile, Xi accepted an an offer to visit Pyongyang, according to North Korea state media. Beijing, however, has yet to confirm the trip, which some analysts said was possibly because it did not want to increase tensions with the United States.

  • Record number of families arrested at southern border in December. December saw the most families caught at the U.S.-Mexico border ever, with nearly 32,000 family members apprehended.

  • ADC urges Trump administration to liquidate surplus cheese. In a letter to President Donald Trump, the American Dairy Coalition (ADC) detailed the current dairy crisis.

  • IBM announces high-resolution global weather forecast model. "When IBM bought the Weather Company in 2016, it wasn’t clear what the long-term plan was for the acquisition, or how IBM would leverage the company’s specialties," the Washington Post noted (link). On Tuesday, “IBM parted the clouds on why it got into the weather business." The company announced it will launch a forecast model this year, “combining the trove of meteorological data from the Weather Company with the tech giant’s supercomputing power." The company’s senior vice president for global forecasting told the newspaper that the model seeks to be “the most accurate source of short term (1-12 hours ahead) weather forecasts” in areas of the world underserved by current modeling, such as South America and Africa. IBM says its model, the Global High-Resolution Atmospheric Forecasting System, or GRAF, will predict weather at a 1.9-mile resolution for the entire globe every hour. Link to IBM release on the topic.

  • Border wall funding impasse in Washington could start reaching roads around the country. Some states are delaying new highway, bridge and other projects that have been authorized for construction because of uncertainty over promised funding during the partial government shutdown, the Wall Street Journal reports (link). The delays could leave some projects idle in the spring in states like Oklahoma where officials are shifting state money to the most critical projects to make up for missing federal funds. The main U.S. Transportation Department agency that handles backing for state infrastructure projects remains open, but the $36.6 billion states have been promised “really isn’t available,” according to a group representing state highway officials, because Congress could come back in a new spending bill with less money than planned. The article concludes that could leave the public and truckers hanging as they wait for promised road and bridge fixes.

  • Treasury Secretary Steven Mnuchin will brief the House today about his department's plan to terminate sanctions on three companies linked to Oleg Deripaska, a Russian billionaire with ties to Russian President Vladimir Putin.

  • Industry observers expected that the marijuana legalization trend in the U.S. would hurt liquor sales, but a new study from the Distilled Spirits Council finds that hasn’t been the case in the three states where weed has been legal the longest. Recreational marijuana is now legal in ten states and Washington, D.C. and several more are considering legalization in 2019.

  • Global food prices hold nearly steady in December. Global food prices as tracked by the UN Food and Agriculture Organization (FAO) edged up slightly in December, with the food price index at 161.7 versus a 161.6 reading in November. For all of 2018, the index averaged 168.4, FAO said, down 3.5% compared with 2017 and down nearly 27% from its peak in 2011. "Sugar values dropped the most in 2018, with also vegetable oil, meat and dairy prices registering year-on-year decreases. However, international prices of all major cereals rose in 2018," FAO said.

  • Federal court strikes down Iowa’s ‘ag gag’ law as unconstitutional. A 2012 law that banned undercover recording at agricultural production facilities in Iowa has been struck down. The law, signed by then Republican Governor Terry Branstad, made it illegal for anyone to go undercover as a worker at an agriculture production facility for the purposes of recording the treatment of animals. Activists said it kept them from informing the public about potential inhumane or illegal activities. Several animal activist groups including the ACLU, Animal Legal Defense Fund, People for the Ethical Treatment of Animals, Center for Food Safety, Public Justice and Bailing Out Benji joined together to challenge the law in court. Today, a federal judge in Des Moines sided with the plaintiffs in the case and ruled the law unconstitutional. The ruling was made by Judge James Gritzner who was appointed to the bench by President George W. Bush. The Animal Legal Defense fund issued this statement after today's hearing: “Ag-Gag laws are a pernicious attempt by animal exploitation industries to hide some of the worst forms of animal abuse in the United States. Today’s victory makes it clear that the government cannot protect these industries at the expense of our constitutional rights.”

Markets. The Dow on Wednesday added 91.67 points, 0.39%, at 23,879.12. The Nasdaq gained 60.08 points, 0.87%, at 6,957.08. The S&P 500 rose 10.55 points, 0.41%, at 2,584.96.

China reported its first annual decline in auto sales in a couple of decades. Auto sales fell by about 6% last year, and many look for another decline this year.

The U.S. dollar is at three-month lows against the Chinese yuan. So far in 2019, the yuan and yen are both up about 0.7% against the greenback.

Crude oil is back in a bull market after rising for the 8th straight session with U.S. WTI moving over $50 a barrel and international Brent crude rising above $60 a barrel.

Fed Chairman Powell today to answer questions on economy and rate increases. Yesterday's minutes from the FOMC's December meeting indicated patience for upcoming rate hikes and possible changes to the central bank's balance sheet plan. Powell will take questions during an appearance at the Economic Club of Washington, D.C. The session will start around 11:40 p.m. CST. The group’s president, David Rubenstein, will interview Powell. Rubenstein is a co-founder of the Carlyle Group , the private-equity firm where Powell worked from 1997 through 2005. Other Fed officials, including Tom Barkin, James Bullard, Charles Evans, Neel Kashkari and Richard Clarida, are set to give presentations throughout the day.

China to encourage its 1 billion consumers to spend to offset trade war. Link to South China Morning Post article. Overall Chinese retail sales growth decelerated in November to its lowest rate in 15 years, despite record e-commerce spending on Singles’ Day.

China inflation data raises fresh economic concerns. China's Producer Price Index (PPI) rose 0.9% in December, the slowest pace in two years and raising fresh concerns about China's economic situation. Their Consumer Price Index (CPI) rose 1.9% in December, under the November pace of 2.2% and below expectations. Food prices rose 2.5%, the same increase as was seen in November, while non-food inflation was at 1.7%, down from 2.1% in November. Falling energy prices were one factor in the data. But the weaker showing has also spurred expectations that China may unleash additional stimulus efforts to try and bolster demand.

Ford Motor Co. is preparing major restructuring of its operations in Europe, including thousands of job cuts as it shuts plants and cancels a production of unprofitable models. Meanwhile, British car maker Jaguar Land Rover is expected to announce up to 5,000 job cuts as it restructures in the wake of weaker demand in China and a dramatic decline in diesel vehicle sales in Europe.


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