Trump met with Fed Chairman Powell | House today considers Dec. 20 CR for FY 2020
In today's updates:
* CNBC reporter tweeted Chinese gov't official's concerns about trade talks with U.S.
Markets: The models run by the Federal Reserve Bank of Atlanta and Federal Reserve Bank of New York both lowered their forecasts of fourth-quarter gross domestic product growth to just above 0%. The Atlanta Fed’s model is now predicting growth of just 0.3%, while the New York Fed’s model is forecasting 0.4% growth.
U.S. fried chicken chain Popeyes wants to become the top chicken brand in China, knocking off KFC. The company plans to build the 1,500 stories, after signing a lease in Shanghai for its first store in China on Monday, which is slated to open next year.
— U.S./China trade policy update:
- U.S./China trade deal mood is pessimistic in Beijing: CNBC. The mood in Beijing about a trade deal is pessimistic due to President Donald Trump’s reluctance to roll back tariffs, which China believed the U.S. had agreed to, a government source told CNBC’s Eunice Yoon.
- If Phase 1 is having a hard time getting complete, other phases are thrown in doubt, say China watchers interviewed. Phase 1 talks continue to focus on getting China to commit to a specific dollar amount and farm products that Chinese negotiators have balked at. Initial Phase 1 talks has both sides agreeing on a $20 billion farm product shopping list, but President Trump told his negotiators to set the figure three times that mark, and then settled on a range of $40 billion to $40 billion. Chinese agricultural imports from the U.S. peaked at $29 billion in 2013, with over half being soybeans. A New York Times article (link), citing experts, says “the president’s unpredictability and ongoing demands of China are complicating an end to the long-running dispute.” China, meanwhile, is reluctant to commit to a meeting to sign any Phase 1 final deal until a deal that includes tariff reductions is finalized. The NYT article notes that, “While China needs and wants to buy agricultural goods like soybeans and pork, it has balked on terms that would leave it exposed to accusations that it favors American products over other countries’, as well as agreements that could result in more American tariffs if its purchases do not come through.” He Jianxiong, the former executive director for China at the International Monetary Fund, at a Nov. 6 event at the Peterson Institute in Washington, said: “Without rolling back some of the tariffs, or reducing the uncertainty of not raising additional tariffs, then I would ask what is the additional incentive of implementing this deal on the Chinese part?”
- China issues warning on Hong Kong decision to overturn mask ban. China’s parliament signaled its “strong dissatisfaction” with a Hong Kong court ruling that overturned a contentious mask ban, in an intervention that threatens to inflame tensions in the territory where a police siege of a university entered a third day. The ban, which prohibits the wearing of masks during public assemblies, was passed after Carrie Lam, Hong Kong’s chief executive, used emergency powers that allow her to bypass the territory’s legislative council — she called for a resolution to the siege, saying she instructed police to try to end the situation peacefully. A top Chinese official declared that only the Chinese legislature has the right to decide “Whether Hong Kong’s laws are consistent with the Hong Kong Basic Law,” adding that “No other authority has the right to make judgments and decisions,” an assertion that appears to undermine what remains of Hong Kong’s judicial independence. Meanwhile a police siege of protesters bunkered in Polytechnic University entered its third day. Forty injured activists were allowed to leave and others escaped by descending from a bridge onto a highway using ropes.
- China is watching proposed U.S. Senate legislation dubbed The Hong Kong Human Rights and Democracy Act. If passed and signed by President Trump, that could complicate efforts by Washington and Beijing to negotiate a final settlement to their long-running trade war. The act requires the U.S. Secretary of State to determine each year if Hong Kong still deserves to be treated as a trading entity distinct from China. Hong Kong’s own exports are at present exempted from Trump’s trade war tariffs and could potentially lose that exemption.
- Goldman Sachs Group Inc. sees the drag on the global economy from the trade war between the U.S. and China fading in 2020 as the bank forecasts that tariffs on American imports from the world’s second-largest economy have already peaked.
- China to boost credit support to economy. The People’s Bank of China (PBOC) is expected to lower its Loan Prime Rate (LPR) Wednesday as the central bank seeks to increase the credit support for the Chinese economy. Central bank Governor Yi Gang said Tuesday the PBOC will push real lending rates lower and called on lenders to reference the LPR when they set lending rates. The PBOC chief met with commercial banks Tuesday and indicated that economic growth remains under pressure and there is still credit pressures in some regions. The PBOC will boost countercyclical adjustments to the Chinese economy and the government is expected to ensure growth in money supply and social financing in line with nominal GDP growth.
— House to take up Dec. 20 stopgap spending measure today. House Appropriations Democrats released the draft stopgap measure Monday afternoon. It would replace the current continuing resolution (CR), which expires Nov. 21, with a new deadline of Dec. 20 to complete fiscal 2020 spending bills.
White House responds. “We need to review all the details of the CR, but are heartened that at first blush it does not appear to contain provisions which impede the President’s ability to pursue his policies, or other items which could impair the ability of the President to sign it by Thursday night,” White House legislative affairs director Eric Ueland said in a statement.
One provision would allow the Census Bureau to spend at a $7.3 billion annualized rate in order to ensure adequate funding for the 2020 decennial count.
The measure would temporarily extend three Foreign Intelligence Surveillance Act (FISA) provisions through March 20, 2020. The provisions are otherwise set to expire Dec. 15.
Highway funds included. House Democrats included a provision that would block a looming $7.6 billion rescission of highway funding set to hit the states on July 1, 2020, under the 2015 highway authorization law. The Congressional Budget Office said the provision wouldn't actually cost anything, however, since the program's funding is expected to continue under baseline assumptions.
Military pay raise. Language would ensure adequate funding for military service members to receive a 3.1% pay raise next year.
The stopgap measure will be attached as an amendment to a fiscal 2020 spending package (HR 3055) that's already passed the House and Senate, a procedural move that will cut down on debate time when the measure goes back to the Senate later this week.
The two parties reached agreement in July to budget $738 billion for defense-related appropriations and $632 billion for nondefense programs during fiscal 2020. But Republicans and Democrats have not yet agreed how to divide up the funding. The chief sticking points have been border wall spending and whether the president should keep the ability to transfer military funds to border wall construction.
— Canadian National Railway workers strike. Teamsters Canada said on Twitter that about 3,000 workers at Canadian National Railway went on strike early this morning as both sides failed to resolve issues in contract negotiations. "Conductors, train people and yard workers at Canadian National Railway are now officially on strike," the union said. The union had issued a 72-hour strike notice over the weekend as talks reached a stalemate. This could temporarily cripple supply networks for grain at a critical time when the harvest is completed and railroads ship thousands of grain cars to the West Coast of Canada weekly for export markets.
— House Speaker Nancy Pelosi (D-Calif.) will meet with AFL-CIO President Richard Trumka and Democratic freshmen to discuss the USMCA trade pact, Politico reported Monday evening. Trumka told union members at a convention in Maryland on Monday evening that NAFTA had been "a disaster for working people," with Maryland alone losing more than 70,000 manufacturing jobs. "We've been lobbying the White House specifically on NAFTA for more than two years, slowly but surely moving the ball down the field. But we are not there yet," Trumka said. "Let me repeat: we are not there yet."
Trumka said there was pressure to "fold on core issues" to secure a deal, but vowed not to let that happen, because millions of jobs were at stake. "Getting this done right is more important than getting it done fast. So until the administration can show us in writing that the new NAFTA is truly enforceable, with stronger labor standards, there is still more work to be done," he said. "We cannot and will not support any deal that does not deliver for working people," he added.
Some of Trump's key Cabinet members will be at the White House today for a concerted push for passage of USMCA, White House spokeswoman Roma Daravi said in a post on Twitter on Monday.
— Other items of note:
When will Congress depart for the year? House Majority Leader Steny Hoyer (D-Md.) told members last week that they should prepare to be in session the week of Dec. 16, instead of on recess, given the Dec. 20 deadline in the new continuing resolution (stopgap spending measure). “I would advise all members on both sides of the aisle not to schedule any business outside of Washington, D.C., between the 16th and the 20th,” Hoyer said.
Which of these 2020 Democrats agrees with you most? The Washington Post asked each Democratic candidate where they stand on more than 70 policy questions. Now, it’s your turn to answer. Link to take the quiz.
USTR has scheduled a hearing on Jan. 30 for its review of GSP trade benefits for nine countries: Azerbaijan, Ecuador, Georgia, Indonesia, Kazakhstan, Thailand, South Africa, Uzbekistan and Laos.
Senate panel votes on Energy secretary nominee. The Senate Energy and Natural Resources Committee will vote on the nominee to be the next Energy secretary, as current department head Rick Perry prepares to take his exit by the end of the year. Nominee Dan Brouillette has served as the deputy secretary since 2017, when the Senate confirmed him 79-17. The panel will also vote on Katharine MacGregor’s nomination to be deputy secretary of the Interior, and mark up a slate of legislation.
McConnell on Trump's fate. Senate Majority Leader Mitch McConnell (R-Ky.), during an appearance yesterday in Louisville, said he "can’t imagine" a scenario where there is enough support in the Senate — 67 votes — to remove President Trump.
Global trade is set to stay weak as 2019 draws to a close. The World Trade Organization's trade barometer shows some stabilization for the global flow of goods, albeit at low levels. The WTO's Goods Trade Barometer recorded signs of a pickup in export orders, container shipping and automobile shipments, offset by weakness in airfreight, and shipments of raw materials and electronic components. The end result: International trade is likely to end the year having risen at the slowest pace since 2009. Trade flows have been weakened by several developments, including the U.S./China trade war and a slowdown in the global automobile industry. Link to WSJ article.
As of Nov. 18, MFP 2 payouts totaled $6.899 billion, including $6.58 bil. for non-specialty crops, $69.7 mil. for specialty crops, and $252 mil. for livestock.
— Markets. Record finishes were registered by the three major indices, with the Dow finishing above the 28,000 plateau for a second straight session. The Down finished up 31.33 points, 0.11%, at 28,036.22. The Nasdaq rose 9.11 points, 0.11%, at 8,549.94. The S&P 500 added 1.57 points, 0.05%, at 3,122.03.
Fed Chairman Jerome Powell told President Trump that the central bank would continue to make monetary policy in a “non-political” manner, during a meeting that followed months of criticism of Powell by president. Powell accepted Trump’s invitation. Trump said he had a “very good & cordial” meeting with the Fed chair on Monday, while the Fed said that Powell had stuck by his insistence that policy would be dictated by the twin goals of stable inflation and maximum employment. “Everything was discussed including interest rates, negative interest, low inflation, easing, Dollar strength & its effect on manufacturing, trade with China, EU & others, etc,” Trump wrote on Twitter. The meeting, which lasted for 30 minutes in the White House residence and was attended by Treasury Secretary Steven Mnuchin, had not been not listed in the president’s official public schedule. Late Monday night, the president tweeted: “At my meeting with Jay Powell this morning, I protested fact that our Fed Rate is set too high relative to the interest rates of other competitor countries. In fact, our rates should be lower than all others (we are the U.S.). Too strong a Dollar hurting manufacturers & growth!” The Fed said Powell met the president and Mnuchin to “discus the economy, growth, employment and inflation.” The Fed statement noted that, “Chair Powell's comments were consistent with his remarks at his congressional hearings last week. He did not discuss his expectations for monetary policy, except to stress that the path of policy will depend entirely on incoming information that bears on the outlook for the economy.” Powell told Trump that the central bank would “set monetary policy, as required by law, to support maximum employment and stable prices ... based solely on careful, objective and non-political analysis,” the statement continued.