Impasse Continues on Partial Gov't Shutdown as Trump Calls for White House Confab

Posted on 01/02/2019 6:53 AM

USDA will need a week to get ready for scheduled reports | U.S./China trade talks near

Taking control of the House this week, Democrats intend to vote tomorrow on a funding package to end the partial U.S. government shutdown, without providing $5B for a border wall with Mexico. President Trump has said "we have no choice" but to let the shutdown continue unless there was funding but invited top congressional leaders yesterday to a White House briefing today on border security. Democratic leaders reportedly have indicated they will attend.
     U.S. and Chinese trade negotiations will soon meet in Beijing. Leading the U.S. delegation is U.S. Trade Representative Bob Lighthizer. The New York Times profiled Lighthizer and his aggressive trade policy tactics.
     China reserves the right to use force to bring Taiwan under its control, President Xi Jinping told a gathering in Beijing, but will strive to achieve peaceful "reunification" with the self-ruled island. Meanwhile, North Korea's Kim Jong-un said he's ready to meet President Trump anytime to denuclearize the Korean Peninsula but warned he may have to take an alternative path if U.S. sanctions and pressure continue.
     Chinese manufacturing had an even worse December than expected, darkening the mood for global equities and upending U.S. stock futures as they start 2019.
     How long will it take USDA to gear up for upcoming NASS and WASDE reports after the partial gov't shutdown ends? Sources signal one week. This is especially the case with the WASDE report. Most of the NASS-related information was obtained prior to the shutdown. But analysis of the data remains.


In a partisan bill, House Democrats will vote to reopen all the shuttered parts of the federal government when they take control of the chamber on Thursday. House Democratic leaders Monday released text of a spending package that would end the partial government shutdown. It includes six of the seven remaining spending bills and a continuing resolution for the Department of Homeland Security that would last through Feb. 8.

The House is planning votes on the package on Jan. 3, following the start of the 116th Congress.

But the Democrats' tactic will not provide any money for Trump’s border wall, meaning the government shutdown that began before Christmas is likely to continue because the Democrats did not and apparently do not want to include President Trump in their approach to finding a solution to the partial gov't shutdown.

In a statement Tuesday night, White House Press Secretary Sarah Huckabee Sanders said the president believes a “Pelosi plan” to reopen the government is “a non-starter” because it “fails to secure the border and puts the needs of other countries above the needs of our own citizens.”

Senate GOP will balk. The Republican-led Senate, under Majority Leader Mitch McConnell (R-Ky.) will likely not consider either measure if Trump says he would not sign them into law.

Bottom line: Both sides are bracing for a prolonged shutdown.

Trump invited congressional leaders to White House today for briefing on border security as government shutdown enters the 12th day. The session would occur a day ahead of Democrats taking control of the House. Democratic leaders have indicated they will attend today's Trump-called briefing. Word of the briefing was first reported by Politico.

The president and Congress remain at odds over his demand for funding for a U.S.-Mexico border wall. The invite was extended to the top two leaders in each party in the House and Senate.

It would be Democratic leaders’ first visit to the White House since Dec. 11, when the president said he would be “proud to shut down the government for border security.”

Government workers' worries, bills pile up. Some federal employees are bracing for the worst, deferring payments, filing unemployment claims and notifying landlords they may not make rent.

Trade talks between the U.S. and China are set to begin soon in Beijing. The American side is being led by Bob Lighthizer, a China skeptic who has said he wants to prevent President Trump from making a quick, empty deal in order to calm the markets.

Trump has told his advisers that Chinese leader Xi Jinping is someone with whom he can cut a big deal. On Saturday, Trump called Xi to discuss the status of talks, tweeting afterward that good progress was being made. “Deal is moving along very well,” Trump said.

Lighthizer, 71, is pushing for substantive changes, such as forcing China to end its practice of requiring American companies to hand over valuable technology as a condition of doing business there. According to the New York Times, “Lighthizer remains deeply skeptical of Beijing and has warned Mr. Trump that the United States may need to exert more pressure through additional tariffs in order to win true concessions.” It added that when Lighthizer senses that anyone — even Trump — “might be going a little soft on China, he opens a paper-clipped manila folder he totes around and brandishes a single-page, easy-reading chart that lists decades of failed trade negotiations with Beijing.”

The article also said that Lighthizer does not always get his way. In the wake of a new trade agreement with Mexico and Canada this fall, the NYT revealed, Lighthizer urged Trump to consider easing steel and aluminum tariffs on those countries and replacing them with less burdensome quotas. Trump rejected his plan, the article said, according to negotiators from all three countries.

Trump also ignored Lighthizer’s advice in early December when he announced that he intended to begin the six-month process of withdrawing the United States from NAFTA in order to pressure House Democrats into passing the new United States-Mexico-Canada Agreement. Link to NYT article.

China announces increased ASF actions. Slaughter facilities in China will now have to test pig products for African swine fever (ASF) before they can be sold on the market and must slaughter hogs from different origins separately, according to new rules released by China's agriculture ministry that take effect February 1. Under the rules, if ASF is found, slaughterhouses have to cull all pigs and suspend operations for at least 48 hours. The new rules come as China reported a new outbreak in Heilongjiang province on a farm with 73,000 hogs, the largest operation yet where ASF has been reported in China.

— South Korea tightens regs in bid to prevent bird flu. Poultry breeding in areas vulnerable to avian influenza will be prohibited under new rules unveiled by the South Korean Ministry of Agriculture, Food and Rural Affairs, with Yonhap News reporting the new rules also will have strengthened requirements for stock breeders. Additional poultry farms would be prohibited with in a 500-meter radius from existing duck and chicken farms, according to the rules. Disease outbreaks that happen in a violation of the regulations would result in farms losing their livestock breeding license, the report said. 

Other items of note:

  • North Korean leader Kim Jong Un said Tuesday he hoped to extend his nuclear summitry with President Donald Trump in 2019, but also warned Washington not to test North Koreans’ patience with sanctions and pressure. During his televised New Year’s speech, Kim said he’s ready to meet with Trump at any time to produce an outcome “welcomed by the international community.” However, he said the North will be forced to take a different path if the U.S. “continues to break its promises and misjudges our patience by unilaterally demanding certain things and pushes ahead with sanctions and pressure.” Kim also said the U.S. should continue to halt its joint military exercises with ally South Korea and not deploy strategic military assets to the South.

  • American detained in Russia isn't a spy, family says. The family of an American detained in Moscow last week announced that he was a former marine attending a wedding. The Federal Security Service, successor to the KGB, claimed Paul Whelan was arrested “during an act of espionage”. His detention comes two weeks after a Russian woman pleaded guilty in Washington to conspiring to act as a foreign agent.

  • Xi Jinping, China’s president, gave a speech on Taiwan, urging it to accept that independence will “only bring hardship”, and that reunification with China is inevitable. He also refused to rule out force as a means of achieving that end. Tsai Ing-wen, Taiwan’s president, said the island would never accept a Hong Kong-style, “one country, two systems” reunification.

  • Slower withdrawal from Syria. President Trump will give the military about four months to pull 2,000 U.S. troops from Syria, after facing criticism for saying the departure would happen within 30 days.

  • Elizabeth Warren became the first big name to announce her intention to run for president in 2020. The Democratic senator from Massachusetts is popular on the party’s left, but also pursued an ill-advised issue with the president over her thin sliver of Native American heritage.

  • Mitt Romney blasts "deep descent" of Trump presidency. Mitt Romney, the incoming senator from Utah and a former Republican presidential nominee, said in an op-ed essay in the Washington Post that Donald Trump “has not risen to the mantle of the office.” Link to op-ed.

  • Outgoing Michigan governor vetoes cage-free egg bill. In one of his last acts as governor of Michigan, Rick Snyder vetoed a bill that would establish the effective date of requirements that all eggs produced in Michigan come from cage-free laying systems.

  • The new year is starting with new attention to extra fees freight railroads are charging their shipping customers. The Surface Transportation Board will start examining the extra charges Norfolk Southern Corp., Union Pacific Corp. and other railroads are imposing to back efforts to get their networks to operate more efficiently. The Wall Street Journal reports (link) the railroads are adding charges when customers aren’t ready to load or unload freight, or causing other delays that slow rail networks. The fees come amid growing tensions over the use of financial penalties that companies say are aimed at unwinding logistics snarls. U.S. maritime regulators are addressing shipper complaints that they’re being hit with unfair fees for not pulling their cargo quickly enough from crowded container sites.

Markets. The Dow on Monday was up 265.06 points, 1.15%, at 23,327.46. The Nasdaq climbed 50.76 points, 0.77%, at 6,635.28. The S&P 500 gained 21.11 points, 0.85%, at 2,506.85.

For 2018, the Dow lost 5.97%. The S&P 500 was down 6.24% for the year. The tech-heavy Nasdaq finished down 4.38% for 2018. The Dow and S&P 500 fell for the firt time in three years and were the biggest declines since 2008. The Nasdaq fell for the first time in six years.

Five Federal Reserve indexes of regional manufacturing in the U.S. all slumped in December, while an official survey shows China’s factory activity shrank for the first time in more than two years.

Minimum wage boost arrives for workers. Some 19 states and 21 cities will increase their minimum wage for workers this year, according to the National Employment Law Project. Around 17 million will receive pay increases as the new levels are phased in during the course of 2019.

Chinese manufacturing had an even worse December than expected. The Caixin/Markit Manufacturing PMI fell to 49.7 last month from 50.2 in November, dropping below the critical 50 level that separates growth from contraction. Besides the first shrinking factory activity figure in 19 months, two separate measures for new orders and new export orders showed contraction amid a trade dispute with the U.S. The Caixin PMI reading echoed the official PMI mark released December 30 that was also in contraction territory, the weakest mark since February 2016.

Crude futures retreated to start the new year, falling as much as 2.2% to $44.41/bbl, amid concerns about a downturn in China that could squeeze demand for oil at a time when supply is in a big surplus. Russian production also hit a post-Soviet record in 2018, according to new figures, while there are fears about a resurgent glut fueled by booming U.S. production and America's waivers for buyers of Iranian crude.

China trims initial oil import quotas issued for 2019. Import quotas totaling 89.84 million tonnes of crude oil have been issued to 58 companies in the first installment of the oil import quotas, according to a report from Reuters. That is well below the 121.32 million tonnes that were released as the initial quota levels in 2018, but the report said that the volume could increase via a second round of quotas expected to be issued later this year. Private refiners received quotas totaling 70.65 million tonnes, down some 20 percent from the initial 2018 installment, the report said. One analytical firm, SIA Energy, said refiners only used 71% of the quotas allocated between January and October 2018, a likely factor in the smaller quota marks released to open 2019.

Looking to curb illegal activities, "17 of the 19 national central banks in the euro area will no longer issue €500 banknotes from Jan. 27, 2019," the ECB said on its website. However, Austria and Germany will both continue printing the notes until April 26 "in order to ensure a smooth transition and for logistical reasons." According to ECB statistics, €500 bills account for just 2.4% of the total number of banknotes in circulation, but a little over 20% of the total value.

China has pledged to lend at least $2 billion to Pakistan to shore up its forex reserves and prevent further devaluations of the rupee against the dollar, two senior government officials told the Financial Times. The promised financial support comes as Islamabad negotiates a potential $7 billion to $8 billion loan with the IMF. The rupee has lost more than a fifth of its value against the greenback since late 2017 and Fitch last month cut Pakistan's debt rating deeper into junk territory.


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