The Finance 202: Trump's TPP flirtation is surprisingly serious


THE TICKER

President Trump’s abrupt order to reconsider the Trans-Pacific Partnership sounds like trademark hot air but stands a stronger chance of becoming real than it might initially appear. 

The president performed the dramatic about-face Thursday, directing top officials to study rejoining the sweeping Obama-era pact he called “a continuing rape of our country” on the campaign trail then iced as soon as he took office. 

The context might suggest it was a passing whim. Trump is no stranger to playing to the room, and the one he presided over Thursday was full of farm-state lawmakers and governors anxious about economic ravages of a trade war with China. The president is also known to change his mind, a lot, even during placid times. These aren’t thoseBut pro-trade Republican senators who witnessed Trump’s reversal in real-time during the White House meeting decided to take the president at his word. Senate Agriculture Committee Chairman Pat Roberts (R-Kan.) called it “certainly good news.” And this was what Sen. Ben Sasse (R-Neb.) tweeted afterward: 

Indeed, he’s steering a zigzagging course while ramping up a protectionist push. “Thursday’s order comes as Trump pushes forward on a chaotic revamp of the U.S.’s approach to global trade, seemingly veering from trade wars one day to multinational pacts the next,” The Washington Post’s Erica Werner, Damian Paletta and Seung Min Kim write. “He has gone from assailing Canada and Mexico to saying he’s within striking distance of renegotiating the North American Free Trade Agreement. He has both pilloried China and praised its leader Xi Jinping.”

Late Thursday, he said he’d only reconsider TPP with major concessions, which participants are unlikely to grant: 

And true to form, Trump is preserving his options with the TPP gambit . “A senior administration official, speaking on the condition of anonymity to describe the White House’s internal approach, said Trump has not set any goals or deadlines for [National Economic Council director Larry] Kudlow and [U.S. Trade Represenative Robert E.] Lighthizer for when a new agreement should be reached,” they write. “Instead, the White House is approaching potential new talks as a way to make signal that Trump is receptive to free market proposals if he feels they can be reached in a way that advances U.S. interests, the official said.” (And Kudlow tells The New York Times the president has asked him to explore rejoining in the past but didn’t know he’d say so publicly Thursday: “There’s out of the blue, and there’s, I guess, out of the dark, navy blue,” Kudlow said, adding this was “dark, navy blue.”)

So the usual swarm of asterisks applies. But trade experts say there is reason to believe the president could see new value in reviving American participation in the Pacific Rim trade deal. “It should have resonated with him before, but now that he’s moving toward serious negotiations with China, this is the best defense against the Chinese and the best way to counter them in the Pacific,” says the American Enterprise Institute’s Claude Barfield.

Wendy Cutler, who helped negotiate TPP as a top USTR official, called Trump’s decision encouraging. “It means there will be work done to back this up and decisions will be made about what the US would need to get back into TPP. He’s set up a process.”

The move comes as Trump as his team zero in on isolating Beijing in their budding trade confrontation. Trump officials believe they’ve already seized some momentum in that fight. They plan on pressing that perceived advantage by detailing new tariffs on Chinese imports and announcing limits on Chinese investment in the U.S. tech industry, The Wall Street Journal’s Bob Davis and Lingling Wei report. “The actions come as administration officials argue the Chinese are already bending to the U.S.’s will,” they write. “They point to a speech on Tuesday by [Xi], who promised to roll out measures this year to lower tariffs on imported cars and to ease foreign ownership restrictions on auto makers in China.”

Whether or not the Trump team has accurately assessed its leverage — skeptics say Xi’s speech amounted to little more than a rehash of old commitments — Chinese leadership does indeed appear to be rattled by the administration’s hawkishness and unsure what to make of it. “For the past few months, some of the most powerful men in China — allies of [Xi] with longstanding ties and deep experience with the United States — have been casting about for a better understanding of Mr. Trump and how to respond to his combative trade agenda, according to several people they have consulted,” The New York Times’s Keith Bradsher and Jane Perlez write

Each government is gearing up to outflank the other with their trading partners. “China is looking to line up other countries against the U.S., Chinese officials said—especially in Europe, whose companies could benefit should China react to the stepped up pressure by retaliating against the U.S.,” The Journal writes. And Kudlow in recent days talked up a “trade coalition of the willing” he said the U.S. would soon name as allies against Chinese trade abuses — prompting observers to note that was among TPP’s founding purposes. 

Recent progress on other trade deals could clear a path. Trump regularly trashed a decade-old free trade agreement with South Korea, calling it a “disaster” and a “job killer” until his administration amended it with modest tweaks last month. The president has since praised it as a “wonderful deal.” The Trump administration is still attempting to finalize a renegotiation of NAFTA with Mexico and Canada, both of which are among the 11 other nations party to the TPP. The administration needs “a clearer idea of the landing zones on some of the key issues” in those talks before moving on to TPP, Cutler says.

The Post team writes that the Trump administration can’t expect to waltz back into the pact. “Reentering the TPP would not be easy. The 11 other countries reached their own trade deal this year, and it is unclear what conditions they would set before they restarted the entire process with the United States,” they write. “The deal would be much stronger with U.S. participation, since it is the world’s largest economy. But several countries in the deal have cast a wary eye toward Trump’s pendulum swings on trade.”

That said, Japan, the next largest economy in the deal, has remained a champion of the U.S. rejoining. Japanese Prime Minister Shinzo Abe “has tried to convince President Trump since he took office to rethink his decision,” Cutler notes. The two have a warm rapport — and are set to meet next week at Mar-a-Lago. 

MARKET MOVERS

Earnings ahoy. CNBC’s Patti Domm: ” A trio of major bank earnings Friday could be the kickoff to a new catalyst for stocks: earnings season. Analysts expect earnings to be up about 18.5 percent this quarter, a whopping gain and a plus for a market that’s been volatile and focused on a host of negatives. Strategists have been counting on super-strong earnings to refocus investors on fundamentals and away from worries such as trade wars and concerns about Syria… Earnings from the major banks — J.P. Morgan Chase, Citigroup and Wells Fargo — officially mark the start of the first-quarter earnings reporting period, ahead of Friday’s opening bell.”

(Everybody’s underestimating how great earnings will be, J.P. Morgan says, projecting they’ll be closer 21 percent.)

Stocks bounce. WSJ’s Michael Wursthorn and Jon Sindreu: “Bank shares surged Thursday, helping major U.S. indexes rebound, as a momentary cool-down in geopolitical tensions helped investors reset their focus on the start of earnings season. The Dow Jones Industrial Average rose nearly 300 points, recouping Wednesday’s losses that were triggered by concerns of possible U.S. military intervention in Syria, as well as simmering fears around whether global synchronized growth will be disrupted by a trade war.”

Global growth peaks. Bloomberg’s Rich Miller and Enda Curran: “The rare synchronized upswing of the global economy is looking down but not out. What’s happening, economists say, is that the broadest period of world growth since 2010 is peaking at an elevated level, not petering out. And the driver of the expansion is shifting to a fiscally juiced U.S. economy from a slowing Europe and Japan. But they acknowledge that their forecasts of another year or more of solid economic activity have become more uncertain after a soggy start to 2018, an outbreak of trade tensions and a ratcheting up of concern over Syria.”

TRUMP TRACKER

Trump mails in Amazon beef. The Post’s Phil Rucker and Josh Dawsey: “Trump, who has assailed Amazon.com and falsely accused the online retail giant of cheating the U.S. Postal Service by taking advantage of bulk delivery rates, on Thursday night ordered a sweeping overhaul of the Postal Service’s business model. Trump issued an executive order forming an administration task force, to be chaired by Treasury Secretary Steven Mnuchin, and directed it to evaluate the Postal Service’s finances and operations. The order also directs the task force to issue a report outlining proposed changes within 120 days. The order states that the Postal Service has incurred $65 billion of cumulative losses since the Great Recession ended in 2009 and that it must make changes so that it operates under ‘a sustainable business model… 

“The order does not single out Amazon by name, but Trump has often railed against Amazon — in public and, more frequently, in private conversations with his advisers and friends — complaining about Jeffrey P. Bezos, the company’s billionaire founder and chief executive. Trump’s advisers say his outbursts about Amazon often are triggered by what the president perceives as negative coverage of him by The Washington Post, which Bezos owns personally. The Post operates independently of Amazon, though Trump has falsely accused the newspaper of being a ‘lobbyist’ for Amazon.”

MONEY ON THE HILL

Ryan’s payday. Bloomberg’s Jeff Green, John McCormick and Bill Allison: “Paul Ryan will easily add to his already considerable net worth if he opts to stray from his native Wisconsin to join a corporate board or dabble in Washington power struggles when he retires next year as speaker of the U.S. House of Representatives. ‘The kind of board that he would go after would probably pay between $250,000 and $300,000 a year and he could probably get three or four of them,’ said Fred Foulkes, a professor at Boston University’s Questrom School of Business. ‘There would be dozens that would like to have him, particularly companies that have part of their business in key relationships with certain parts of government.'”

Wall Street next? Fox Business’s Charles Gasparino: “Where will… Ryan end up after he leaves Congress at the end of his term? Just follow the money to Wall Street. That’s the assessment from Republican aides and people who know the soon-to-be former speaker… People in Congress who know Ryan say he has looked into following in the footsteps of his old friend and Republican house colleague, former Majority Leader Eric Cantor. After losing his seat in 2014, Cantor almost immediately went to work for the investment bank Moelis & Co. as the firm’s vice chairman and, of course, enjoyed a significant pay boost.”

Warren vs. Mulvaney. The Post’s Renae Merle: “After months of letter writing and political one-liners, two of Washington’s most strident adversaries met Thursday to debate the future of the Consumer Financial Protection Bureau. On one side was Sen. Elizabeth Warren (D-Mass.), who came up with the idea for the watchdog agency and has been among its most vocal supporters in Congress. On the other was Mick Mulvaney, who has spent years criticizing the CFPB as rogue agency that needed to be reined in before President Trump appointed him in November to be its temporary leader… At the hearing Thursday, Warren lashed out at Mulvaney… ‘You’ve taken obvious joy in talking about how the agency will help banks a lot more than it will help consumers and how upset this must make me. But here’s what you don’t get, Mr. Mulvaney: This isn’t about me,’ Warren said.”

See their exchange here: 

Mulvaney called recent moves by banks to cut off lending to gun manufacturers “troubling.” Bloomberg: “But he said he has no desire to insert his bureau in the matter. ‘It looks like we’re heading towards red banks and blue banks,” Republican Senator John Kennedy of Louisiana said to Mulvaney after discussing recent policy changes by Citigroup Inc. and Bank of America Corp. which have restricted their business with firearms vendors and manufacturers.”

Meanwhile, a panel of judges questions Mulvaney’s dual role. American Banker’s John Heltman: “A panel of judges remained skeptical of claims by Leandra English, deputy director of the [CFPB], that she is the rightful head of the agency. But they didn’t sound convinced that… Mulvaney is, either. English had already faced long odds to unseat Mulvaney as head of the agency, and oral arguments Thursday before the U.S. Court of Appeals for the D.C. Circuit did not appear to reverse that.”

Mulvaney wins tax turf. WSJ’s Richard Rubin: “The Trump administration ended an internal dispute and the result will shape regulations under last year’s tax law, giving the Office of Management and Budget more involvement and authority in the process. Under the agreement, OMB will review significant Treasury tax rules, especially when they create novel policy issues or potential conflicts with other agencies. OMB and the Treasury Department announced the agreement on Thursday after months of negotiations. That is a departure from the past 35 years, when Treasury’s tax regulations were largely exempt from the cost-benefit analysis and other scrutiny from OMB’s Office of Information and Regulatory Affairs.”

POCKET CHANGE

Blankfein: Nasty times. Politico: “Goldman Sachs CEO Lloyd Blankfein said political volatility is the new normal in the U.S. In an interview with Politico in Brussels on Thursday, Goldman’s chief said the situation nowadays is peculiar because the ‘economy is pretty good and politics are as bitter and as negative as I’ve ever seen it.’ “One of the common slogans of the U.S. political scene is, it’s the economy stupid … it doesn’t feel like that now.’ Blankfein also underlined that he doesn’t ‘get hysterical at every pronouncement [made by Trump]’ because there’s a difference between the rhetoric and what actually gets done.”

Jobless benefits drop. Washington Examiner’s Joseph Lawler: “The number of people receiving unemployment benefits is running at the lowest level in 44 years, the Department of Labor reported Thursday. Altogether, 1.88 million people were receiving jobless benefits at the end of March. That was low enough to sent the monthly average for such claims down to 1.85 million, the lowest such mark since January of 1974, when the total workforce was much smaller.”

Zuck’s next grilling. The Post’s Tony Romm: “Facebook chief executive Mark Zuckerberg barely left his grilling in Congress before another group of lawmakers is asking him to testify — this time, in Europe. Antonio Tajani, president of the European Parliament, is set to send a letter to Zuckerberg on Monday insisting that the Facebook co-founder come to testify, a spokesman for Tajani said Thursday, amid heightened concern about Facebook’s privacy practices. If Zuckerberg agrees, it would bring him face-to-face with some of the tech industry’s toughest critics outside the United States, who will begin implementing new rules in May that would fine companies for mishandling consumers’ sensitive information.”

THE REGULATORS

DAYBOOK

Today

  • The American Action Forum holds an event on CFIUS reform.

THE FUNNIES

From The Post’s Tom Toles: 

BULL SESSION

Five takeaways from former FBI director James B. Comey’s new book:

Here are four fact checks from Mark Zuckerberg’s testimony



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