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Why the White House wants out of the trade war — As MM reported yesterday, nobody in the White House outside of Peter Navarro really wants the trade war with China to escalate to the next step, no matter the pugilistic posture Trump wants to project.
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That’s because rhetoric aside, they all know what the data show: The tariffs are being entirely passed on to U.S. consumers. And sometimes price hikes go BEYOND the size of the tariffs.
Via Deutsche Bank chief economist Michael Spencer: “The strong conclusion is that so far US consumers have borne substantially all of the tariff increase. … [I]n one intriguing example, the pass-through from a tariff to consumer prices has been greater than 1:1.”
Unsustainable — The White House also knows that the plan to tax American consumers to pay bailouts to farmers slammed by China’s retaliatory tariffs – which is exactly what’s happening — is not a sustainable one. And patience among farmers and farm states senators, to the extent that it exists, will not last. The price increases also hit hardest on low-income, blue-collar voters that make up Trump’s base.
Big day for the regulators — Top financial regulators including the Fed’s Randy Quarles, OCC’s Joseph Otting, FDIC’s Jelena McWilliams and NCUA’s Randy Hood testify before Senate Banking this morning. They could face heat from both sides with the GOP unhappy with the pace of deregulation and Democrats the opposite. (More below.)
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GOOD WEDNESDAY MORNING — MM sees reports that the sun may reappear today after 765 days of continuous rain. Email me on firstname.lastname@example.org and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on email@example.com and follow her on Twitter @AubreeEWeaver.
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Senate Banking hearing with top financial regulators starts at 9:30 a.m. … House Financial Services subcommittees hold hearings at 10:00 a.m. on protecting workers and 2:00 p.m. on sanctions … Retail Sales at 8:30 a.m. expected to rise 0.2 percent headline and 0.7 percent ex-autos … Industrial Production at 9:15 a.m. expected to be flat …
ALSO TODAY — USTR Bob Lighthizer will meet with House Speaker Nancy Pelosi.
FIRST LOOK: AOC AND OTHERS COMPLAIN ABOUT DEREG — Via our Zachary Warmbrodt: “More than a dozen House Democrats including Reps. Alexandria Ocasio-Cortez, Rashida Tlaib and Katie Porter are calling on Federal Reserve Chairman Jerome Powell to reconsider banking rollbacks that they say threaten the economy.
“In a letter led by Rep. Chuy Garcia, the 13 lawmakers tell Powell and Fed Vice Chair for Supervision Randal Quarles that their recent deregulatory moves “seem to ignore lessons from the 2008 financial crisis and greenlight the same risky financial activity that led to the last crash.” Read more here.
TRUMP OPEN TO BUDGET DEAL — Our Burgess Everett and Nancy Cook: “Trump left a meeting with Senate Majority Leader Mitch McConnell on Tuesday … seemingly open to a deal with Democrats to raise the budget caps that will cause strict spending cuts in the fall, according to three people familiar with the matter.” Read more.
HEARING PREP — Compass Point’s Isaac Boltansky emails: “I think the regulators will face jabs from both sides of the dais. While they might have found refuge with GOP lawmakers during previous hearings, I think Republican frustration with the pace and scope of the deregulatory agenda will be on display.”
Brookings’ Aaron Klein emails: “I suspect there will be a lot of questioning regarding the Bernanke-Geithner-Yellen-Lee letter and systemic risk/FSOC lack of action. I’m keeping an eye on how much is said and by whom on AML. That issue scrambled traditional partisan-industry lines.
TARIFFS HIT CHINA AS WELL — South China Morning Post’s Finbarr Bermingham: “Some exporters were taken by surprise. ‘Frankly, I am super pissed, because this will completely kill my U.S. market,’ said Anna Kam, whose company Sky City 2K exports video game console controllers, 85 percent of which are sourced and manufactured in mainland China” Read more.
GRASSLEY SEES PROGRESS ON TARIFFS — Our Sabrina Rodriguez: “Senate Finance Chairman Chuck Grassley suggested … that U.S. and Canadian officials could be nearing a deal to lift the tariffs … Trump imposed on steel and aluminum imports.” Read more.
ALICE RIVLIN DIES — Our Caitlin Emma: “Alice Rivlin, the founding director of the Congressional Budget Office, has died. She was 88 years old. Rivlin was appointed to CBO in 1975 and holds the record for the longest tenure in that post, until 1983. She was most recently a senior fellow at the Brookings Institution, where she worked on economic studies and health policy.” Read more.
CALABRIA ON FANNIE/FREDDIE POWERS — Our Katy O’Donnell: “Federal Housing Finance Agency Director Mark Calabria on Tuesday laid out his most forceful argument yet for why he has the power to end government control of Fannie Mae and Freddie Mac without legislation, even as he urged Congress to take the lead.”
DEMS DITCH TRUMP ON CHINA — Our Burgess Everett and Heather Caygle: “Democrats have pushed … Trump for months to take a tougher stance toward China on trade. But now that Trump has taken their advice, he finds himself on an island with no lifeline from Democrats.
“In interviews with a dozen House and Senate Democrats from the Midwest and in leadership, most lawmakers refused to back Trump’s offensive against China, particularly as he’s kept tariffs on U.S. allies. Even those most willing to praise Trump on trade have been notably reserved.” Read more.
STOCKS RISE, CLAWING BACK CHUNK OF MONDAY’S PLUNGE — AP’s Damian Troise and Stan Choe: “Stocks climbed on Tuesday and clawed back a chunk of their losses from Monday’s rout, the latest whipsaw move as investors weigh just how badly the escalating U.S.-China trade war will hurt the economy. The day’s rally was nearly a mirror image of Monday’s plunge.” Read more.
ASIAN STOCKS WOBBLE — Reuters’ Shinichi Saoshiro: “Asian stocks struggled near a 3-1/2-month low on Wednesday on lingering concerns over the economic impact of a U.S.-China trade war, although an overnight bounce on Wall Street helped limit the losses. … The index had fallen to its lowest level since the end of January the previous day as a trade conflict between the United States and China intensified.” Read more.
UBER HAS POISONED AN ALREADY-SICK IPO MARKET — WSJ’s James Mackintosh: “Uber and Lyft have overtones of the wacky days of the dot-com bubble, when sketchy business plans and big losses were an active selling point..” Read more.
And the blame game is hitting Morgan Stanley — Bloomberg’s Eric Newcomer, Sonali Basak and Sridhar Natarajan: “Morgan Stanley nabbed the biggest U.S. initial public offering of the past five years. Now it gets to field the second-guessing after Uber Technologies Inc. tumbled 18 percent in its first two days of trading.” Read more.
DISASTER DEAL NEARS — Our Caitlin Emma: “Congress is close to unlocking billions of dollars in disaster relief for ailing communities, if only negotiators can get beyond demands from three of the most powerful men in Washington.” Read more.
LABOR CHIEF OF STAFF FORCED OUT — Our Ian Kullgren: “Labor Secretary Alexander Acosta’s chief of staff will be forced out by the end of this month. White House officials instructed Acosta to fire Nick Geale after its review concluded that Geale’s interactions with employees were harming DOL morale, according to a former Trump administration official with direct knowledge of the investigation.” Read more.
NEW BIPARTISAN RETIREMENT SAVINGS BILL — Our Patrick Temple-West: “Sens. Rob Portman (R-Ohio) and Ben Cardin (D-Md.) … introduced a bill to help Americans save for retirement, saying they were driven by concern over the vast number of people who have no money set aside for when they stop working.” Read more.
FIRST LOOK: KRANINGER PRESSURED — Via Americans for Financial Reform: “At 10am in Washington, Percy the Payday Loan Shark will deliver a thank-you card to CFPB Director Kraninger for moving to cripple consumer protections on payday loans. (You can see him here.)”
CONSUMERS SET TO BE COLLATERAL DAMAGE? — AP’s Paul Wiseman and Joyce Rosenberg: “For many Americans … Trump’s trade war may soon get very real. His administration is preparing to extend 25 percent tariffs to practically all Chinese imports not already hit with duties, including toys, sneakers, shirts, alarm clocks, toasters and coffeemakers. That’s roughly $300 billion worth of products on top of the $250 billion targeted earlier.'” Read more.
CREDIT CARD DELINQUENCIES ON THE RISE — American Banker’s Laura Alix: “Credit card delinquency rates hit a seven-year high in the first quarter largely because many borrowers in their 20s are struggling to keep up with their minimum payments” Read more.
PAYDAY LENDERS DRUM UP CUSTOMER SUPPORT — WSJ’s Yuka Hayashi: “Payday lenders have been mobilizing their customers to push the federal government to ease Obama-era regulations of the industry, according to research by a consumer advocacy group that favors the rules.” Read more.
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