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Overnight Finance: Koch groups launch major campaign against Trump tariffs | Future of NAFTA at risk | GOP senator works on bill to counter tariffs | Trump economy faces new threats

Overnight Finance: Koch groups launch major campaign against Trump tariffs | Future of NAFTA at risk | GOP senator works on bill to counter tariffs | Trump economy faces new threats
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Happy Monday and welcome back to Overnight Finance, where we're overflowing like the Potomac with news. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

See something I missed? Let me know at slane@thehill.com or tweet me @SylvanLane. And if you like your newsletter, you can subscribe to it here: http://bit.ly/1NxxW2N.

Write us with tips, suggestions and news: slane@thehill.com, vneedham@thehill.com, njagoda@thehill.com and nelis@thehill.com. Follow us on Twitter: @SylvanLane, @VickofTheHill, @NJagoda and @NivElis.

 

THE BIG DEAL: There's more fallout from President TrumpDonald John TrumpKey takeaways from the Arizona Senate debate Major Hollywood talent firm considering rejecting Saudi investment money: report Mattis says he thought 'nothing at all' about Trump saying he may leave administration MORE's decision to impose aluminum and steel tariffs on key U.S. allies. Trump administration officials have made the rounds on the television networks to defend the tariffs while world leaders condemn the move.

Here's a recap of recent developments to let you know where things stand today, and how Trump has set the table for months of contentious negotiations.

 

Canada joins EU challenge to Trump tariffs in trade court: Canada filed a case against the U.S. at the World Trade Organization (WTO) on Friday, the latest effort by a key U.S. ally to pressure the Trump administration to remove stiff tariffs on steel and aluminum imports.

"On top of the retaliatory measures announced yesterday, the Government of Canada today requested WTO consultations with the United States regarding its imposition of punitive tariffs on imports of steel and aluminium from Canada, and more generally, on the United States' improper use of national security pretexts for protectionist purposes," Canadian Foreign Minister Chrystia Freeland said in a statement. More here.

 

Reuters: US isolated at G7 meeting as allies blast tariffs: The United States' closest allies attacked the Trump administration for imposing tariffs on steel and aluminum imports and mounted challenges with the world's top trade body, fouling the mood at a G7 finance leaders meeting.

Top global economic leaders on Saturday asked U.S. Treasury Secretary Steven MnuchinSteven Terner MnuchinDC think tank declines Saudi money amid Khashoggi controversy US lobbying firms cut ties with Saudi Arabia On The Money: Deficit hits six-year high of 9 billion | Yellen says Trump attacks threaten Fed | Affordable housing set for spotlight in 2020 race MORE to convey their "unanimous concern and disappointment" about the metals tariffs imposed by Washington this week, wrapping up a heated G7 meeting in Canada.

"Ministers and Governors agreed that this discussion should continue at the Leaders' Summit in Charlevoix, where decisive action is needed. The aim of this should be to restore collaborative partnerships to promote free, fair, predictable and mutually beneficial trade," the group said in a summary statement written by Canada.

 

Reactions:

  • "The idea that we are somehow a national security threat to the United States is quite frankly insulting and unacceptable."  -- Canadian Prime Minister Justin Trudeau 
  • "I don't think our tariffs are anything to do with our friendship and long-standing alliance with Canada." National Economic Council Chairman Larry Kudlow

 

THE LATEST

Koch groups plan major campaign against Trump tariffs: Three advocacy groups backed by Charles and David Koch on Monday announced a multimillion dollar campaign to push back against tariffs and the kinds of trade barriers that President Trump supports.

Who is behind it: Freedom Partners, Americans for Prosperity and The LIBRE Initiative.

What they are doing: they plan to take out ads, hold events and lobby over the issue.

Why it's so big: Conservative groups have been vocal about their opposition to Trump's trade policies, but publicly pushing back is a serious escalation in the rift between Trump and the Koch brothers on trade.

Niv Elis has more here.

 

GOP senators mull how to tie Trump's hands on tariffs: GOP Sen. Bob CorkerRobert (Bob) Phillips CorkerDemocrats torch Trump for floating 'rogue killers' to blame for missing journalist Trump to send Pompeo to meet Saudi king Trump defends 0B US arms sale to Saudi Arabia MORE (Tenn.) is working on legislation responding to President Trump's decision to slap steep steel and aluminum tariffs on key trading partners, the senator's office announced Monday.

What we know: Corker over the weekend spoke out against the tariffs on Twitter and shared stories questioning Trump's decision.

What we don't: It is still unclear how his legislation would seek to counter Trump's tariffs.

One idea out there: Sen. Mike LeeMichael (Mike) Shumway LeeSenators pledge action on Saudi journalist’s disappearance Bernie Sanders: US should pull out of war in Yemen if Saudis killed journalist Senators warn Trump that Saudi relationship is on the line MORE (R-Utah) has legislation that would require congressional approval for imposing tariffs.

 

But hold on... GOP Sen. John CornynJohn CornynTrump defends 0B US arms sale to Saudi Arabia Florida politics play into disaster relief debate O’Rourke faces pivotal point in Texas battle with Cruz MORE (Texas), the No. 2 Senate Republican, downplayed the chances on Monday that Congress would pass legislation pushing back against President Trump's tariffs, despite growing frustration among Republicans. 

"I think that's primarily an executive branch function, and I don't really see Congress passing and getting a presidential signature on something constraining his authority," Cornyn told reporters.

 

Theresa May tells Trump tariffs are 'unjustified' British Prime Minister Theresa May told Trump in a call Monday that his decision to impose steel and aluminum tariffs on the European Union is "unjustified and deeply disappointing," her office said.

"The prime minister raised the U.S. decision to apply tariffs to EU steel and aluminum imports, which she said was unjustified and deeply disappointing," a Downing Street spokesperson said. 

May's office said she stressed that "the U.S., U.K. and E.U. are close national security allies and we recognize the importance of the values of open and fair trade across the world." The White House said later Monday that Trump "underscored the need to rebalance trade with Europe" during his call with May. Read more here.

Trump doubling down: The president shows no signs of backing down. He took aim at China and Canada Monday morning. "China already charges a tax of 16% on soybeans. Canada has all sorts of trade barriers on our Agricultural products. Not acceptable!" More on that here.

 

ON TAP TOMORROW

 

LEADING THE DAY

Trump tariffs threaten to torpedo NAFTA: Trump's decision to impose steep steel and aluminum tariffs on Canada and Mexico is threatening the ongoing negotiations over the North American Free Trade Agreement (NAFTA), a key trade deal for all three economies.

Canada and Mexico had been temporarily exempted from the tariffs while they negotiated updates to NAFTA with the Trump administration.

But with an end-of-the-month deadline looming to make a decision, Trump opted to hit the nation's two largest trading partners with duties of 25 percent on steel and 10 percent on aluminum. 

"It's nerve-wracking. I would consider, at this point, that NAFTA is really at risk," said Sherman Robinson, a trade expert at the Peterson Institute for International Economics. The Hill's Niv Elis and Vicki Needham explain why here.

 

What comes next: Speaker Paul RyanPaul Davis RyanElection Countdown: Cruz, O'Rourke fight at pivotal point | Ryan hitting the trail for vulnerable Republicans | Poll shows Biden leading Dem 2020 field | Arizona Senate debate tonight Paul Ryan to campaign for 25 vulnerable House Republicans GOP super PAC pushes back on report it skipped ad buys for California's Rohrabacher, Walters MORE (R-Wis.) had said that a deal on NAFTA needed to be reached by May 17 for Congress to be able to consider it under the time constraints set out in fast-track trade rules.

With that deadline now passed, the negotiations could drag on for months. 

Even if U.S. Trade Representative Robert LighthizerRobert (Bob) Emmet LighthizerMcConnell urges GOP senators to call Trump about tariffs Companies brace for trade war MORE can reach an agreement this year, it would be up to the next Congress -- one whose composition will be determined by the November midterm elections -- to ratify it.

Trump, Trudeau and other world leaders are also slated to meet next week when Canada hosts a Group of Seven meeting in Quebec. So far, Trump has shown no signs of backing down.

 

China: Trade deals in jeopardy if US tariffs are implemented: China said Sunday that any trade deals currently being discussed with the U.S. will not go into effect if the Trump administration implements proposed tariffs on Chinese goods, according to multiple media reports.

"If the United States introduces trade sanctions including a tariff increase, all the economic and trade achievements negotiated by the two parties will not take effect," the Chinese government said in a statement to Xinhua state news agency Sunday, The Associated Press reported.

 

Also today... the House is getting ready to take up its first 'minibus' spending bill.

The first group of spending bills for the 2019 fiscal year is expected to receive a vote on the House floor sometime this week as part of a consolidated piece of legislation, according to The Hill's Niv Elis.

The so-called "minibus" legislation will include three appropriations bills: Energy and Water, Legislative Branch, and Military Construction and Veterans Affairs.

Those bills are relatively uncontroversial, but sit tight. There are likely to be fights over the Homeland Security bill, which could contain Trump's border wall funding, and the Health and Human Services bill, which could bring another fight on abortion.

 

FINANCE IN FOCUS: Trump has presided over a strong U.S. economy during his first term, maintaining low unemployment and solid growth ahead of the November elections. 

Republicans hope the positive trends will carry them to victory in the midterm campaign, but growing trade tensions and tightening financial conditions could slow the expansion.

Economists see U.S. growth nearing the White House's target of 3 percent, in part because of the $1.5 trillion tax-cut law that Republicans passed in December.

While the fiscal boost from the tax law could power growth through the midterm elections, Trump's tariffs on U.S. allies loom darkly over the future. I took a look here at the threats facing the U.S. economy as we move into the second half of Trump's term.

 

In a nutshell: Topline economic numbers during Trump's first 18 months in office have remained robust, with unemployment below 4 percent and growth by GDP nearing 3 percent. The president inherited years of sustained job gains and growth from former President Obama, whom Democrats credit with the current state of the economy.

Trump and Republicans are counting on the strong economy and the tax-cut law to boost them at the ballot box as they seek to defend the House majority and pick up seats in the Senate. 

The economy should give the GOP a boost heading into November, but analysts warn there are several landmines Trump could trip before the election.

Economists see Trump's imposition of steel and aluminum tariffs on imports from key allies as the biggest threat to economic growth. While the tax package is expected to boost U.S. growth in 2018, economists are still searching for proof that businesses have invested their savings in expansion. 

The tax cuts are also expected to add billions of dollars to federal deficits as interest rates rise across the board. Consumer and corporate debt have also spiked under years of loose financial markets, while wage growth has remained flat. 

Meanwhile the latest jobs report raised GOP hopes for the midterms while worrying Democrats, reports my colleague Alexander Bolton:

"The economy added 223,000 jobs in May, a bigger than expected number that was coupled with news that unemployment had fallen to 3.8 percent. It extends the good economic news for Trump and the GOP, which has seen a series of favorable jobs reports this year.
"Strong top-line economic numbers play into the Republican argument that voters should reelect them to support Trump's agenda of lower taxes and less regulation. 
"Democrats are still largely optimistic about their electoral chances in the fall. At the same time, some acknowledge the economy could help the GOP."

 

MARKET CHECK: From CNBC: "The Nasdaq composite posted a record close on Monday, led by shares of Apple and Amazon.

"The tech-heavy index rose 0.7 percent to 7,606.46 as Apple and Amazon gained 0.8 percent and 1.5 percent, respectively. Apple and Amazon also posted record closing highs. The Nasdaq also closed less than half a percent away from an intraday record.

"The Dow Jones industrial average closed 178.48 points higher at 24,813.69, while the S&P 500 climbed 0.5 percent to 2,746.87 as tech closed at a record high."

 

GOOD TO KNOW

  • The New York Times explores how Treasury Secretary Steven Mnuchin's is making a defense of free trade even as protectionists rise to influence in Trump's orbit.
  • China is reaching out to Europe with pledges to improve market access for companies in a charm offensive that contrasts with President Trump's escalation of trade disputes worldwide, according to Bloomberg News.
  • The Fifth Circuit's mandate to vacate Labor Department fiduciary rule is "still pending."
    U.S. Public Interest Research Group (US PIRG) weighs in on the Consumer Financial Protection Bureau complaint database and why it should remain public.

 

ODDS AND ENDS

  • Howard Schultz will step down as chairman of Starbucks later this month, he told employees Monday.