On The Money: Stocks plummet as Trump's trade war with China escalates | China retaliates with tariffs on US crops | Trump eyes $300B in new tariffs | Trump, Xi to meet | Kavanaugh breaks with conservative justices in Apple case

On The Money: Stocks plummet as Trump's trade war with China escalates | China retaliates with tariffs on US crops | Trump eyes $300B in new tariffs | Trump, Xi to meet | Kavanaugh breaks with conservative justices in Apple case
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Happy Monday and welcome back to On The Money. I'm Sylvan Lane, and here's your nightly guide to everything affecting your bills, bank account and bottom line.

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THE BIG DEAL--Stocks plummet as Trump's trade war with China escalates: The Dow Jones Industrial Average plunged 617 points on Monday, falling more than 2 percent amid fears that President TrumpDonald John TrumpBooker hits Biden's defense of remarks about segregationist senators: 'He's better than this' Booker hits Biden's defense of remarks about segregationist senators: 'He's better than this' Trump says Democrats are handing out subpoenas 'like they're cookies' MORE's escalating trade war with China will damage the U.S. economy.

Markets fell on the news that China would move to retaliate against higher tariffs on Chinese goods imposed Friday by Trump, fueling concerns that Washington and Beijing are moving further away from a deal that would end the trade fight.

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Trump has repeatedly downplayed the economic pain from the tariffs, but the retaliatory measures by China and falling stocks served as a reminder that both sides are likely to take a hit from a trade war involving the world's two largest economies. I explain why here.

 

Market swoon: China's retaliation rattled U.S. stock markets, which have adjusted to previous ups and downs in the tumultuous negotiations.

  • The new U.S. tariffs on Chinese exports are expected to raise prices for basic consumer goods, while China's response would further squeeze farmers struggling to get by.
  • The S&P 500 also fell 2.4 percent, while the tech-heavy Nasdaq composite plunged 3.4 percent.

 

How we got here: Tensions between the Trump administration and China reached new heights last week after Chinese officials reportedly backtracked on previous commitments with the White House.

  • In response, Trump escalated the nearly yearlong trade war by hiking tariffs on $200 billion in Chinese goods from 10 percent to 25 percent.
  • China responded on Monday by raising tariffs on $60 billion in U.S. agricultural exports, exerting more leverage over the ailing farm sector.
  • In total, Trump has imposed a 25 percent tariff on $250 billion in Chinese goods. He has also threatened to tax the roughly $300 billion in remaining Chinese exports not yet subject to tariffs if China doesn't yield.

 

Economic stakes: Higher prices for household goods and basic necessities pose dangers to consumers, especially those with lower incomes. Friday's tariff increase could raise prices on hundreds of consumer goods, though it could take several weeks for those price hikes to show up.

  • Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said in an email that Trump's recent tariff hike could raise prices for furniture and clothing from China by 10 percent.
  • "Wars have casualties, and U.S. consumers are a pawn in this war," said Diane Swonk, chief economist at Grant Thornton LLP. "If you have a prolonged trade war, you could get on awfully thin ice."
  • "China's retaliation is likely to be gradualist but focused once more on the financially strained Republican farm belt," wrote Kim Catechis, head of global emerging markets at investment firm Martin Currie."

 

What comes next: President Trump on Monday said he plans to meet with Chinese President Xi Jinping next month when world leaders gather for the Group of 20 (G-20) summit in Japan.

The president predicted his meeting with Xi would be "very fruitful" and argued he would be negotiating from a position of strength after trade talks broke down last week between the world's two largest economies.

"We're in a great position right now, no matter what we do," Trump told reporters Monday.

But hours later, the Office of the U.S. Trade Representative (USTR) released the list of roughly $300 billion in Chinese products that President Trump may hit with tariffs, a significant step toward subjecting all goods from China to import taxes.

 

ON TAP TOMORROW

  • The Senate Judiciary Committee holds a hearing entitled "5G: National Security Concerns, Intellectual Property Issues, and the Impact on Competition and Innovation."
  • The Senate Budget Committee hosts two former chairmen of the panel for a hearing on fixing the budget process, 2:30 p.m.

 

LEADING THE DAY

Kavanaugh breaks with conservative justices in Apple decision: Supreme Court Justice Brett KavanaughBrett Michael KavanaughSecond ex-Senate staffer charged in aiding doxxing of GOP senators Second ex-Senate staffer charged in aiding doxxing of GOP senators Supreme Court hands Virginia Democrats a win in gerrymandering case MORE sided with the liberal wing of the court in a Monday ruling that found iPhone users can sue Apple over App Store prices, a significant and surprising decision that shows the Trump nominee isn't afraid to buck the court's conservative majority.

While Kavanaugh has consistently aligned himself with the court's more conservative justices, he has occasionally broken rank to join the Supreme Court's liberals.

And the newest justice did so again with his ruling in the Apple case on Monday, in which he authored the opinion, finding that iPhone users can move forward with a class-action lawsuit against the tech giant over allegedly inflated app prices. The Hill's Jaqueline Thomsen breaks down the decision here.

 

Class-action lawsuit filed against owner of TurboTax: A class-action lawsuit was filed Sunday against TurboTax owner Intuit, alleging that the company breached an agreement with the IRS by diverting taxpayers away from its free-filing program.

"The victims of this scheme were intentionally misled and deprived of the opportunity to make an informed decision about their tax-filing service," Eric Gibbs of Gibbs Law Group LLP, one of the lawyers representing the plaintiffs, said in a statement.

The law firms that filed the complaint said their case is the first nationwide class-action suit filed against Intuit over the free-filing issue. The Hill's Naomi Jagoda explains the suit here.

  • The lawsuit, filed in federal court in California, is the latest example of legal action being pursued against tax-preparation companies for allegedly hiding their free options. Last week the Los Angeles city attorney filed lawsuits against Intuit and H&R Block.
  • The IRS has a partnership with Intuit and other tax-prep companies, known as "Free File," under which the companies offer free online tax filing services to low- and middle-income taxpayers.
  • The investigative news outlet ProPublica has published a series of articles in recent weeks finding that TurboTax and others have taken steps to hide their options under the free-file program, such as by hiding their free options from web search results, prompting concerns from members of Congress and state and local officials.

 

GOOD TO KNOW:

  • European Union trade chief Cecilia Malmstrom says Brussels is finalizing a list of U.S. goods to target should President Trump put in place new tariffs on vehicles by the May 18 deadline.

 

ODDS AND ENDS

  • Facebook on Monday announced that it will increase wages and offer more counseling to its thousands of content moderators in the U.S., most of whom are contract workers who have complained of unfair working conditions.
  • Op-Ed: Riley Walters, a policy analyst at the Heritage Foundation, argues that President Trump's tweets "spotlight enforcement flaws of trade deals."