What to Know in Washington: Tariffs Risk Turmoil Ahead of 2020

President Donald Trump’s threat to impose new tariffs on Mexico unless it stops the flow of migrants into the U.S. could cause massive economic disruption ahead of the 2020 elections and doom his signature renegotiation of a North American trade deal.

Trump announced a 5% tariff on all imports from Mexico unless it takes “decisive measures” — as judged by his administration — to stem migrants entering the U.S., according to a White House statement. The tariffs would begin June 10 and scale up incrementally until they reach 25 percent on Oct. 1.

The surprise move rattled global financial markets overnight as investors were counting on slow but steady progress toward congressional approval of the U.S.-Mexico-Canada Agreement that Trump’s team negotiated to modernize the North American Free Trade Agreement, which went into effect in 1994.

Trump’s sharply worded statement describing alleged consequences of lax border security blamed Mexico and Democrats — the two groups that have the most control over his trade deal’s fate.

These tariffs represent a de facto dismantling of NAFTA, which could unite a broad coalition of manufacturers, farmers and bipartisan lawmakers against the president the year before he seeks re-election.

By using tariffs to score political points on border security with the element of his voter base most opposed to illegal immigration, Trump jeopardizes a real legislative win and the economic growth that continues to prop up his popular approval.

Senate Finance Chairman Chuck Grassley (R-Iowa) said that “following through on this threat” will put the USMCA at risk, dashing the chance for Trump to fulfill one of his central campaign pledges. “Trade policy and border security are separate issues,” Grassley said in a statement. “This is a misuse of presidential tariff authority and counter to congressional intent.” Read more from Jenny Leonard.

Photographer: Eduardo Leal/Bloomberg
Avocado prices could jump as a result of tariffs.

Goods at Risk: Autos are by far the largest category of Mexican-made products sold in the U.S., and top manufacturers from Audi to Volkswagen produce vehicles in the country. Oil refineries in Louisiana and Texas, as well as builders reliant on imported steel, could be hit. At the same time, Mexico also is a big supplier of fruit and drinks, and Trump’s latest volley may, therefore, mean less joy in Margaritaville this summer. Americans should be prepared to pay more for guacamole, avocado toast and many other items. Read more from Bruce Einhorn, Debby Wu and Dan Murtaugh.

Mexico’s Response: Mexico’s President Andres Manuel Lopez Obrador maintained his strategy of avoiding confrontation with Trump. He spoke about the need to deepen dialogue and find a long-term solution to the problem of migration with the U.S. He even addressed himself to Trump as “your friend” in the two-page letter he posted on the Mexican president Twitter account. Nacha Cattan has more on AMLO’s strategy.

USMCA Push in Congress: Also yesterday, the Trump administration formally notified Congress it’s moving forward with its plan to get the USMCA approved — a move that Speaker Nancy Pelosi (D-Calif.) called “not a positive step” as her party weighs whether to support the deal.

White House officials submitted a so-called Statement of Administrative Action, a step toward introducing legislation that would bring the agreement into force. The move starts a minimum 30-day period for consultations between the White House and Congress to finalize the bill before a vote can take place. This action could set up a showdown with Democrats who have opposed efforts by the Trump administration to rush a vote on the deal. While some Democrats are also pushing the White House’s goal for approval before the August recess, others are wary of delivering Trump a signature legislative victory as he hits the campaign trail for his 2020 re-election bid. Read more from Jenny Leonard and Erik Wasson.

China Retaliation: Separately, China will retaliate against the U.S. for blacklisting Huawei, according to the editor-in-chief of the Global Times, a tabloid published by the Communist Party’s People’s Daily. “Based on what I know, China will take major retaliative measures against the U.S. placing Huawei and other Chinese companies on Entity List,” Hu Xijin said in a tweet, without saying how he got the information. “This move indicates Beijing will not wait passively and more countermeasures will follow.” Read more.

Trump to London Next Week

Trump and U.K. Prime Minister Theresa May plan to discuss China’s Huawei during his state visit to London next week, a U.K. official said, as the U.S. seeks to convince allies in Europe to exclude the telecom giant from 5G networks.

The U.K. has not yet made a decision on whether to follow the U.S., which put Huawei on a blacklist earlier this month, arguing that China’s government could use it for espionage or to disrupt critical infrastructure. The Huawei discussion is scheduled for June 4.

During the visit, which begins Monday, Trump and May also plan to discuss China, Iran, the Mideast, Russia and Syria, said the official, who briefed reporters on the plans on condition of anonymity. Read more from Margaret Talev.

Trump said yesterday he might also meet with Boris Johnson, the pro-Brexit front-runner to replace May. Speaking to reporters, Trump said he also could sit down with Nigel Farage, whose Brexit Party won 30.8% of the U.K. vote in last week’s European Parliamentary elections, Jessica Shankleman and Margaret Talev report.

Protests Planned: Meanwhile, thousands of protesters are preparing to greet Trump and demonstrate against a range of his policies from immigration to climate change.

The plan is for demonstrators to take over Trafalgar Square in central London, with the main Facebook page logging 7,600 attendees and 33,000 interested people as of this morning. Organizers are also trying to raise 30,000 pounds ($38,000) to fly a giant balloon depicting Trump as a small-handed, diaper-clad infant — as they did during his visit last year.

“This is about sending a strong message that people in the U.K. don’t accept the divisive right-wing policies that Trump stands for, and that inviting him for a state visit is totally inappropriate,” the Stop Trump Coalition said in a statement. Another group, Stand Up To Trump, is also organizing the protests. Read more from Alex Morales and Jessica Shankleman.

Politics & Policy

2020 Democratic Hopefuls Flock to California: Most of the Democratic presidential hopefuls are converging on San Francisco this weekend in the biggest single gathering of the candidates so far this year, all bidding for advantage in a state that’s set to play a pivotal role early in the 2020 race.

Fourteen of the 23 candidates in the race are planning to attend the three-day California Democratic Party convention that begins today. Most of those at the top of the field plan to be there, including home-state Sen. Kamala Harris (D-Calif.), Sens. Bernie Sanders (I-Vt.) and Elizabeth Warren (D-Mass.), and Indiana Mayor Pete Buttigieg. The notable exception is Joe Biden, who instead will be delivering an address at a Human Rights Campaign fundraiser Saturday in Ohio.

The candidates will be making rapid-fire pitches to California’s top elected and party officials and putting themselves in front of voters in the nation’s most populous state. Perhaps as important, they also have a chance to reach the activists who will be the backbone of any campaign in a massive and crucial primary battleground. Read more from Jeffrey Taylor and Sahil Kapur.

Disaster Aid: Rep. John Rose (R-Tenn.) yesterday objected to unanimous consent approval in the House of the $19 billion disaster aid plan to help victims of storms across the country, marking the third delay by a GOP lawmaker. The House will likely pass the measure by a roll-call vote after lawmakers return from Memorial Day recess on Monday.

Rose didn’t object to an extension of the National Flood Insurance Program through June 14, preventing the federal initiative from expiring on Saturday. The stopgap bill was passed by the House yesterday via unanimous consent. It will allow new flood insurance policies to be issued and avoid delays of U.S. real estate transactions that depend on the program. Read more from Erik Wasson.

Wyden Threatens Nominations: Treasury Secretary Steven Mnuchin has been “unresponsive” to questions about his refusal to hand over Trump’s tax returns to Congress, Sen. Ron Wyden (D-Ore.) said. Wyden, the top Democrat on the Senate Finance Committee, said yesterday he received a reply to a letter he sent to Mnuchin earlier this month asking why he and Internal Revenue Service Commissioner Charles Rettig haven’t complied with House Democrats’ repeated requests for six years of Trump’s personal and business tax documents. The response, which Wyden called “wholly unacceptable,” could prompt him to block Treasury Department nominees from getting Senate approval, he said. Read more from Laura Davison.

National Cyber Strategy: A public-private commission is taking aim at the growing number of Russian and Chinese cyberattacks on the government and businesses by working to establish a national cyber-defense strategy. The Cyberspace Solarium Commission’s 14-member panel began holding its nearly weekly meetings in early April, with a goal of providing a national strategy for cyber-deterrence to Congress by the end of the year. The commission is the brainchild of Sen. Ben Sasse (R-Neb.), who called for a national “coherent cyber doctrine” ahead of the 2020 elections. Rebecca Kern has more on the effort.

AOC, Cruz Float Lobbying Ban: Rep. Alexandria Ocasio-Cortez (D-N.Y.) is gaining support from a most unusual source, Sen. Ted Cruz (R-Texas), for her suggestion to ban lobbying by former members of Congress.

“Here’s something I don’t say often: on this point, I AGREE with @AOC,” wrote Cruz, in response to her message on Twitter yesterday. “The Swamp would hate it, but perhaps a chance for some bipartisan cooperation?”

Ocasio-Cortez, the most visible of Congress’s new progressive insurgents, didn’t immediately agree, tweeting back that she’d only pair with Cruz if they could “agree on a bill with no partisan snuck-in clauses, no poison pills, etc.”

“Then I’ll co-lead the bill with you,” she wrote.

“You’re on,” Cruz responded. Read more from Ben Brody.

What Else to Know Today

Twist in Census Question Case: New evidence about the source and motivation behind the Trump administration’s addition of a question on citizenship to the 2020 census could affect a highly anticipated Supreme Court ruling in the case. The New York Immigrant Coalition, which is leading an array of parties suing to bar the question, said in a letter yesterday to U.S. District Judge Jesse Furman in Manhattan that the fresh evidence shows a Republican redistricting consultant “played a significant role” in orchestrating the addition of the question.

The group said the consultant concluded in a 2015 study that the citizenship question would give Republicans and white voters more clout at the ballot box. The group asked Furman to let it publicly release redacted portions of the evidence and to consider sanctions against the U.S. He ordered the government to respond by Friday morning to the redactions request and by Monday on the sanctions, and scheduled a hearing for Wednesday. The group alerted the Supreme Court to the group’s motions. Read more from Greg Stohr and Chris Dolmetsch.

Thad Cochran Dies at 81: Thad Cochran, a seven-term Republican senator from Mississippi who was one of the longest-serving members in Congress when he retired in 2018, has died. He was 81. He passed away early yesterday in Oxford, Miss., according to a statement issued on behalf of Cochran’s family by the office of his successor, Sen. Cindy Hyde-Smith (R).

Cochran was chairman of the Appropriations Committee, which governs federal spending, when he retired in April 2018 because of health concerns. He was first elected to the Senate in 1978 after serving three terms in the House. Amid increasing political polarization in Washington, Cochran was known for his cordial, gentlemanly approach to getting things done at the Appropriations Committee and, earlier, as chairman of the Agriculture Committee. Read more from Patrick Oster.

Hurricane Season: Hurricane season starts tomorrow, and a little-publicized change in the way the Federal Emergency Management Agency tracks publicly available data on disaster spending could muddy attempts to compare storm costs and distribute aid fairly.

FEMA and other federal agencies have stopped tagging spending associated with individual storms far earlier than in the past, making it much more difficult to track contract outlays for a single hurricane across agencies. Inaccurate totals could allow Congress and the administration to cherry pick numbers to under- or overestimate disaster spending and make it harder to plan for future disasters. Read more from Michaela Ross.

Wall Faces More Legal Challenges: Trump’s Mexico border wall is being litigated to pieces: The California judge who already halted funds from being diverted from the federal budget for some construction projects is now being asked to block others. The targets of the latest challenge are sections of the wall proposed for El Centro, Calif., and Tucson, Ariz. U.S. District Judge Haywood Gilliam is scheduled to hold a hearing in Oakland, California, on June 5.

The American Civil Liberties Union and a coalition of 20 states said their objections to the new projects are “virtually identical” to the arguments that persuaded Gilliam to prohibit Trump from using $1 billion in taxpayer funds to break ground on the wall in El Paso, Texas, and Yuma, Ariz. The ACLU contends that Trump’s plan to spend another $1.5 billion for the El Centro and Tucson sites circumvents Congressional authority to allocate federal funds. Read more from Kartikay Mehrotra.

New Hampshire Abolishes Capital Punishment: New Hampshire’s legislature overrode its governor’s veto to end the death penalty, as other states pause or debate whether to keep capital punishment. With a two-thirds majority needed for final action, New Hampshire’s state Senate yesterday voted 16-8 to override the veto by Gov. Chris Sununu (R). The House had voted to override May 23.

With New Hampshire’s action, 21 states now have abolished capital punishment, and an additional five states — California, Colorado, Ohio, Oregon and Pennsylvania — have governor-imposed moratoriums, according to the non-profit Death Penalty Information Center. Read more from Adrianne Appel.

U.S.-China Defense Strategies: Top American and Chinese defense officials will lay out rival visions for the Indo-Pacific region as they meet in Singapore this week amid a bruising global trade war, tensions over China’s push for technology leadership and the specter of stalled U.S.-North Korea nuclear talks.

Acting Defense Secretary Patrick Shanahan will meet Chinese Defense Minister Wei Fenghe at the Shangri-La Dialogue today. Both men will deliver closely watched — and likely contrasting — keynote speeches at the annual security conference. They will also meet on the sidelines with each other, and with defense officials from across the region. Read more from Iain Marlow and Glen Carey.

Shanahan Calls for Review of USS John McCain: Secretary Shanahan said he’s asked his chief of staff to look into the USS John S. McCain incident, after reports the White House requested the ship be out of sight during Trump’s visit to a military facility in Japan. Shanahan told reporters in Singapore he will have an update on the matter tomorrow, and will wait to get a full explanation of facts before passing judgment.

Trump yesterday acknowledged that a “well meaning” person appeared to have requested that the U.S. Navy move the warship out of view before his visit to Japan, but added, “I would not have done that.”

“I wasn’t a fan but I would never do a thing like that,” Trump told reporters yesterday upon departing the White House for a trip to Colorado. “Now, somebody did it because they thought I didn’t like him, ok? And they were well meaning, I will say.” Read more from Margaret Talev, Colin Keatinge and Glen Carey.

Korea Executed Envoy Over Summit, Report Says: North Korea executed its former top nuclear envoy to the U.S. and four other foreign ministry officials in March after a failed summit between Kim Jong Un and Trump, South Korea’s Chosun Ilbo newspaper reported. Kim Hyok Chol, who led working-level negotiations for the February summit in Hanoi, was executed by firing squad after being charged with espionage after allegedly being co-opted by the U.S., the newspaper said Friday, citing an unidentified source. The move was part of an internal purge Kim undertook after the summit broke down without any deal, it said.

Speculation has swirled for months about the fate of Kim Hyok Chol, who hasn’t received any recent mentions in state media dispatches. Previous South Korean media reports about senior North Korean officials being executed following the talks have proven false. Kim Jong Un’s top aide Kim Yong Chol, who was also involved in the summit, is reportedly undergoing hard labor, according to the Chosun Ilbo report. The U.S. can’t independently confirm the report, Shanahan told reporters in Singapore toda y. Read more from Shinhye Kang and Jihye Lee.

To contact the reporter on this story: Zachary Sherwood in Washington at zsherwood@bgov.com

To contact the editors responsible for this story: Giuseppe Macri at gmacri@bgov.com; Loren Duggan at lduggan@bgov.com