| 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 Ryan (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 Lighthizer 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.
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