LOOKING INTO PUTIN’S EYES, PART II: In line with his past meetings with international leaders, President Trump seems to have no set agenda other than getting a feel for Russian President Vladimir Putin, while Putin has some clear objectives. We think too much has been made of an “unprepared” Trump, nonetheless, how he handles this encounter may indicate the future direction of U.S. Russian relations. Putin is looking to break ground on U.S. sanctions, Russian compounds in the U.S., and Syria, but if he wants to make headway he needs to follow Chinese President Xi and South Korean President Moon’s pattern of flattery off the bat as Trump responds to gut feelings. We covered a lot of ground yesterday on a Russian sanctions bill moving through the halls of Congress and the future of relations between the Kremlin and U.S. with Will Pomeranz of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson Center. Listen to what he had to say here.
MAKE TRADE NOT WAR: President Trump has been sending clear signals about his views on globalism since starting his campaign bid in 2016. Tensions are high at the G20 as he sits down with several leaders whose economies are most threatened by these potential changes in trade policy - with German Foreign Minister Sigmar Gabriel weighing in that he fears “a [U.S.] trade war with Europe.” The Administration is weighing import tariffs or quotas on Chinese steel as a way to protect U.S. manufacturing. This major shift in approach from the U.S. would have ripple effects through international markets, with the potential for retaliatory action from other countries as well as an inflation in cost of goods. While Trump may not acknowledge these consequences, a healthy majority of his top advisers are urging him to hold off from restricting international trade.
HEALTHCARE CHASM: Senate Republicans are growing further apart. Influenced by constituents, lobbyists and donors over the recess - they’ve had plenty of time to digest the bill and come up with demands for revision, now saying they are weeks away from a passing vote. However, Senate Majority Leader McConnell sent two updated versions of the bill to CBO for scoring before leaving for recess. One version included Senator Ted Cruz’s (R-TX) controversial provision, giving insurers the ability to sell plans outside of the guidelines as long as they offer at least one within them. This threatens their promise of protecting people with pre-existing conditions. McConnell has a long way to go (even if he sorts out Cruz) as moderates are calling for increased funding for opioid addiction, slower Medicaid rollbacks and increasing the number of insured people. Compounding McConnell’s woes is a handful of Republicans who want to keep Obamacare taxes in the bill to fund increased spending opposing some who won’t vote yes until all Obamacare provisions are repealed. 15 working days. Sounds simple. Bye bye August recess...
FORGET STATEHOOD: While the majority of Puerto Ricans support statehood, the indebted territory has a long way to go. As they work on sending representatives to DC, bond holders are energizing a fight against statehood until Puerto Rico’s debts are paid. They need Congressional approval to become a full state and both parties are split - and it won’t happen in this or the next Congress. Unfortunately for Puerto Rico, filing for bankruptcy as a state has become one of the only ways to handle the massive amount of debt they’ve acquired since Bill Clinton closed a loophole in 1996 that incentivized corporations to move there. The Administration has signaled interest in helping the territory by sending the Chairwoman of the Small Business Administration to San Juan for a week to encourage participation in their lending programs, and by appointing Douglas Domenech of Puerto Rico to be the Assistant Secretary at the Department of Interior, which handles tourism development.
FLY THE FAIR SKIES: It comes as no surprise that United Airlines was behind a series of letters sent to Cabinet members calling on them to intervene with Gulf State carriers. Of the hundreds of “open sky” agreements the U.S. has with other countries, allowing access to their air space, the big three are only fighting ones from the Gulf States: Qatar Airways, Etihad Airways and Emirates - accusing them of having an unfair advantage by being heavily subsidized. The fight dates back to 2015 and is starting to heat up as Delta, United, and American see President Trump as their golden opportunity to end access by the Gulf Carriers by marketing it as an unfair deal hurting American jobs. The U.S. Travel Association, Fedex, and smaller airlines believe the big three are more threatened by competition than by subsidies.
CALL REPLAY | LOADED FOR BEAR - RUSSIAN SANCTIONS AHEAD?: Hedgeye hosted a call on Russian sanctions with the Deputy Director of the Kennan Institute for Advanced Russian Studies of the Woodrow Wilson Center, William Pomeranz. Dr. Pomeranz discussed the sanctions timeline to passage, implications on businesses in the U.S. and globally, and what they mean for National Security, as well as President Trump's meeting with Russian President Vladimir Putin at G20 tomorrow. If you missed the call, listen to the full replay here.
BUDGET CONTROL ACT BE DAMNED: CONGRESS THROWING MONEY AT DOD IN FY 2018: Our Senior Defense Analyst Emo Gardner writes that Congress is 3/4 of the way to giving DoD $25B more than the president requested, but that’s at least $70B more than the BCA allows. To find out more, read the entire piece here.
CALL INVITE | THE ART OF THE DEAL - TRUMP V. NAFTA: Mark your calendar for a conference call with John Murphy of the U.S. Chamber of Commerce on July 13th at 11:00am ET on the timeline for NAFTA renegotiations, the emerging contours of the Administration’s strategy, and the implications on trade and the the U.S. economy. Get the event details here.
