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PROTECTIONISTS WIN THE BATTLE, STEELING FOR WAR AHEAD?: Over the span of 24 hours, President Trump has managed to infuriate his Republican allies in Washington first with his gun control proclamations at a bipartisan meeting at the White House and now with his proposal to move forward with tariffs on foreign exports of steel and aluminum as early as next week. We first heard the action on Section 232 was going to occur this week on our NAFTA call on Monday, but we also heard that turmoil and confusion had engulfed the White House and Trump’s trade team over the past 24 hours with no one but Trump himself actually knowing whether or not an announcement on steel and aluminum would be made. Hill Republicans and the business lobbies have been steeling themselves for months given Trump’s frequent trade tirades, but felt that they were making progress against his protectionist tendencies warning Trump and their allies in his inner circle that his actions could spark a trade war and impact economic growth.  With decisions on NAFTA and Section 301 looming, Senate Republicans are already taking a hard look at making revisions to Section 232 to challenge or influence the Administration - as well as oversight they can deploy on NAFTA should Trump unravel any progress they’ve made with him and try to exit that agreement.  While Congress plays a significant role when it comes to trade deals, Trump has sole authority to impose tariffs and duties, but they can and will likely use every lever they can to obstruct his course. Unless pushback from Republicans –  led by House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell – causes Trump to scale back his moves to impose Section 232, we think action on Section 301 will lurk sooner than expected and will cast a long shadow on NAFTA talks currently underway in Mexico City.

SENATE SCRUM: It’s been another whirlwind week in Washington and we’re not talking Hicks, Sessions, the NRA or trade wars. In the span of a week, Senator Dianne Feinstein lost the endorsement of the CA state party and picks up a challenger to her left underscoring a fault line among Democrats nationally; in a reprise of the Mississippi civil war for a Senate seat two years ago, conservative Senator Roger Wicker of Mississippi picks up a challenger from the right from State Senator Chris McDaniel exposing a recurring Republican nightmare, and Tennessee Senator Bob Corker announced that he wasn’t running again - again.  And things are about to heat up in Arizona where convicted and pardoned Trump ally, Sheriff Joe Arpaio, entered the Republican primary against far-right candidate Kelli Ward and heavy favorite Rep Martha McSally. If that primary takes a turn for the worse, and Arpaio or Ward somehow emerge from the ashes, Democratic Rep Kyrsten Sinema could snatch a victory from the Republican jaws of defeat. And that move is definitely not in the Republican midterm playbook.

NOTE FROM ACROSS THE FROZEN POND | Hedgeye CEO Keith McCullough: “Senior Macro analyst Darius Dale and I have been seeing subscribers in London all week. The biggest pushback we’re getting is the same we’ve been getting in the U.S. for the last few weeks:

  1. Our call on Reflation rolling over in the coming months;
  2. European growth and inflation slowing;
  3. Global Growth Divergences (i.e. China and Europe slowing).

All the while, the thing most sensitive to reflation rolling over in the USA (UST 10yr Yield) hit a 2 week low yesterday morning. This comes despite consensus talking up the risks of new Fed chair Jerome Powell, “twin deficits”, and Treasury issuance… AND without the FEB reflation rollover data being reported, yet!

Meanwhile, European inflation readings falling are readily obvious to anyone who is data dependent at this point (Eurozone Headline CPI just decelerated -10bps in February to +1.2% YoY and it’s trending lower). On the globe NOT being in a rate of change synchronized #acceleration anymore, stay tuned.”

JT TAYLOR: CAPITAL BRIEF - EZCPI

ENERGY POLICY | VENEZUELA POLITICAL UPDATE: Replay of Joe McMonigle's call with Dr. Francisco Monaldi, a Fellow in the Latin American Initiative and Energy Economics at the Baker Institute at Rice University on the latest situation on the ground in Venezuela as well as the developing White House announcement of possible new sanctions. You can access the replay here.

MACRO POLICY CALL REPLAY | WHAT'S NEXT FOR NAFTA?: Listen to a replay of our NAFTA call covering the major issues, timelines, and impact on industries with one of Washington's top trade advisors here.

DEFENSE POLICY CALL REPLAY | GOOD START BUT JUST A START: If you missed General Emo Gardner's comprehensive overview and analysis of the Pentagon's FY19 budget submission, you can access it here.