On The Money: Trump to hit China with new tariffs next month | Stocks plummet on latest trade threat | Senate sends budget deal to Trump | Judge orders NY not to share Trump’s tax returns for now

Happy Thursday and welcome back to On The Money, where we’re celebrating the start of August recess, if not much else. 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– Trump says US will hit China with new round of tariffs next month

The tariff truce is no more. Despite two days of what President Trump called “constructive” trade talks between U.S. and Chinese officials, the president announced Thursday that he will impose a 10-percent tax on more than $300 billion in Chinese goods on Sept. 1.

That import penalty, combined with the existing 25 percent tariff on $250 billion in Chinese goods, would cover almost all products the U.S. brings in from China.{mosads}

While most of the Chinese exports previously taxed by Trump were industrial parts, chemicals, technical equipment and other component products, the new tariffs will cover and likely raise prices for hundreds of essential consumer goods and technology products. 

“We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!” the president tweeted.

 

So, what happened? Trump’s unexpected announcement showed he is unhappy with the progress made in recent trade talks between U.S. and Chinese envoys in Shanghai. 

• The talks broke up on Wednesday without making significant progress toward a trade deal, though the White House issued a statement on Wednesday that did not signal a tariff escalation.

• But Trump voiced frustration that China has not yet purchased “large quantities” of U.S. agricultural goods nor cracked down on the flow of the drug fentanyl into the country, pledges China made in previous rounds of talks that Trump claimed as victories.

 

Wall Street freaks out: Trump’s surprising announcement sent stocks plunging, as one might expect given the impact his trade policy has had on businesses and the global economy.

• The Dow Jones Industrial Average lost a 311-point gain and closed 281 points below its Thursday open after Trump announced a 10 percent tariff on more than $300 billion worth of Chinese goods.

• The Nasdaq composite and S&P 500 also lost gains of more than 1 percent, closing with losses of 0.8 percent and 0.9 percent respectively after Trump posted a series of tweets announcing the tariffs.

 

Reactions:

• “The Trump administration is again taxing the American people in the form of new tariffs on their favorite technology products. Tariffs are taxes paid for by U.S. consumers, not China’s government.” — Gary Shapiro, president and CEO, Consumer Technology Association

• “We all agree China is a bad actor, but an unprecedented tax hike on hardworking Americans is not the answer. It’s time for the administration to come up with a real strategy, put a stop to harmful tariffs and finally deliver the trade deal Americans were promised.”  — Jonathan Gold, spokesman for Tariffs Hurt the Heartland, a coalition of anti-tariff trade groups.

• “The tariffs announced today will raise costs on everything from computers to backpacks to clothes as kids go back to school, without any reason to think that it will make China stop stealing our technology and undercutting American jobs. Trump said he’d bring back Americans’ jobs, instead he’s picking their pockets.” — Sen. Ron Wyden (D-Ore.), ranking member of the Senate Finance Committee.

• “The tariffs will be credit negative for a number of US sectors, including computers and electronics, manufacturing, and apparel and leather. Potential further broadening of Chinese tariffs could affect US crude oil, transport equipment and semiconductors.” — Moody’s Analytics.

• “President Trump is, in effect, using American families as a hostage in his trade war negotiations. Tariffs are taxes and this move will noticeably raise the cost of shoes at retail and will have a chilling effect on hiring in the footwear industry.” — Matt Priest, president and CEO of the Footwear Distributors and Retailers of America.

 

What comes next: Who knows? We’ve seen Trump back down from previous tariff threats before, only to follow through later. The president said the tariffs will continue “until such time as there’s a deal,” and we have no idea when that’s going to be. 

It’s also entirely possible that Trump and Xi strike some sort of deal on agricultural purchases and fentanyl that scraps the new tariffs before Sept. 1. We’ve got a month until the new tariffs kick in, so buckle up.

 

LEADING THE DAY

Senate passes sweeping budget deal, sending it to Trump: The Senate passed a sweeping two-year budget and debt ceiling deal on Thursday, sending the agreement to President Trump’s desk.

Senators voted 67-28 to approve the bill, which suspends the debt ceiling until mid-2021 and adds an estimated $1.7 trillion to the deficit over the next decade compared to automatic spending cuts that would have otherwise kicked in.

Twenty-three GOP senators joined with five Democrats to oppose the bill. Five senators, including four 2020 contenders, didn’t vote. 

The bill was one of the final must-pass items on the Senate’s to-do list, paving the way for the chamber to quickly leave for the five-week August recess. The House already passed the budget deal last week, meaning it now goes to Trump, who is expected to sign it.

Inside the deal: The agreement includes enough sweeteners that both sides were able to claim victories, including more military spending for Republicans and census and opioid funding important to Democrats. The Hill’s Jordain Carney tells us more here.

This is what it sounds like when hawks cry: Conservative groups called the budget and debt ceiling agreement an irresponsible move that would saddle the nation with unsustainable debt. 

 

Judge temporarily blocks NY from sharing Trump tax returns: A federal judge on Thursday issued an order that temporarily prevents New York from providing the House Ways and Means Committee with President Trump’s state tax returns.

The order from judge Carl Nichols, a Trump appointee to the federal district court in D.C., comes one day after Nichols said that he was leaning toward issuing such an order during a teleconference.

Trump last week filed a lawsuit against the Ways and Means Committee and two New York officials, challenging a New York state law that allows the chairmen of Congress’s tax committees to request public officials’ state tax returns from the New York Department of Taxation and Revenue. The Hill’s Naomi Jagoda explains the decision here.

 

GOOD TO KNOW

• Top Republicans on the House Oversight and Reform Committee on Thursday demanded briefings from both Capital One and Amazon following the breach of data for more than 100 million Capital One customers that was stored through Amazon cloud storage services.

• Democratic presidential candidate Bill de Blasio on Thursday rolled out a tax plan that would substantially increase taxes on wealthy individuals and corporations, one day after he spoke about his desire to raise taxes during a primary debate.

• The former top White House economic adviser said that President Trump’s trade wars have had a “dramatic impact” on the U.S. manufacturing sector while doing little to hinder China’s economy.

• The Wall Street Journal: “The U.S. Department of Housing and Urban Development is close to finalizing a major reform of its extensive senior housing portfolio, allowing nonprofit owners of 125,000 apartments to tap private sources of financing for the first time.”

 

ODDS AND ENDS

• Mark Esper, the newly appointed Pentagon chief, ordered a review of the Defense Department’s “war cloud” contract after President Trump threatened to investigate whether it was written with a bias toward Amazon.

• Home improvement retailer Lowe’s will reportedly lay off thousands of employees, outsourcing their jobs to third-party companies as part of a plan to turn its finances around.