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The compromise bill to raise the debt ceiling that House Rep released yesterday faces its first major test in the House Rules Committee, where 2 of the panel's 9 Reps have already signaled they will oppose bringing it to the House floor for a vote. The Fiscal Responsibility Act is the product of a deal hammered out by House Speaker Kevin McCarthy & Pres Biden to cap federal baseline spending for 2 years in exchange for Rep votes to raise the debt ceiling beyond next year's elections & into 2025. The bill needs to pass the GOP majority House & the Dem controlled Senate before Jun 5, when the Treasury Dept projects the US would be unlikely to have enough money to meet its debt obligations. A bloc of conservative Republicans have publicly attacked the compromise bill, accusing McCarthy of caving in to the White House. Several Dems, too, have panned the deal, which includes new work requirements for food stamps that many progressives said was a red line. McCarthy wants to hold a vote on the bill tomorrow. But before a bill can receive a vote in the full House, it must be approved by a majority of the 13-member House Rules Committee, which sets the rules of debate on the bill. The committee is scheduled to meet today to hash out the rules of the debt ceiling vote. The panel's makeup is heavily skewed towards the party in the majority, 9-4, a set up meant to ensure that legislation did not get held up by a few dissenters siding with the minority. But it only takes 3 Reps to side with the 4 Dems in order to hold up the bill. 2 Reps, Chip Roy & Ralph Norman, had already said they planned to do just that.
Debt ceiling bill faces a tough path in the House as GOP opposition grows
The Biden administration is reviewing tariffs imposed on imported goods from China to determine whether some or all of the tariffs should be lifted. Former Pres Trump imposed tariffs on thousands of Chinese goods in 2018 & 2019 in response to an investigation that found China was violating US intellectual property laws & coercing American companies into transferring sensitive technology to Chinese firms as a condition of gaining access to China's market. The Trade Representative (USTR) is reviewing the tariffs, which were imposed under Section 301 of the Trade Act of 1974, due to a requirement in the law that requires a review to occur 4 years after tariffs are imposed. Deputy US Trade Representative Sarah Bianchi, who oversees the USTR's engagement with Asia, said, "We are conducting the review from an analytical perspective. We’re not base-casing any breakthrough in the trade relationship" with China as part of the review. Bianchi didn't offer a specific timeline for the completion of the tariff review but indicated it was "reasonable" to complete it by the end of 2023. The expiration of tariff exclusions on 352 import categories from China at the end of Sep could serve as a decision point in the tariff review process. The duties imposed in 2018 & 2019 were valued at roughly $370B at the time. The tariffs, which are taxes on imported products, ranged from 7.5% on some consumer goods to 25% on vehicles, industrial components, semiconductors & other electronics. Several categories were excluded from the tariffs, including cellphones, laptop computers & videogame consoles. The Biden administration's tariff review comes as inflation remains persistently high – although it has eased since the review began over a year ago. Treasury Secretary Janet Yellen had said that eliminating "non-strategic" tariffs would help bring costs for certain goods down to ease the strain on consumers, whereas Trade Representative Katherine Tai contended that the tariffs give the US "significant leverage" over China. Bianchi said that inflation-related discussions about the tariffs have eased as inflation has eased. She also emphasized the need for the US & China to have healthy discussions even on issues where there is disagreement.
Biden admin reviewing whether to lift tariffs on imports from China
Treasury yields fell as markets reopened after being closed for Memorial Day yesterday & investors braced themselves for a vote on a debt ceiling deal ahead of the Jun 5 deadline. The yield on the 10-year Treasury was down by almost 10 basis points to 3.723% & the 2-year Treasury was trading more than 7 basis points lower at 4.518%. Yields & prices move in opposite directions & one basis point equals 0.01%. Over the weekend, Pres Biden & House Speaker Kevin McCarthy reached an agreement to raise the debt ceiling. That came after Treasury Secretary Janet Yellen said that the US would default on its debt obligations as early as Jun 5, several days later than the previous Jun 1 deadline. A vote on the deal is expected to take place tomorrow in the Rep-controlled House of Representatives & later in the week in the Senate, which is controlled by the Dems. But a group of Reps said they would not agree to the deal, suggesting that there was a way to go before it is approved. However, politicians from both sides of the aisle said they expected a resolution to be found & analysts appeared positive about a deal being approved ahead of the deadline.
Treasury yields stumble as investors anticipate debt ceiling deal vote
All traders can do now is wait to find out how those guys in DC plan to handle the deal deal. Meanwhile safe haven gold is in demand by nervous investors.
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