Impeachment — Not Dead Yet; Trade Talks Still Stalled; Key Infrastructure Meeting This Week
Author: Greg Valliere
May 20, 2019
THERE’S A WIDESPREAD BELIEF on Capitol Hill that President Trump would not mind an impeachment drive in the House, because it would show his supporters that there’s still a “witch hunt” by the Washington establishment against him. Many Democrats would love to play along — and now an outspoken conservative his joined the cause.
A REPUBLICAN REBEL: Michigan Rep. Justin Amash, a strict Constitutionalist, said this weekend that his reading of the redacted Mueller report convinces him that there’s evidence of obstruction of justice that “meets the threshold for impeachment.” This prompted Trump to fire up his base; he called Amash a “loser” and a “total lightweight.”
AN EVEN MORE SERIOUS DEVELOPMENT is the New York Times report that money laundering experts at Deutsche Bank reported to their superiors that they found “suspicious activity” by companies affiliated with Trump and Jared Kushner. If there’s a smoking gun that could land Trump in major jeopardy, this is it. At the least, Trump’s ties to Deutsche Bank will receive more scrutiny in the liberal House.
BOTTOM LINE: We think chances are about 25% that the House could be provoked to impeach Trump, even though leaders like Nancy Pelosi think such a move could backfire on the Democrats. Prospects of conviction in the Senate remain slim, maybe a 10% chance. In any event, there’s more to come — Robert Mueller’s testimony has been pushed back until June, and we think it might provide fresh ammunition for impeachment advocates.
* * * * *
SOME TRADE PROGRESS, BUT NOT ENOUGH: We were encouraged to see steel and aluminum tariffs against Canada and Mexico lifted on Friday, but ratifying the so-called U.S.-Mexico-Canada Agreement still looks like a difficult fight. There was virtually no chance Congress would ratify the deal without lifting the tariffs, but now there’s the lingering issue of altering labor and environmental provisions in the pact, which the Democrats are demanding.
CHANCES OF RATIFYING THE USMCA DEAL this year have risen from 20% to about 40%, but we’re still skeptical because opening up the completed pact to fresh negotiations is a slippery slope that will attract more amendments, which Canada and Mexico would have to accept. And getting a deal approved before Canada’s October elections will be difficult.
THE MORE TROUBLING TRADE NEWS is that negotiations between the U.S. and China have ground to a halt, with no new talks scheduled. Presidents Trump and Xi might be able to jump-start the process when they meet in late June at the G-20 summit in Japan, but considering the worsening relations between the two countries (including fresh tensions in the South China Sea) a breakthrough on trade does not seem imminent. This is an element of uncertainty for both countries that could persist for several months, a clear economic headwind.
* * * * *
HOW TO PAY FOR INFRASTRUCTURE? Talks will resume on Wednesday at the White House as President Trump, Nancy Pelosi and Chuck Schumer meet to discuss how to pay for up to $2 trillion in new spending. Even the hint of a gasoline tax hike has roiled Capitol Hill, where Republicans adamantly refuse to consider that option. They are aligned with anti-tax advocate Grover Norquist in opposing any tax hike.
SLIM CHANCES: The Democrats want a tax hike to pay for infrastructure, which prompted Trump to declare over the weekend that he’s “being played” by his opponents. Our guess is that this week’s talks will be contentious; Democrats are determined to show that Trump is an inept negotiator. Chances for a significant infrastructure bill this year are well below 50%.
The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.
For further information, please visit AGF.com.
©2021 AGF Management Limited. All rights reserved.