A China fight returns

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Jan 27, 2025 View in browser
 
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By Jasper Goodman

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QUICK FIX

One of the great unresolved financial policy battles of the last Congress is poised to return in 2025, with a new X factor: President Donald Trump.

Republicans came within spitting distance of resolving a long-running intraparty feud over how to restrict U.S. investments in China at the end of last year, but a bipartisan deal on the matter was torpedoed when Trump and billionaire Elon Musk objected at the eleventh hour to a spending package it was set to get attached to.

Now, with a GOP trifecta in place and Trump vowing to take a hard line on China, GOP lawmakers are gearing up to revisit the issue, which is a stated priority for House Speaker Mike Johnson and National Security Adviser Mike Waltz.

“We’re going to finally get it over the finish line,” said Sen. John Cornyn (R-Texas), who has pushed legislation for years that would require U.S. firms to disclose investments in some sectors of the Chinese economy.

Lawmakers who have worked on the issue say they are confident legislation on the matter can move this Congress, but several hurdles remain.

Trump is now the biggest wild card. It is unclear where he will come down on the debate, which he hasn’t taken a firm position on in the past. But his Treasury Department is gearing up to review the issue, and his arrival is forcing lawmakers back to the drawing board on legislation that has long been a point of friction.

GOP China hawks have pushed for a ban on investments in entire sectors of the Chinese economy, but that approach has drawn pushback from the more business-friendly leaders of the House Financial Services Committee, who prefer a narrower solution using sanctions.

An executive order on trade issues signed by Trump on his first day in office directs the Treasury and Commerce departments to deliver recommendations by April 1 on steps the administration should take on restricting U.S. capital from flowing to China, including whether a Biden order on the matter should be modified or scrapped. The approach the administration decides to take is expected to play a major role in shaping the direction that lawmakers on Capitol Hill go.

“I think you’ll have a broader effort to work between the administration, the House and the Senate to incorporate the most recent executive orders … with what needs to be done legislatively as well,” said Rep. John Moolenaar (R-Mich.), who chairs a special House committee focused on China issues.

Moolenaar, a leading China hawk, told MM he expects legislation to build on “the framework that’s there” from the bipartisan deal that was crafted at the end of last Congress.

Drafting new legislation has the potential to reopen a fraught debate that has long divided Republicans on Capitol Hill. It could also spur a lobbying blitz by financial firms that want to avoid stringent new investment restrictions. They pushed lawmakers at the end of last year not to stray far beyond Biden’s executive order, which went through a comment process.

“This is something that does need to be done,” said Rep. Warren Davidson (R-Ohio), the chair of a House Financial Services subcommittee on national security issues who supports a sanctions-based approach. “I think there’s a sense of urgency in both [House Financial Services and Foreign Affairs] to get it done. And I think it’s going to have to be collaborative.”

It’s MONDAY — Send Jasper your Super Bowl predictions — and Capitol Hill tips — to Jasper at jgoodman@politico.com. As always, you can find Sam at ssutton@politico.com.

 

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One in five Americans don't have access to credit. That means many Americans in need will struggle to make ends meet under the CFPB's regulation of overdraft. This regulation disregards years of consumer-driven progress by banks to offer customers more flexible ways to handle short-term financial needs. It will ultimately reduce access to overdraft, harming consumers who rely on this lifeline to keep the lights on, feed their families, and pay rent in a pinch. Learn more.

 
Driving the Week

MONDAY … The Wilson Center's Wahba Institute for Strategic Competition will hold a virtual discussion on the U.S. and Japan’s collaboration on energy security and infrastructure at 10 a.m. … New home sales for December will be released at 10 a.m. … Rohit Chopra, Nicholas Anthony, Will Hild and Todd Zywicki speak on a Federalist Society panel on debanking at 3:30 p.m. … The Senate votes on Scott Bessent’s nomination for Treasury secretary at 5:30 p.m. …

TUESDAY … The Federal Open Market Committee will hold a closed meeting at 9 a.m. … The Senate Commerce, Science and Transportation Committee will hold a hearing on the Panama Canal at 10 a.m. … The Consumer Confidence Index will be released at 10 a.m. … The Commerce Department’s National Institute of Standards and Technology will hold a virtual meeting of the National Artificial Intelligence Advisory Committee at 2 p.m. …

WEDNESDAY … The Peterson Institute for International Economics will hold a virtual conference on U.S.-China geoeconomic competition” at 9 a.m. … The Center for Global Development will hold a virtual discussion on “The Economic Impacts of Antimicrobial Resistance” at 10 a.m. … The American Enterprise Institute for Public Policy Research will hold a discussion on environmental sustainability and clean energy at 12 p.m. … Federal Reserve Board Chairman Jerome Powell will hold a news conference after the FOMC meeting wraps up at 2:30 p.m. … The Senate Special Committee on Aging will hold a hearing on "Making Washington Work for Seniors” at 3:30 p.m. …

THURSDAY … The Commerce Department will release its fourth-quarter and year-end GDP estimates at 8:30 a.m. … The Urban Institute and UnidosUS will hold a conference on "Latino Homeownership: Research, Insights, and Solutions" at 11 a.m. …

FRIDAY … Commerce will release the Personal Consumption Expenditures Index for December at 8:30 a.m. … Agency reporting for the Treasury Report on Receivables and Debt Collection Activities closes for the first quarter of FY25 …

Trump claims victory after threatening Colombia with tariffsThe White House said late Sunday that the government of Colombia has agreed to take deportation flights of migrants from the country, hours after President Donald Trump threatened tariffs and visa restrictions, our Myah Ward reports.

Migrants will be returned to Colombia on military aircraft “without limitation and delay,” White House press secretary Karoline Leavitt said in a statement. The late-night declaration of victory by the White House caps a tumultuous day of threats lobbed back and forth between the countries’ two leaders on social media.

Trump said Sunday he would slap an emergency 25 percent tariff on all goods imported from Colombia after the country’s president turned away two U.S. military aircraft full of detained Colombian migrants. As our Paul McLeary, Victoria Guida and Myah Ward wrote, the move could have been "the first legal test of Trump's threat to impose sweeping tariffs on trading partners, which he likely has power to do under emergency authorities. He did not specify the legal basis for the tariffs.

“The punitive duties, which Trump announced in a social media post, would increase to 50 percent in a week as the U.S. president ignites another fight with a foreign leader over his tariff and immigration policies.”

Coming soon: Treasury Secretary Bessent — The Senate is expected to vote at 5:30 p.m. today on Scott Bessent’s nomination to become Trump’s Treasury secretary. The hedge fund manager is widely expected to sail through the chamber with bipartisan support. The chamber voted 67-23 to advance Bessent’s nomination on a procedural vote Saturday, with 15 Democrats joining Republicans to back him.

The House GOP’s high-stakes week in MiamiHouse Republicans are gathering in Miami this week for a retreat with one key goal: finalizing a budget blueprint plan for the massive, party-line bill they’re planning, touching energy, border security and tax policy.

As our Meredith Lee Hill reports, “Republicans need to decide what will go in that package — with the price tag of Trump’s priorities reaching $10 trillion over 10 years — versus what might be included in a separate, bipartisan government funding bill that will be negotiated with Democrats over the next seven weeks. The fate of a necessary debt ceiling increase is top of mind.”

Committee chairs will present their proposals for the reconciliation package and answer member questions during a series of breakout sessions Tuesday.

 

Power shifts, razor-thin margins, and a high-stakes agenda. We’ve transformed our coverage—more reporters, more timely insights, and unmatched policy scoops. From leadership offices to committee rooms, caucus meetings, and beyond, our expert reporting keeps you ahead of the decisions that matter. Subscribe to our Inside Congress newsletter today.

 
 
On the Hill

First in MM: Nunn introduces beneficial ownership extension — Rep. Zach Nunn (R-Iowa) is reintroducing legislation to extend until 2026 the deadline for millions of small businesses to report their ownership information to Treasury. The reporting deadline — which was set by a 2021 anti-money laundering law called the Corporate Transparency Act — was originally the start of this year, but enforcement has been put on hold amid a legal dispute. Nunn’s bill is being co-led by Democratic Rep. Sharice Davids of Kansas.

Scott, Hill announce first hearings — The House Financial Services and Senate Banking committees are gearing up for their first hearings under new chairs next week. Both panels will hold hearings looking at debanking. House Financial Services will also hold a full committee hearing focusing on “Making Community Banking Great Again.” Fed Chair Jerome Powell is set to testify in the House on Feb. 12.

 

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Housing

Hill weighs in on housing finance reform — House Financial Services Chair French Hill (R-Ark.) called on the Trump Administration Friday to work with Congress to release Fannie Mae and Freddie Mac from government control, our Katy O’Donnell reports. Hill urged the White House to take the lead on the process.

 

New Year. New Washington. New Playbook. With intensified congressional coverage and even faster delivery of policy scoops, POLITICO’s reimagined Playbook Newsletter ensures you’re always ahead of the conversation. Sign up today.

 
 
Crypto

Travis Hill on debanking — In a fireside chat moderated by Intrafi’s Chief Content Officer and Head of External Affairs Rob Blackwell, acting Federal Deposit Insurance Corp. Chair Travis Hill said that the agency’s approach to digital assets and blockchain businesses has been “very problematic.”

 

A message from the Consumer Bankers Association:

The CFPB's regulation of overdraft ignores the needs of the 1 in 5 Americans who lack access to credit.

Overdraft services, which must be clearly disclosed by law, provide a financial lifeline for those who actively choose to opt in. Removing access to these services would strip Americans in need of this informed choice, forcing many to turn to less-regulated, potentially riskier, and far more costly alternatives.

Banks know their customers want flexibility and choices. That's why banks have built new solutions and tools that provide more control and information to customers to help manage their money. By ignoring these efforts, the CFPB's regulation reduces access to overdraft services for those who need them most.

See how CBA is fighting to protect consumers' financial flexibility.

 
 

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