- Tariff day, April 2, fast approaching
- Congress returns, budget talks proceed
- Debt ceiling needs to be increased
- Ukraine, Russia to talk under U.S. leadership
On April 2, President Donald Trump’s tariff deadline will arrive. As Federal Reserve Chair Jerome Powell said at his post FOMC press conference last week, the new administration’s tariff policy has created a level of uncertainty for consumers, investors, and regulators. There is speculation that some agreements may be announced prior to the April 2 deadline, and rumors of talks and deals are likely to create substantial headline risk in the week ahead.
Congress returns
After a weeklong break, the House and Senate return, with the task of coming to a budget agreement as their top priority.
The Republican Congress wants to support Trump by passing some of his key programs that include money for enhanced border and immigration enforcement, strengthening the U.S. military, expanding energy development, and perhaps most critical, extending Trump’s first-term tax cuts that expire at the year’s end.
With most policies facing a 60-vote filibuster hurdle in the Senate, the Congressional leadership is planning on using the Budget Reconciliation process, which is a key legislative tool that can be used that is exempt from Senate filibusters. Democrats used the Reconciliation process to get both Obama and Biden programs passed. The process is started when both bodies pass a Budget Resolution that provides the broad outline for the Reconciliation legislation. The current problem is that prior to the break, the House and Senate passed very different versions of the Budget Resolution, and in the coming weeks, they need to come to a unified approach.
The House passed the “one big, beautiful” bill approach that would take all the legislative initiatives, include the renewal of Trump’s tax cuts from the first term and raise the debt ceiling by $4 trillion. The Senate took a very different approach proposing two separate bills: first bill with policy times and a second bill later in the summer with the tax extension. The Senate passed bill also has no provision for raising the debt ceiling.
Debt ceiling
While it is starting to look obvious Congress must pass an increase in the debt ceiling, the government needs to finance authorized programs and pay off debt already incurred. Trump has asked for a repeal of the ceiling, but this got little support from the most conservative House Republicans who are in the Freedom Caucus. However, when combined with tax cuts, policy initiatives, and spending cuts (as the House leadership put in their version of the Budget Resolution), these conservative Republicans voted with the leadership and Trump. The speaker believes that only by combining the entire package into one bill can he get the Freedom Caucus members to support the bill. With the speaker’s razor thin majority, on what is likely to be a straight party line vote, he can’t lose more than two of his members.
This week should see tough negotiations between the House and Senate Republican leaders, but at the end of the day, coming to a unified party position is likely going to require the direct involvement of Trump. The clock is ticking and in the next few weeks the Treasury Department is likely to establish a “must pass” date to raise the debt ceiling adding more tension to the leadership and White House talks.
Ukraine
Watch for possible headlines this week out of Saudi Arabia, where representatives of Ukraine and Russia are expected to meet under the auspices of the United States. Trump is committed to bringing an end to the war between Russia and Ukraine and talks now seem to be focused on two fronts: first an energy facilities cease fire and an agreement aimed at conflict-free shipping in the Black Sea.
At this point, it is not clear what agreements can be reached but with the parties all talking, this could be another focus for headlines in the coming week.
