July Washington DC Preview

QUICK FIX

— Tariff truce: The U.S. and China will resume trade talks after a meeting between President Donald Trump and Chinese President Xi Jinping at the Group of 20 Leaders' Summit in Osaka, Japan. Trump agreed to hold off on raising tariffs on additional Chinese goods, while China agreed to buy U.S. farms products. Trump also said he would loosen his administration's trade ban on Chinese telecommunications giant Huawei. The two sides didn't put a shot clock on negotiations.

— Immigration talks with Mexico press on: The U.S. and Mexico will reach a self-imposed July 15 deadline to demonstrate progress on Mexico's measures to stem the flow of Central American migrants to the U.S. The two sides made a deal on immigration enforcement in early June, but a side agreement — not initially disclosed by either party — said the two countries would circle back in 45 days to gauge progress. If the measures were deemed insufficient by the U.S., the countries would open talks about a "safe third country" or regional asylum deal. Preliminary U.S. border figures obtained by POLITICO showed a decline in arrests over a week-long period in mid-June — but whether the numbers will have fallen enough to satisfy Trump remains to be seen.

— Partisan split on must-pass defense authorization: The House will begin consideration of its annual defense policy bill — and likely hundreds of amendments — when it returns from its Fourth of July recess. Republicans are unlikely to support the new National Defense Authorization Act, H.R. 2500 (116). Defense hawks have slammed it for its lower $733 billion budget topline, limits on low-yield nuclear weapons and loosening of terrorist detainee policy, among other things. Among other contentious proposals, Democrats and Republicans have teed up an amendment to prohibit military action against Iran without congressional approval amid heightened tensions in the Middle East.

TRADE

Clock ticking on USMCA: It will be a race against the clock for the Trump administration and congressional Republicans to try to pass the new USMCA trade deal before the end of the month. After members get back from their July Fourth recess, they'll have only 12 joint-session working days left before Congress takes its five-week summer break.

Democrats have formed USMCA working groups to break down problems they have with the deal as written. Those lawmakers will be working with U.S. Trade Representative Robert Lighthizer to try to reach a compromise on the four major outstanding issues: labor provisions, environmental standards, access to medicines and enforcement.

Lawmakers have said they expect to meet with Lighthizer at least weekly. The Trump administration could send its implementing legislation to Capitol Hill to try to force the issue, but it will be up to House Speaker Nancy Pelosi to decide when to take up a vote. Pelosi said last week that Democrats could opt to demand the pact be reopened to address enforcement concerns.

Tariff tension: Companies hoping to get exclusions from duties on $200 billion in Chinese imports that Trump hiked from 10 percent to 25 percent in May could find out this month whether their requests were granted. — Megan Cassella

BUDGET & APPROPRIATIONS

Race to avert shutdown: Congress has just three months left to finish up fiscal 2020 funding bills before money runs dry on Oct. 1. And no matter how quickly spending leaders are able to tick through the 12 annual funding measures, none of that action will matter if a broader budget deal doesn't get done.

Once lawmakers return from recess on July 9, those talks could continue with top White House officials. But leaders on both sides of the aisle are already preparing for the likelihood of another stopgap spending bill that drags out current funding levels, especially since Trump's top fiscal advisers just floated that idea in their most recent meeting on the issue.

Without an agreement on overall caps for defense and non-defense spending, Senate appropriators could follow the lead of their House counterparts in starting to pick tentative limits this month so they can start the process of writing fiscal 2020 bills.

On the House side, the chamber passed 10 of its 12 annual spending bills in June, leaving only the Legislative Branch, H.R. 2779 (116), and Homeland Security measures untouched. It is unclear, however, whether House Democrats will want to wade this month into the contentious issues that snagged those bills last month or whether they will hold off on passage until after a budget deal is struck. — Jennifer Scholtes

EMPLOYMENT & IMMIGRATION

Asylum changes coming: The end of July will bring a deadline for the Department of Homeland Security secretary and attorney general to show they've taken steps to implement a number of policies to toughen the asylum process. Trump issued a memo in April that gave the departments 90 days, until July 29, to "take all appropriate actions" to adopt several asylum policies, including adding a fee to asylum applications. — Ted Hesson

FINANCIAL SERVICES

Powell's month in the spotlight: July will be packed with events for the Federal Reserve, with Chairman Jerome Powell scheduled to face Congress for his semiannual testimony and Fed policymakers meeting to decide whether to cut interest rates. When Powell goes before the House Financial Services Committee on July 10 and the Senate Banking Committee the next day, he'll be grilled by lawmakers over the central bank's rate plans as well as the increasingly aggressive criticism he's getting from the president. Trump has been haranguing Powell for months to slash rates, an unprecedented display of public pressure on the central bank. Policymakers meet on July 30-31 to determine whether economic conditions are weakening enough to warrant lower rates as insurance against a more rapid economic slowdown.

Facebook returns to Congress: The social media giant will be the subject of back-to-back Senate Banking and House Financial Services hearings on July 16 and 17 focused on its "Libra" digital currency project announced last month. House Financial Services Chairwoman Maxine Waters has called on the company to halt its foray into finance until policymakers can vet the project. The Facebook executive overseeing Libra is expected to testify.

Bank merger review: Waters will lead another hearing July 24 on the proposed merger of lenders BB&T and SunTrust. The California lawmaker and other Democrats have been critical of the deal, which would create the nation's sixth-largest retail bank, and Waters has asked regulators to hold off on approving it until her committee has had a chance to review it.

Next steps on housing finance overhaul: Treasury is expected to release a highly anticipated plan to overhaul the nation's housing finance system any day now. Trump in March directed the department to come up with a proposal to end more than a decade of government control of Fannie Mae and Freddie Mac, the companies that back about half the country's mortgages. Federal Housing Finance Agency Director Mark Calabria, the regulator who oversees Fannie and Freddie, says he expects to engage with Treasury on the way the companies will operate in the future once the report is unveiled. Congress will have a say, too. — Mark McQuillan

HEALTHCARE

Obamacare on the line: A federal appeals court next week will consider Obamacare's fate months after a judge in Texas ruled the entire law unconstitutional, a decision that shocked Washington and the health care industry. A group of Republican-led states, with full support from the Trump administration, contend the nearly decade-old law was invalidated after Congress eliminated the penalty for not having health coverage. Democrat-led states and the House of Representatives are defending the law in a case that could reach the Supreme Court next term, at the height of the 2020 election. But first, the 5th U.S. Circuit Court of Appeals will hear oral arguments in the case, Texas v. Azar, on July 9 in New Orleans. — Jason Millman

DEFENSE

Defense nominees on deck: The Senate Armed Services Committee could hold a confirmation hearing this month for Mark Esper to be permanent Defense secretary, just weeks after Trump's last choice, Pat Shanahan, pulled out.

No date has yet been set for a hearing. But asked when he'd like to see Esper confirmed, Senate Armed Services Chairman Jim Inhofe (R-Okla.) responded tersely: "Yesterday."

Esper took over as acting Pentagon chief after Shanahan withdrew from consideration and resigned from the Pentagon amid questions about ties to former employer Boeing, his qualifications for the job and a troubled family history.

Esper will likely face pointed questions about his independence from the White House and his ties to Raytheon, where he was a top lobbyist.

In addition to Esper, Trump has also tapped Pentagon Comptroller David Norquist to become deputy Defense secretary and Army Undersecretary Ryan McCarthy to replace Esper as the service's top civilian leader. — Connor O'Brien

AGRICULTURE

Details on trade aid 2.0: Farmers are anticipating an announcement from the Agriculture Department outlining specifics of the administration's second round of assistance for producers hurt by retaliatory tariffs. The latest iteration of the trade relief program, which carries an expected price tag of $16 billion, has been under review by the Office of Management of Budget since mid-June. The bulk of the assistance will consist of direct payments to farmers, but the program will also include USDA purchases of surplus commodities and promotion of U.S. goods in new export markets.

The first wave of payments under the new program could begin as early as the end of the month. USDA has said direct payments could be made in up to three rounds, running through the fall.

Relocation deadline: Employees at the Economic Research Service and National Institute of Food and Agriculture whose jobs are being relocated to a new Kansas City-area headquarters have until July 15 to notify the department whether they intend to move. Agriculture Sonny Perdue has touted the relocation plan as a way to bring researchers closer to farming communities, as well as cut costs and improve staff recruitment and retention. But many employees are frustrated by the decision. Union leaders estimate that a significant amount of staff may quit — as many as four out of five employees at ERS, for example. — Liz Crampton

EDUCATION

Still waiting: Senate education leaders Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) are still negotiating a rewrite of federal higher education law, missing Alexander's self-imposed May deadline to release a draft. The House education committee, meanwhile, has wrapped up its series of bipartisan hearings on the Higher Education Act, so we're watching to see what legislation Democrats on the committee produce.

Union courting: 2020 hopefuls continue to woo the nation's teachers unions, first at the National Education Association's forum on education in Houston on July 5. The American Federation of Teachers, meanwhile, continues to hold town hall meetings with candidates as the union weighs whom to support. — Benjamin Wermund

CANADA

Feud with China deepens: Prime Minister Justin Trudeau has a China problem on his hands ahead of the Oct. 21 Canadian federal election. China last week said it would block all shipmentsof Canadian meat, a move that escalated a diplomatic dispute between the two nations that began in December with Canada's arrest of a Huawei executive at the request of the U.S. China has also restricted imports of Canadian canola and prosecuted two Canadians on espionage charges that Trudeau has called "arbitrary."

The freeze-out: The diplomatic impasse with China could have election year ramifications for Trudeau for reasons that go beyond economic hits. High-level Canadian officials have been rebuffed in efforts to meet with their Chinese counterparts to broker a solution. That has forced Trudeau to lean on Trump for assistance, but the G-20 meeting over the weekend ended without any resolution for Canada.

A summer cameo for Parliament? Canada's Parliament adjourned late last month ahead of the election and is not scheduled to return until well after Canadian voters head to the polls. But the new North American trade deal could lure lawmakers back to Ottawa for a special session. Canada's bill to implement the USCMA is expected to pass easily, but the Trudeau government held off on setting up a final vote to see if the Trump administration can reach an agreement to satisfy House Democrats' concerns with the NAFTA replacement.

If Trump lands a deal before Congress' August recess, Trudeau will recall Parliament for an emergency summer session to pass the USMCA bill, a Canadian official told POLITICO. If not, the Canadian Parliament is unlikely to take up USMCA again until 2020. — Alex Panetta