Morning Report — Trump pauses tariffs on Mexico, Canada as China retaliates

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In today’s issue:

Trump pauses North American tariffs; China retaliates
USAID on the chopping block
Gabbard, RFK Jr. face key committee votes
Netanyahu aims for White House backing

President Trump agreed Monday to delay for a month the aggressive tariffs he levied on Canada and Mexico over his advisers’ misgivings, receiving in return pledges from both trading partners to help him strengthen U.S. border security.

But China struck back against new U.S. tariffs with a targeted tit-for-tat warning.

Trump’s initial order to levy and then pause 25 percent tariffs on two North American neighbors rattled financial markets; added new levels of uncertainty among governments and businesses to the north and south and in Europe and Asia; and prompted new warnings from economists that tariffs risk slowing U.S. growth one way or another, a result viewed as entirely avoidable.

In a month, Trump faces fiscal pressures that will require different negotiating strategies and deadlines he does not control alone. Examples: a March 14 deadline in Congress to keep the government funded, pressure to collaborate with Democrats to lift the nation’s borrowing authority to avert default, expectations for new spending to help victims of natural disasters and the hurdles of nudging fractious House and Senate Republicans to coalesce around the specifics of lower taxes, less spending, higher revenues and less red ink this year.

The president used his power to leverage some concessions from Canada and Mexico but allowed a 10 percent tariff on China, which he announced Saturday, to take effect today. The new levy, layered on top of tariffs from his first term, affects more than $400 billion of goods that Americans purchase from China each year. The U.S. took steps to close a loophole that allows Chinese e-commerce companies to avoid tariffs by shipping packages worth less than $800 into the U.S. duty-free.

“They all want to make deals,” Trump told reporters in the Oval Office on Monday, roping the European Union into the picture. “They’re ripping us off really badly.”

CHINA HITS BACK: Beijing moved swiftly early today to retaliate, including with additional tariffs on liquefied natural gas, coal, farm machinery and other products. It imposed restrictions on the export of certain critical minerals, many of which are used in the production of high-tech products. And China launched an anti-monopoly investigation of Google, The New York Times reports.

CNBC: China’s additional tariffs of 15 percent on coal and liquified natural gas imports from the U.S. start Feb. 10. American crude oil, farm equipment and certain cars and trucks are subject to 10 percent duties.

Mexican President Claudia Sheinbaum on Monday during a phone call with Trump promised to fortify the U.S.-Mexico border with 10,000 members of its National Guard. Justin Trudeau, the Canadian prime minister, in separate conversations with Trump on Monday, said Canada would appoint a fentanyl czar and launch a joint strike force to combat organized crime, among other steps.

The trade showdown Trump choreographed was foreshadowed during his campaign and previewed during his first term, but his fondness for tariffs used as weapons among allies has garnered criticism, including among a few Republicans in Congress.

Trump supporter Sen. Ron Johnson (R-Wis.) told Newsmax in an interview, “I share the market’s concerns. … It’s going to hurt Americans, American companies, American exporters. It will hurt American consumers long-term.”

The Hill: Trump’s tariff actions give Washington whiplash: “We’ll see what happens.”

Sen. Mitch McConnell (Ky.), the former Republican leader and occasional Trump roadblock, told CBS’s “60 Minutes” during an interview broadcast on Sunday that he opposes the president’s tariff policy.

"It will drive the cost of everything up. In other words, it will be paid for by American consumers," McConnell said. "I mean, why would you want to get in a fight with your allies over this?"

Many trade analysts concur.

“The United States is now signaling that tariffs are an all-purpose club to be used for whatever policy goal the president wishes,” Edward Alden, a trade expert at the Council on Foreign Relations, told The New York Times. “That formula will create enormous, in many ways unprecedented, uncertainty not just in North America but in the entire global economy.”

▪ The Hill: Trump oil tariffs expected to raise prices at the pump.

▪ The Hill: Five things to know about the Trump tariffs on Canada and Mexico.

▪ Reuters: Trump nominee will review previous administration’s restrictions on firearm exports.

SMART TAKE with NewsNation’s BLAKE BURMAN:

What would a United States sovereign wealth fund (if that is indeed the name) look like? President Trump signed an executive order that could lead to the creation of one.

“The extraordinary size and scale of the U.S. government and the business it does with companies should create value for American citizens,” Commerce secretary nominee Howard Lutnick said. “If we are going to buy two billion COVID vaccines, maybe we should have some warrants and some equity in these companies.”

While this concept is not new, large national sovereign funds are not common in the Western Hemisphere. According to public data, there are five sovereign wealth funds in the world with assets of more than $1 trillion. Saudi Arabia’s Public Investment Fund is believed to be close behind, at about $925 billion, and Trump seemed to set a target.

“I think in a short period of time, we’d have one of the biggest funds,” Trump said. “The Saudi Arabia fund is on the large side, but eventually we’ll catch it.”

This has a ways to go, but keep this in mind as well: The U.S. is currently more than $36 trillion in debt, and Congress could have a say in whether this happens.

Burman hosts “The Hill” weeknights, 6p/5c on NewsNation.

3 THINGS TO KNOW TODAY:

▪ Our brains are filling with more and more microplastics, a new study shows. They have so far been identified in the liver, placenta, blood, testicles and even certain arteries that lead to the heart.

▪ New York Gov. Kathy Hochul (D) signed a law Monday to stop Republican-led states from targeting New York physicians over prescriptions for abortion medication.

▪ How the Trump administration will handle railroad safety is unclear. Vice President Vance — who as an Ohio senator co-authored a safety bill after a toxic train derailment in East Palestine, Ohio — traveled there on Monday with Environmental Protection Agency Administrator Lee Zeldin.

LEADING THE DAY

© The Associated Press | Fernando Vergara

FOREIGN AID: As part of the Trump administration’s crusade for “government efficiency,” Secretary of State Marco Rubio is being put in charge of the U.S. Agency for International Development (USAID) as the White House mulls the future of the agency. USAID has for decades administered billions of dollars of humanitarian and development assistance around the world.

The move comes after Elon Musk, under the auspices of the Department of Government Efficiency (DOGE), a White House working group tasked with “eliminating government waste” took aim at the agency. USAID offices were closed Monday and employees were told to work remotely. Dozens of senior officials have been furloughed and hundreds of contract employees laid off. Trump issued a 90-day freeze on nearly all foreign assistance, and while the State Department issued waivers for some lifesaving humanitarian aid, confusion over instructions disrupted aid agency operations.

Sen. Andy Kim (D-N.J.), a former USAID employee, was among a chorus of Democrats on Monday blasting the turmoil surrounding the agency.

“You have mysterious people within this new administration sending out emails across the entirety of USAID telling them not to show up,” Kim said Monday at the agency’s Washington headquarters. “This is no way to govern, this is no way to treat public servants, and this is no way for us to conduct our foreign policy as a country.”

Senate Minority Leader Chuck Schumer (D-N.Y.) said late last week that any effort to dissolve USAID would be “illegal and against our national interests.” Democrats on the House Foreign Affairs Committee are calling on Chair Brian Mast (R-Fla.) to convene an urgent hearing with senior Trump administration officials about USAID. Rep. Gregory Meeks (D-N.Y.), joined by Democratic members of the committee, urged Mast to convene a hearing with Rubio and Peter Marocco, director of foreign assistance, within the next two weeks, with lawmakers set to go on recess on Feb. 13.

Lawmakers and legal experts are warning the Trump administration’s efforts to shutter USAID are unconstitutional and likely to face challenges in court. Trump, meanwhile, dismissed the suggestion on Monday that it would require an act of Congress to do away with USAID.

“I don’t think so. Not when it comes to fraud. If there’s fraud. Those people are lunatics. And, if it comes to fraud you wouldn’t have an act of Congress, and I’m not sure you would anyway,” Trump said.

▪ The Hill: USAID appears to be first on the DOGE chopping block, despite being less than 1 percent of the federal budget. One USAID employee described the agency as a “guinea pig” for the panel.

▪ The Hill: Five takeaways from Musk and Trump’s war with USAID.

▪ Politico: Musk steamrolls Washington with Trump’s blessing.

▪ The New York Times: Inside Musk’s aggressive incursion into the federal government.

TREASURY: Democratic leaders in both chambers on Monday vowed to introduce legislation to “stop unlawful meddling in the Treasury Department’s payment systems.” Democrats have been sounding the alarm over reports that DOGE was given access to the Treasury Department’s sensitive payment systems.

“We must protect people’s Social Security payments, their Medicare payments, tax refunds, from any possible tampering by DOGE or any other unauthorized entities,” Schumer told reporters on Monday. David Lebryk, who was the Treasury’s highest-ranking career official, resigned following a clash with Musk over access to the systems.

The Hill: Sen. Elizabeth Warren (D-Mass.) sent a letter to Treasury Secretary Scott Bessent on Monday demanding to know what access Musk was given to the federal payments system and what safeguards were implemented to protect Americans’ private data.

SHUTDOWN CHANCES RISE. House Minority Leader Hakeem Jeffries (D-N.Y.) said Monday that Democrats will use the coming battle over government funding as a vehicle to block Trump’s early efforts to gut federal programs — raising the chances of a shutdown in the middle of next month. In a letter to House Democrats, Jeffries hammered the administration for issuing a since-rescinded order to freeze previously allocated federal aid. Jeffries suggested Democrats will oppose any federal spending bill that doesn’t explicitly prevent Trump from freezing, slashing or otherwise altering those programs.

Jeffries’s warning arrives as Speaker Mike Johnson (R-La.) and GOP leaders are already struggling to unite their restive conference behind not only a government spending bill, but also a much larger package of tax cuts, immigration reforms and energy policies. Somewhere in that mix, they also need to raise the debt ceiling — an unpopular idea among many House conservatives.

▪ Government Executive: As the Trump administration gathers names of recent hires, some are being asked to justify their jobs.

▪ The Hill: Trump on Monday directed secretaries to begin a process to create an American sovereign wealth fund, suggesting it could partially own the popular app TikTok.

CFPB: Trump put Bessent, a billionaire hedge fund manager, in charge of the Consumer Financial Protection Bureau on an acting basis. Bessent replaces Rohit Chopra, who was fired on Saturday before the end of a five-year term that was set to end in late 2026. On Monday, Bessent ordered the bureau’s staff to pause much of its work.

The Wall Street Journal: Trump administration officials are weighing executive actions to dismantle the Education Department.

WHERE AND WHEN

The House will convene at noon.
The Senate meets at 11 a.m.
The president will sign executive orders at 2 p.m. Trump will welcome Israeli Prime Minister Benjamin Netanyahu to the White House for meetings at 4 p.m. They will hold a joint news conference at 5:10 p.m. in the East Room. They will dine in the State Dining Room at 5:40 p.m.
Secretary of State Marco Rubio is in Costa Rica where he will meet this morning with President Rodrigo Chaves and Foreign Minister Arnoldo André. He will speak to the press this morning along with Chaves in San Jose. Rubio will travel to Guatemala City, Guatemala, for a working dinner with President Bernardo Arévalo.

ZOOM IN

© The Associated Press | Alex Brandon

CABINET: Former Rep. Tulsi Gabbard (Hawaii) and Robert F. Kennedy Jr. are facing crucial tests today as Senate committees decide whether to advance their nominations to the floor, The Hill’s Al Weaver reports. The pair of contentious nominees are facing key panel votes that will determine their future to lead the U.S. intelligence apparatus and the Department of Health and Human Services, respectively.

“I think [they’re] both going to be fine,” said Sen. Markwayne Mullin (R-Okla.), a top ally of Trump and Senate Majority Leader John Thune (R-S.D.). “I was very confident in [Kennedy] throughout the process. … I said we had work to do with Tulsi. Tulsi’s done the work and I feel good where we’re at.”

Sen. Susan Collins (R-Maine) — considered a swing vote — announced Monday that she will support Gabbard, giving her a key boost in her confirmation process. Meanwhile, Kennedy has a singular focus: winning over the support of Sen. Bill Cassidy (R-La.), a member of the Finance Committee who could single-handedly end his confirmation hopes.

Cassidy, a physician, publicly clashed with Kennedy about the designee’s past unfounded claims linking rising reported cases of autism to vaccines. The Louisiana Republican told reporters at the Capitol on Monday that he was still “working through” Kennedy’s nomination, adding that their discussion over the weekend was “cordial.”

▪ The Hill: The Senate on Monday confirmed Chris Wright, the CEO of fracking company Liberty Energy, to lead the Energy Department.

▪ The Washington Post: Key Trump Cabinet members refuse to acknowledge that Trump lost in 2020.

▪ The New York Times: Publicly released agreements show the vast wealth of Trump’s Cabinet picks and the uncharacteristically large list of potential conflicts of interest with which they enter office.

BUDGET: Congressional Republicans’ ambitious plans to quickly advance Trump’s legislative agenda are hitting a speed bump as divisions remain about spending cuts. House GOP leaders aimed to produce a blueprint at the annual retreat last week and then mark up a budget resolution in committee this week, report The Hill’s Emily Brooks and Mychael Schnell. But now, Johnson is being forced to punt an initial vote on the legislation.

“There will not be a budget resolution markup this week,” a source told The Hill. “Leadership provided an ambitious timeline, and the House is doing the best it can to meet that.”

Meanwhile, Senate Budget Committee Chair Lindsey Graham (R-S.C.) is back-channeling with the House Freedom Caucus on potential budget cuts to try to get the fractious House GOP on the same page as their Senate counterparts Graham’s efforts have the implicit approval of other GOP senators, who know that whatever the Senate does has to pass a fractious House.

“We need their help, and they need ours,” Rep. Ralph Norman (R-S.C.), a Freedom Caucus member, told Politico. “It would be better if we got together.”

Funding freeze: A second federal judge on Monday blocked the Trump administration from implementing an across-the-board pause on federal grants. U.S. District Judge Loren AliKhan expressed concern the plan is still in force despite the rescission of the Office of Management and Budget (OMB) memo.

The Justice Department, which is representing the Trump administration, disputed that the funds targeted in the OMB memo were being restricted, arguing instead that the only funds that remain frozen are those included in Trump’s executive orders. Still, the judge said the plaintiffs had proven certain funding sources outside of executive order parameters were inaccessible.

ELSEWHERE

GAZA CEASEFIRE: Israeli Prime Minister Benjamin Netanyahu will meet with Trump at the White House today, the first foreign leader to visit with the president in his second term. Officials said the future of the Gaza hostage-release and ceasefire deal hangs on the outcome of the meeting. Trump's Middle East envoy, Steve Witkoff, played a key role in persuading Netanyahu to accept the ceasefire's first phase, and Trump wants to see the truce continue in order to focus on a peace deal between Israel and Saudi Arabia.

“I have no guarantees peace is going to hold,” Trump said Monday of the ceasefire agreement. Witkoff added that the ceasefire has held so far.

But Netanyahu’s allies have threatened to bring down the government if Israel goes down that path — and does not resume the war in Gaza. Netanyahu, who is blowing past a deadline to begin the second round of negotiations to speak with Trump, is waiting to see where the president stands before he makes any decisions, Axios reports. The second phase of the deal is supposed to lead to a permanent ceasefire, and a full withdrawal of Israeli forces from Gaza.

“Our decisions and the courage of our soldiers have redrawn the map,” Netanyahu said Sunday. “But I believe that, working closely with President Trump, we can redraw it even further and for the better.”

▪ CBS News: Trump and Netanyahu will hold a press conference after their meeting.

▪ The Times of Israel analysis: With his D.C. invite, Netanyahu already has a huge win. Now he has to convince Trump on his Gaza plan.

▪ Haaretz: More pressure from the White House: Trump forces Netanyahu to pick a new hostage negotiator.

UKRAINE: Trump’s Ukraine envoy, Keith Kellogg, hinted on Fox News that both sides would have to make concessions to end the war — which could include Kyiv giving up occupied territory. Kellogg said Ukrainian President Volodymyr Zelensky “has already indicated he will soften his position on land,” the retired lieutenant general said, adding that Russian President Vladimir Putin “is going to have to soften his positions as well.” But Zelensky’s communications adviser dismissed Kellogg’s comments.

“If his plan is just a ceasefire and elections, it is a failed plan — Putin won’t be intimidated by just those two things,” Dmytro Lytvyn told journalists.

Over the weekend, Moscow joined Washington in calling for Ukraine to hold elections, sparking concern in Kyiv. The surprising alignment has stoked fears in Ukraine that Putin is aiming to play Kyiv and Washington against each other in attempting to end the war.

Meanwhile, Trump’s threat of sanctions has left Putin “rattled” and concerned about the Russian economy, British Prime Minister Keir Starmer said in Brussels on Monday. Starmer said it was necessary to “see all allies stepping up — particularly in Europe” when it comes to inflicting economic harm on Russia, and he argued it would help bring about peace.

▪ The New York Times: To wean itself off Russian natural gas, Europe has found new sources of energy, including imports from the U.S. But high costs are straining the economy.

▪ Reuters: Trump said on Monday he wants Ukraine to supply the U.S. with rare earth minerals as a form of payment for financially supporting the country's war efforts against Russia.

▪ Politico: European Union leaders deflect Trump on Greenland and on tariffs.

OPINION

■ Trump opens the door for a rebalancing of power, by Chris Stirewalt, columnist, The Hill.

■ Trump’s attack on USAID is an assault on Americans’ safety, by Sen. Chris Coons (D-Del.), guest essayist, The Washington Post.

■ Elon Musk’s glaring conflicts of interest deserve more attention, by Jianli Yang, opinion contributor, The Hill.

THE CLOSER

And finally … 🦅Bald eagles are a success story thanks to the wisdom of a Republican administrator of the Environmental Protection Agency in the Nixon years, generosity of Canadians, buy-in from lawmakers from both parties last year and the signature of a Democratic president.

It’s worth cheerleading for the government’s history of conserving icons with help from U.S. allies and thanks to bipartisan consultation with Congress.

Bald eagles not only prospered after the banning of the pesticide DDT in 1972 and escaped the endangered species list in the 2007 after a nurturing boost from imported birds from Canada, they became the official national bird thanks to bipartisan legislation signed by former President Biden on Christmas eve.

▪ The Associated Press: American bald eagles are having a moment.

▪ Time: The cover shoot with Trump and an American bald eagle named Uncle Sam.

Stay Engaged

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