How Brexit will happen, maybe

 In Politics

HOW BREXIT WILL HAPPEN, MAYBE — In hopes of reaching a deal by October on the terms of Britain’s departure from the European Union, Prime Minister Theresa May released her proposed plan on Thursday. But there are already some doubts that she will have the votes to get it through Parliament, let alone the EU. Former Conservative Party leader Iain Duncan Smith said he has “deep misgivings” about May’s white paper, and as many as 60 in her own party could vote against it.

President Donald Trump isn’t making things any easier for her. From The Sun’s exclusive interview with the president: “In an extraordinary intervention timed to coincide with his UK visit, Mr Trump said Theresa May ignored his advice by opting for a soft Brexit strategy. And he warned her any attempts to maintain close ties with the EU would make a lucrative US trade deal very unlikely. Mr Trump said: ‘If they do a deal like that, we would be dealing with the European Union instead of dealing with the UK, so it will probably kill the deal.’” Read more.

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POLITICO’s Charlie Cooper in London on the paper’s details: “The U.K. will formally ask the EU for a post-Brexit ‘association agreement’ including a ‘free-trade area’ for goods, a looser arrangement for financial services, alongside a security partnership and continued membership of many EU agencies…” Read more.

MORE ON TRUMP AND BREXIT — Brookings’ Thomas Wright in POLITICO Magazine: “When President Trump visits the United Kingdom on Friday, he will find the special relationship in its worst shape since the Suez Crisis of 1956. It did not look this way immediately following his election. Trump loudly supported Britain’s controversial withdrawal from the European Union. He repudiated President Barack Obama’s comment that the UK would be ‘at the back of the queue’ and promised quick progress on a bilateral Free Trade Agreement. …

“Contrary to the rhetoric, the Trump administration has pursued a predatory policy toward Britain designed to capitalize on the UK’s need for new trading arrangements after Brexit. The United States has sought to exact painful concessions that it was unable to secure when Britain negotiated as a member of the EU.” Read more.

CHINA: U.S. ‘ENEMY TO ALL’ — POLITICO’s Adam Behsudi, reporting on the state of affairs across the other big ocean: “China‘s Ministry of Commerce accused the U.S. of ‘slander’ and said Washington is ‘fully responsible’ for an escalating trade war, according to a tersely worded statement Beijing released [Thursday] in response to President Donald Trump’s plan to hit $200 billion worth of Chinese goods with another round of tariffs.

“China also strongly signaled that negotiations between the two countries are not moving in a positive direction. … ‘Due to domestic politics, the U.S. has gone back on its words, brazenly abandoned the bilateral consensus, and insisted on fighting a trade war with China.’” Read more.

MM sidebar: Aggressive statements from China aren’t a bad sign in and of themselves for Trump’s fair-trade crusade. But there’s still no sign the administration agrees on how to use any leverage it might have gained – something that’s vital for success. A couple of lawmakers, including Reps. Jeb Hensarling and Mia Love, pressed the Treasury secretary on Thursday to explain the administration’s goals, but he largely stuck to the vague line of wanting “fair and reciprocal trade” and for China to “open up.” Speaking of Mnuchin…

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WHAT TRADE WAR? — From your guest host: “Treasury Secretary Steven Mnuchin on Thursday dismissed fears that the U.S. is waging a global trade war as he was hit with a barrage of questions from nearly every member of a key House committee about the Trump administration’s policies.

“‘I don’t think we’re in a trade war,’ Mnuchin said in testimony to the House Financial Services Committee. ‘We’re in a situation of trade disputes.’ Still, he said his department is ‘very much monitoring the impact on the economy’ from tariffs and the resulting retaliation. …

“On China, Mnuchin acknowledged that talks between the two sides had largely ‘broken down’ but said the administration’s objectives are ‘pretty clear.’ ‘To the extent that the Chinese want to make serious efforts to make structural changes, I and the administration are available to discuss those,’ he said.” Read more.

Mnuchin also didn’t express particular concern that the Chinese would retaliate through the Treasury markets, given their large holdings of U.S. debt. “I have no reason to believe that that’s of concern to the market at this point. The market is very liquid and has a lot of depth, but that’s something we’ll continue to monitor.”

On Treasury’s long-awaited financial technology report, Mnuchin said he has seen a draft, and it should be out within the next 30 days.

HAPPY FRIDAY THE 13th — Ben White will be back in your inbox next week. Reach him at [email protected] and @morningmoneyben, and Aubree Eliza at [email protected] and @AubreeEWeaver. And as always, feel free to send tips on financial regulation to me: [email protected]

THIS MORNING ON POLITICO PRO FINANCIAL SERVICES — Katy O’Donnell on senators’ bipartisan anger in the wake of last year’s massive data breach at Equifax. To get Morning Money every day before 6 a.m., please contact Pro Services at (703) 341-4600 or [email protected]

DRIVING THE DAY — JPMorgan Chase, Wells Fargo, Citigroup and PNC report earnings … 9 a.m.: Carnegie Endowment for International Peace holds an event on Brexit with Michel Barnier, the UK’s chief Brexit negotiator … 11 a.m.: Fed releases its semiannual monetary policy report

BANKS POUR MONEY INTO COMPETITIVE RACES — POLITICO’s Zach Warmbrodt: “Republicans and Democrats facing competitive midterm races this year are getting an early burst of support from bankers, who are riding high off the passage of a sweeping financial deregulation bill.

“The American Bankers Association, which has spent months overhauling its political operations, for the first time is running television ads in support of incumbent lawmakers from both parties who have backed industry-friendly policies.” Read more.

KNIGHT STAYS AT WH, AS TOP HILL AIDE — POLITICO’s Andrew Restuccia and Jake Sherman: “The White House announced on Thursday that Shahira Knight, a top economic adviser to President Donald Trump who played a central role in shepherding the Republicans’ tax bill through Congress, will replace Marc Short as legislative affairs director. …

“Knight, a deputy director of the National Economic Council, announced in June that she would be leaving the administration for a job at the Clearing House, a banking policy and lobbying group. But she agreed to temporarily extend her tenure in the administration in the aftermath of NEC Director Larry Kudlow’s recent heart attack. Since then, Knight has been in quiet discussions with the White House to take over for Short, and Trump had started publicizing the move internally.” Read more, and insert Godfather reference here.

ROSS DIVESTS ALL STOCKS — POLITICO’s Doug Palmer and Colin Wilhelm: “Billionaire Commerce Secretary Wilbur Ross said Thursday he was selling all his stock holdings after being criticized by the Office of Government Ethics for some of his financial transactions.

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