(UBS)
Reconciliation Advances.
Senate Republicans early this morning passed their roughly $70 billion reconciliation package funding Immigration and Customs Enforcement (ICE) and Customs and Border Protection (CBP). The final vote only occurred after a grueling 18-hour “vote-a-rama” that included votes on 60 amendments. After passing the Senate on a mostly party-line vote of 52 to 47, the bill now heads to the House for a vote next week. Efforts to pass this bill in the Senate had been complicated by bipartisan backlash over the administration’s proposed $1.8 billion Justice Department “anti-weaponization” fund. Despite assurances from the Trump administration that the fund would not move forward, Senate Democrats forced a series of amendment votes aimed at restricting or eliminating it. Senate Democrats also forced votes on politically charged amendments on immigration, health care, and election policy. Legislative victories are becoming increasingly hard to come by.
Evolving Tariff Landscape.
Following the Supreme Court's decision earlier this year to strike down the lion's share of tariffs imposed under emergency economic powers, the Trump administration pivoted to imposing 10% tariffs under an authority that has never been used before. These tariffs, while global and broad-based, are legally limited by both time (only 150 days) and tariff level (15% cap). Their purpose was to provide time for the administration to apply tariffs using other authorities on a more longstanding basis. One authority allows the administration to impose retaliatory tariffs in response to unfair trade practices (applied against China in the first Trump administration). These tariffs only can be imposed after lengthy investigative and administrative processes. This week, the Trump administration announced plans to impose broad-based tariffs of 10% or 12.5% on imports from major US trading partners. Under the plans, there are exemptions for a wide variety of products. The proposed tariffs won't be implemented until later this year after they go through a process of public comment. The latest proposal reflects the Trump administration's balancing of its interest in broad-based tariffs with concerns about the economy and inflation. The result will be broad-based tariffs with complex layers of exemptions and sector-specific tariffs as well as possible additional bilateral deals and retaliatory tariffs.
Social Security. In anticipation of the annual Trustees report on the soundness of Social Security and Medicare, AARP called for Congress to act on Social Security. Last year's report stated that Social Security will be able to pay 100% of traditional benefits (excluding disability, which is projected to be solvent until 2099) until 2033. At that time, the fund will only be able to cover 77% of scheduled benefits. Over the years, the date of insolvency fluctuates based on a number of factors, including tax receipts. We do not expect AARP's push to result in any action to address the fiscal challenges that Social Security faces until we get much closer to the insolvency date.
