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Axios Sneak Peek

Welcome to Sneak Peek, our weekly lookahead for both ends of Pennsylvania Avenue, plus the cream of the Sunday shows. I'd love your tips and feedback: jonathan@axios.com.

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1 big thing: Trump's potentially explosive China play

The big sleeper issue in the U.S.-China relationship: cars.

Senior White House officials are quietly preparing to confront China over what they consider unfair handling of automobiles, one of the world's largest industries. It's a move that could profoundly disrupt relations between the superpowers.

Watch for the issue to pop in President Trump's talks next month with China's Xi Jinping.

What you need to know:

  • When U.S. automakers sell in China, they are met with import tariffs of 25%. That's why 96% of the 27.5 million vehicles sold in China last year were built there.
  • When U.S. automakers like GM build in China, they are required by law to form joint ventures with Chinese companies. Those Chinese companies must own 50% or more of the venture.
  • By contrast, the U.S. imposes tariffs of just 2.5% and lets foreign car companies own their entire U.S.-based operations.
  • U.S. companies have swallowed these rules since the '90s because the Chinese market is so lucrative. But Trump and his top nationalist-minded advisers — Steve Bannon, Stephen Miller and Peter Navarro — believe the status quo is unacceptable.

The White House's calculus: China currently exports very few cars to the U.S., but it's itching to sell dramatically more. Trump is perfectly positioned to negotiate the terms of China's market entry. He's got plenty of leverage with tariff levels and ownership restrictions — though the Trump folks are still hashing out their negotiation strategy.

A playbook for Trump: Michael Dunne, an authority on the Chinese auto market, has three rules — from his book "American Wheels, Chinese Roads" — for American negotiators to deal with China:

  1. If the Chinese want to sell their cars to Americans, they must invest in plants in America.
  2. Chinese companies will be free to own 100% of their operations in America — provided that American car companies get the same rights in China. If the Chinese refuse, then America will reciprocate.
  3. Profits from operations stay inside the United States. Repatriation to China will be limited and will require approvals from the the U.S. government.

2. Crossroads at Pennsylvania Ave.

"Fox News Sunday" host Chris Wallace called this week a "critical crossroads" for the administration on Russia, the president's Supreme Court nominee and dismantling Obamacare.

Essentials:

  • Obamacare changes: The key moment on "Fox News Sunday" was when Wallace showed Paul Ryan a graphic of how the current House plan would hurt low-income seniors. Ryan replied that he's looking at changing the healthcare bill to offer "additional assistance to people in those older cohorts."
  • Trump's budget blues: Trump has zero chance of getting his 20% cut to the National Institutes of Health. Ryan told Wallace the medical research body is "particularly popular in Congress." Sen. Susan Collins called the NIH cuts "disturbing" in her interview with NBC's Chuck Todd on "Meet the Press."
  • Alternative facts: Ryan told Wallace he was on track to pass healthcare. Conservative Sens. Rand Paul and Ted Cruz beg to differ. Paul told ABC's "This Week" that House leaders are "flat-out false in telling us, oh, you guys ran on this plan." Cruz on CBS' "Face the Nation" called phase three of the GOP leaders' health care package — the bills that have to be passed separately — "the sucker's bucket," because they won't get 60 votes.
  • Inconvenient intelligence: House Intelligence chair Devin Nunes confirmed on Fox that the Justice Department report refutes Trump's wiretapping claims. FBI director James Comey testifies before Nunes' committee tomorrow and will likely say the same thing — his long-awaited public commentary on the allegations.

3. Obamacare replacement: Final countdown

After showering attention on conservatives, the healthcare whip team is turning focus to the moderates who worry Ryan's healthcare plan will hurt their elderly constituents.

Steve Scalise's whip team met with a couple dozen members of the Tuesday Group on Thursday, but these House moderates couldn't agree on what they'd need from leadership to get to "yes." They're fed up with being taken for granted on tough votes and they're worried that they'll take a tough vote for the team only to watch the bill die in the Senate.

The count: Everybody knows it's going to be extremely tight. A Freedom Caucus source says "short of some major change — which we are being told won't come — the bill does not have the votes." Leadership hopes pressure from Trump and Steve Bannon — who texts regularly with Freedom Caucus leader Mark Meadows — can sway conservative holdouts.

What's next: A full court press, with a mixture of public advocacy (Trump's rally in Kentucky tomorrow) and private cajoling. Vice President Pence and HHS Secretary Tom Price are making last-minute pitches to reluctant members. Price meets with conservative movement leaders tomorrow and key industry groups later in the week.

What's on the table: Leadership will likely offer more generous tax credits to seniors and are considering buying off moderates with a reserve fund that would be used in the Senate to boost up the tax credits. But that risks solidifying the remaining Freedom Caucus members against the bill.

4. Hot in the West Wing

Top West Wing officials are avidly reading and passing around a dissent by Judge Jay Bybee of the Ninth Circuit making the case for the president's authority to issue the travel ban:

"We are judges, not platonic guardians. It is our duty to say what the law is, and the meta-source of our law, the U.S. Constitution, commits the power to make foreign policy, including the decisions to permit or forbid entry into the United States, to the President and Congress."

The president's aides say the dissent crystallizes their view of the role of the federal judiciary and power of the executive.

It's a good forecast of the arguments the team will make both in court and in the court of public opinion. Don't be surprised if the dissent gets mentioned in Gorsuch's confirmation hearing tomorrow.

But the dissent isn't all good news for the president. At the end of it, Bybee chastises Trump (without naming him) for his attacks on federal judges: "Such personal attacks treat the court as though it were merely a political forum in which bargaining, compromise, and even intimidation are acceptable principles."

1 fun thing: Meme-ing Miss Blueberry

The internet is getting a major kick out of Olivia Nuzzi's New York mag cover story on Kellyanne Conway. Nuzzi reports that Conway picked berries as a child in New Jersey and now answers to the Secret Service codename "Blueberry." This news — of course — inspired memes...

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Sessions vows to take travel ban appeal to Supreme Court

Ted S. Warren / AP

Attorney General Jeff Sessions has announced the DOJ will ask the Supreme Court to review Thursday's ruling from a federal appeals court keeping the block on President Trump's travel ban in place:

"President Trump's executive order is well within his lawful authority to keep the Nation safe…The Department of Justice strongly disagrees with the decision of the divided court..."

The dissenters: Sessions is right, the court was split 10-3. The dissenters said that the law does not permit judges to second-guess a president's ability to make decisions about national security.

The majority: Chief Judge Roger Gregory, however, wrote the ban "drips with religious intolerance, animus, and discrimination."

Featured

Ford veteran returns after brief stint at Uber

Alan Diaz / AP

Sherif Marakby, an automotive executive who left Uber in April after one year, has re-joined Ford, where he previously spent 25 years, according to the Wall Street Journal. Marakby will be a vice president overseeing the company's self-driving and electric-car businesses.

The news comes a few days after Ford abruptly named James Hackett as its new CEO, replacing Mark Fields. Hackett was previously heading the company's Smart Mobility division.

Between the lines: Marakby's departure from Uber was only the latest amid a slew of controversies around the company, including an ongoing lawsuit from Alphabet's self-driving car unit, Waymo. And with Detroit's increasing focus on keeping up in the autonomous driving race and rethinking car ownership models, it's no surprise to see Marakby being wooed back by Ford, which has been heavily investing in those areas over the past year.

Featured

U.K. resumes sharing intel with U.S.

Matt Dunham / AP

The U.K. has resumed sharing intel with the U.S. according to the U.K. Home Secretary, Reuters and BBC report. This comes after the U.K. halted sharing intel with U.S. officials due to undesired leaks to the media about the Manchester bombings and photos of the crime scene.

Why now? U.K. counter-terrorism officers reportedly received assurances today about the U.S. Earlier today Trump said he had asked the DOJ to launch review of the leaks and threatened prosecution.

Featured

Millennials want to buy houses, but not save for them

Keith Srakocic / AP

Avocados aside, almost 80% of millennials plan to buy a home at some point, but aren't prepared for it, according to a study by Apartment List. The study also found that many millennials, especially those in metropolitan areas, significantly underestimate how much a down payment will cost them.

  • Almost 70% of 18- to 34-year-olds have saved less than $1K for a down payment.
  • 40% don't save at all on a monthly basis — even among 25-34 year olds who historically have owned or would be soon owning a home already.
  • Millennials making less than $24K typically save about 10% in general, while those who make more than $72K only save 3.5%.
  • Less than 30% of 25- to 34-year-olds can save enough for a 10% down payment in the next three years.

Why: In the survey, not being able to afford to buy a home was the biggest determent, followed by not being ready to settle down or waiting to get married. Student debt, rent and delayed careers due to the recession could all attribute to the affordability problem, as well as trends in urban areas to spend more on food and entertainment, Wall Street Journal points.out.


Featured

Zuckerberg: We need more purpose

Steven Senne / AP

Mark Zuckerberg told Harvard's graduating Class of 2017 Thursday that strong projects creating a sense of purpose for everyone involved. He said his hardest times at Facebook came about when he didn't take the time to explain the purpose of the project.

His call to action: Let''s "do big things not just to create progress, but to create purpose...You are graduating into a world that needs purpose. It's up to you."

His advice to those with big ideas: "Be prepared to be misunderstood."

What pop culture gets wrong about tech and innovation: "The idea of a single eureka moment is a lie," which he says is detrimental to future innovators who tend to think, "we feel like we just haven't had ours yet." Also, "no one writes math formulas on glass."

Here's everything Zuckerberg says our society needs right now:

  • "How about stopping climate change before we destroy the planet and getting millions of people involved installing solar panels?"
  • Track health data and share genomes
  • "Invest in cures so people don't get sick"
  • "How about modernizing democracy so everyone can vote online?"
  • "And how about personalizing education so everyone can learn… continuous education through our lives"
  • "Let's do it in a way that gives everyone" a role
  • "We need affordable child care"
  • "Healthcare that's not tied to just one employer"
  • "We need a society that's less focused on locking us up and [that] stigmatizes us when they do"
  • Eliminate income inequality
  • Deal with automation and self-driving trucks
His take on globalization: "There are people left behind by globalization…It's tough to care about other people when we don't feel good about our lives at home. There's pressure to turn inward."
Zuckerberg was accepted into Harvard as a member of the Class of 2006 and today received a Doctor of Laws with the Class of 2017.
Featured

OPEC down for "whatever is necessary" to raise oil prices

Ronald Zak / AP

Following a series of meetings between OPEC and non-OPEC countries in Vienna Thursday, Saudi Arabia's energy and oil minister, Khalid Al-Falih announced that all members will do "whatever is necessary to balance the markets," even if that means further extending cuts in oil output past March 2018.

Why March? Earlier today, the group agreed to extend its November deal to cut oil output by nine months. Al-Falih said that although they believe they will hit their desired target by the end of the year, the three-month extension should help with any buildup of stocks.

Conformity to deal: "The conformity level from the members is exceptional. We have reached 102% of overall conformity, so we are even exceeding our commitment," said Al-Falih. Russia's minster of energy, Alexander Novak, also noted that his country reached full conformity at the end of April.

The caveat: Despite Al-Falih's boasting of such high conformity, not all OPEC and non-OPEC members who agreed to cut oil output by 1.8 million barrels a day are keeping up their end of the bargain. Iraq is just one example of cheating the agreement. According to Bloomberg, Iraq produced roughly 80,000 more barrels of oil a day than permitted.

Next meeting: All OPEC and non-OPEC members will meet again on November 30, 2017. Al-Falih said that the two groups are considering extending their close alliance and continuing to work together beyond 2017 and the nine-month extension.

  • 14 OPEC countries, as of January 2017: Algeria, Angola, Ecuador, Equatorial GuineaGabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia (the de facto leader), United Arab Emirates, and Venezuela.
  • 10 non-OPEC countries: Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan and South Sudan.
Facts Matter Featured

What is NATO Article V and where does Trump stand on it?

Matt Dunham / AP

The issue

At a NATO leaders meeting May 25 President Trump did not explicitly endorse the collective defense article, Article V, of the North Atlantic Treaty, which binds member nations to defend one another if one comes under attack.

The facts

Trump was expected to make a commitment to Article V in the speech, but then stopped short of doing so. He did discuss shared "commitments," using the example of the September 11 attacks (the only time Article V has been invoked):

"We will never forsake the friends who stood by our side. And we will never waver in our determination to defeat terrorism and to achieve lasting prosperity and peace."

Why it matters

Article V is the cornerstone of NATO, and NATO member countries have been waiting to hear Trump confirm the U.S. will honor it, especially as he has repeatedly stressed that not all members are paying their fair share of defense spending and once called the alliance "obsolete." After the backlash to the omission, Sean Spicer stepped in to explain they're "not playing cutsie" and that Trump is "fully committed" to Article V.

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Ryan says Congress will move up deadline on debt ceiling

Andrew Harnik / AP

House Speaker Paul Ryan told investors Thursday that Congress will move up its deadline to raise the debt ceiling to avoid an economic default, reports AP. Congress was initially expected to vote on the debt limit this fall.
"The debt ceiling issue will get resolved."
—Paul Ryan
Timing: His reassurance comes a day after Treasury Secretary Mnuchin warned that Congress needs to vote to raise the nearly $20 trillion ceiling before their August recess.
Featured

Trump to Macron: "You were my guy"

Peter Dejong / AP

French officials said today that President Trump denied having supported far-right nationalist Marine Le Pen in the recent French presidential election while meeting with French President Emmanuel Macron today. Instead, Trump told Macron:

You were my guy.

Worth noting: While it certainly seems like Le Pen's nationalist positions would have endeared her to Trump, he stopped short of endorsing her in an April interview with the AP: "No, I have no comment on [endorsing Le Pen], but I think that [the April 20 shooting of Paris police officers] will probably help her because she is the strongest on borders and she is the strongest on what's been going on in France."

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Senate will start putting together draft health care bill next week

(Jacquelyn Martin / AP)

After three weeks of working group meetings, Senate Republicans will begin drafting their version of a health care bill over next week's recess.

"Over the break, initial legislation will be drafted, and then we'll have more time — we'll actually have a basis to discuss on these things," Sen. Ron Johnson told reporters, saying leadership and committee staff will write the bill.

What to watch: While we expect the Senate bill to take on some the same basic policy structure as the House bill, some pieces are subject to change — particularly after the release of the Congressional Budget Office score yesterday. There's a lot of hesitation to include state waivers that allow states to opt out of the Affordable Care Act ban on charging sick people higher premiums, and the Medicaid per-person funding growth rate debate is still unresolved.