Axios Markets

As the Trump administration mulls its plan to battle the impact of COVID-19 on the U.S. economy, scant attention has been given to a major source of potential stimulus: reining in its tariffs on China.

Why it matters: U.S. tariffs increase costs for American companies that import Chinese goods, and with fewer customers making purchases as the COVID-19 outbreak slows demand, the trade war "is going to be a bigger drag on the economy," Chad P. Bown, a senior fellow at the Peterson Institute for International Economics (PIIE), tells Axios.

• The U.S. still has most of its tariffs in place on $360 billion worth of Chinese imports after the phase one trade deal it signed in mid-January.

The big picture: President Trump's trade war sent the U.S. manufacturing and transportation industries into a recession in 2019, and the coronavirus outbreak this year has further damaged global trade.

• While the trade war is no longer the top concern, if U.S. tariffs on China are left in place, the recoveries of the U.S., Chinese and world economies will likely all be slower and weaker.

Background: The Trump administration has provided tariff exceptions for certain medical products like masks and gloves, but Treasury Secretary Steven Mnuchin told a House committee last week the White House was "not considering" removing Chinese tariffs but would "look at all the options that we think are important to help."

• That hasn't sparked much hope for a change in course.

What we're hearing: "Given how slow publicly they’ve been to just react to ... the public health problems with the coronavirus, I’m not optimistic that they’re going to see the linkages to the trade war and make the connection," Bown says.

• The trade war "is an important political thing for [Trump], and I’m not optimistic they’re going to want to be seen to change the terms despite it obviously being problematic for the U.S. economy."

Between the lines: Aditya Bhave, senior global economist at Bank of America Securities, pointed out in a recent note to clients that the impact of uncertainty shocks, like the trade war, "tend to be lagged, large and long lasting."

• Weak data early this year from Southeast Asia and the eurozone "suggest that trade war related disruptions continued to weigh on growth,” he adds.
• As the major hub of the world's supply chain, and the epicenter of the coronavirus outbreak, the speed at which it can get its industry back up and running is paramount for China, its trading partners and the United States.

Another group that would be greatly helped by a rollback in tariffs is farmers and the U.S. agriculture sector, which last year saw farm debt rise to record levels and bankruptcies increase 20%.

• The industry was banking on the phase one deal's commitment of a $200 billion increase in purchases from China, which was in doubt when the agreement was signed and now looks even less likely.

Flashback: Trump has provided $28 billion in bailout funding for farmers and last year 40% of U.S. farm income came from trade assistance. That funding has expired.

Reality check: "Most observers believed that the ag sector was hurt and would need an extraordinary year to make up for that. I don’t think they’re going to see it," Mary Lovely, a senior fellow at PIIE and economics professor at Syracuse, tells Axios.

• "Couple that with the fact that the U.S. could very possibly be heading towards a recession, and it’s going to be a tough year for them."

The Bank of England cut its policy rate by 50 basis points, to 0.25%, in a surprise move ahead of its March 26 policy meeting. (Bloomberg)

The CDC warned that many Americans will be exposed to COVID-19 over the next year and recommended people over 60 and those with chronic medical conditions to stock up on groceries and medications. (CNBC)

ECB President Christine Lagarde demanded fiscal spending from eurozone leaders during an emergency call, saying without it Europe “will see a scenario that will remind many of us of the 2008 Great Financial Crisis." (Bloomberg)

Trump’s push to suspend U.S. payroll taxes fell flat with both Democrats and Republicans, as Congress is set to leave Washington soon for a scheduled weeklong break. (WSJ)

As confirmed cases of COVID-19 topped 119,000 globally and rose to 1,039 in the U.S., data show worry is beginning to grow.

What's happening: Only about 26% of Americans currently say they are "very concerned" about a coronavirus epidemic in the U.S., but that number is rising steadily, a new survey from CivicScience provided first to Axios shows.

• Compared to a week ago, 52% of respondents say they are more concerned than they had been, with 21% saying they are "much more concerned."

The big picture: "Concern is high and more preventative actions like cancelling travel plans or stocking up on disinfectants are underway, but we’re not yet seeing people hunkering down in their homes and stocking up on food and other necessities," CivicScience analysts say in the report.

• "Much like any other consumer trend or behavior, a change in attitude always precedes action — in this case, concern is climbing, economic sentiment is down, and consumers are in the early days of preparing for what’s to come."

Wells Fargo is facing bipartisan anger over its fake accounts scandal and CEO Charlie Scharf spent four hours in front of Congress on Tuesday pitching a new vision of the bank, with the worst behind it, Axios' Courtenay Brown reports.

What they're saying: "We have not yet re-earned the trust we would like the Wells Fargo name to represent," Scharf told the House Financial Services Committee — an acknowledgement of ongoing mismanagement after a snowball of customer abuse scandals.

• Scharf, less than five months into the job, pinned the bank's troubles on his predecessors.

The big picture: His testimony came after Democrats released a report last week — with previously unseen emails — that showed Wells Fargo executives were lax in complying with regulators' demands.

• Two board members mentioned in the report, Betsy Duke and James Quigley, resigned abruptly on Sunday, days before they were due to testify in front of the same committee as Scharf.

Ahead of this week's hearings, Wells Fargo attempted to get in front of a number of top complaints about big banks, like low worker pay and high overdraft fees.

• The bank said last week it would raise the minimum wage for workers in most of its U.S. locations.
• It's also introducing accounts with limited overdraft fees.

But those moves did little to assuage lawmakers — Democrats in particular — who expressed concern about the lasting impact of Wells Fargo's misdeeds.

• "It is clear to this committee that the bank you inherited is a lawless organization that has caused widespread harm to millions of consumers throughout the nation," Rep. Maxine Waters, who chairs the House Financial Services Committee, told Scharf.

BlackRock, Morgan Stanley and Barclays have all undertaken "deep cleaning" procedures at various offices in the New York City area after traders at the firms tested positive for COVID-19.

• BlackRock and Barclays said an infected person worked in their respective offices in Manhattan, while the Morgan Stanley employee worked at the company's purchase office.

What's next: Following the media reports from Bloomberg, Reuters and CNBC, employees at other financial institutions told Axios that some employees have been told to work from home, but the trading staff is still being asked to come into the office.

• Trading on the floor is still a necessity for many banks because of the required high-speed technology and tight regulatory oversight. But some, including JPMorgan and Bank of America, have been working to set up contingency plans, Reuters' Imani Moise reported.