Dec 10, 2018

Axios Sneak Peek

By Jonathan Swan
Jonathan Swan

Welcome to Sneak Peek, our weekly lookahead for both ends of Pennsylvania Avenue, plus my best scoops. Please urge your friends and colleagues to sign up for Sneak Peek.

  • Situational awareness: This will be my last Sneak Peek for 2018. I fly out Monday to visit family in Australia. I appreciated your kind notes, corrections, complaints, ideas and tips throughout the year. The first edition of 2019 Sneak will be Jan. 13.
  • Secure tips/leaks: jonathanvswan@protonmail.com
1 big thing: Inside Trump's frantic search for a new chief of staff

Rep. Mark Meadows. Illustration: Lazaro Gamio/Axios

Over the past 24 hours, President Trump has been privately asking many people who they think should be his new chief of staff, according to three sources with direct knowledge.

  • Trump has asked confidants what they think about the idea of installing Rep. Mark Meadows, the chairman of the ultra-conservative House Freedom Caucus, as John Kelly's permanent replacement, according to these sources.
  • As recently as this afternoon, Trump was discussing three other candidates besides Meadows, according to a source with direct knowledge. I don't yet have their names, and it should go without saying that there will be, and already is, intense opposition to Meadows. The Freedom Caucus chairman has made more enemies than most in Washington.

The reality: Trump is nowhere on this. He hadn't thought far beyond his first choice, the VP's chief of staff Nick Ayers, with whom Trump had been secretly discussing the job for months.

  • Ayers, who was previously considered the favorite, is out of the running, according to sources with direct knowledge.
  • "Nick couldn't give POTUS a two-year commitment, so he's going to help him on the outside instead," one of these sources told me. (The Wall Street Journal's Michael Bender first reported this news, and Ayers confirmed it on Twitter.)
  • Ayers is expected to move to run the pro-Trump outside group America First, according to another source with direct knowledge. Trump will decide on Kelly's replacement by the end of the year, the source added.

Between the lines: Ayers told Trump he'd only commit to taking the job until next spring — as chief caretaker until Trump finds a permanent solution. Trump had privately asked for a two-year commitment, and he didn't appreciate that Ayers wanted to announce an end date.

  • Ayers told Trump he deserves a two-year commitment from whomever replaces Kelly, according to sources familiar with their conversations. Even people opposing Ayers have told me that if he'd wanted the job, he could have had it.
  • Bottom line: This leaves Trump scratching around for a new chief — and people close to Trump are scouring for names — after the president announced on Saturday that Kelly would depart at the end of the year.

Behind the scenes: On Friday night, the most senior White House staff and their spouses, around 50 in all, sat around a long table for Christmas dinner in the State Dining Room of the Executive Residence. Christmas trees lined the walls and waiters served squash soup, fish and chocolate cake. A military choir sang Christmas carols, "Silent Night" and "Joy to the World," and a military band played.

  • Ayers showed up late to the dinner, several guests noticed. Unbeknownst to most everyone there, he'd been meeting with President Trump, Mike Pence and Kelly to secretly discuss the terms of Kelly's departure and his likely ascent to chief of staff, according to two sources briefed on the meeting.
  • Two guests described the dinner as "awkward" because the elephant in the room — Trump's plan to oust Kelly and replace him with Ayers — wasn't brought up as the two sat at the table.
  • Instead, sources recalled, Trump gave a generic pep talk: "We are doing a great job. You guys all work hard. Chief Kelly has done a great job."
  • "We all knew something was up, but nobody talked about it," one dinner attendee told me.
2. Behind the scenes of Trump's trade wars

Last Saturday night, after his dinner with China's President Xi Jinping in Buenos Aires, President Trump rode to the airport in his armored limousine.

  • The first lady, Treasury Secretary Steven Mnuchin and Press Secretary Sarah Sanders joined the president in "The Beast."
  • Inside the car, Trump dictated a statement to Sanders listing the concessions he said China made during the dinner, according to two sources familiar with their private conversation.
  • The statement, which was circulated to principals, was all Trump.

Since then, we've seen a mess of competing and confusing statements from the Chinese and American sides, throwing U.S. stock markets into a spiral.

Behind the scenes: On Monday, John Kelly emailed staff saying Robert Lighthizer would head the China talks. Some speculated that hawkish Lighthizer is warring against moderates Larry Kudlow and Mnuchin. The reality, though, is that this is Trump’s show.

  • Sources with direct knowledge told me that even the small, senior group that joined Trump at the Xi dinner didn't know beforehand what Trump would say. One source with direct knowledge called it a "jump ball."

What's next: While the last week of market mayhem might've seemed crazy, we haven't reached peak uncertainty. That could come in February or March when three of Trump's most audacious trade battles simultaneously crescendo.

  • First: Trump has been threatening to issue a withdrawal notification for NAFTA, which would make Congress choose between backing his new deal with Canada and Mexico — the USMCA — or withdrawing altogether. (Trump has come extremely close to notifying NAFTA withdrawal multiple times over the past year, according to sources with direct knowledge.)
  • Second: In March, Trump may ratchet up tariffs against $200 billion worth of Chinese products if Beijing doesn’t keep the promises he claims Xi made, like making serious moves to stop their theft of U.S. intellectual property.
  • Third: Trump will have to decide whether he follows through on his threat to impose 20% or 25% tariffs on automobile imports. The Commerce Department has until February to deliver Trump its report on auto tariffs, which would force a decision from the president. (Almost everyone on Trump's team, besides his hawkish trade adviser Peter Navarro, thinks car tariffs are a terrible idea. And Congress would likely revolt. But as Trump said, he's a "Tariff Man." He loves them, is furious about foreign treatment of U.S. automakers, and thinks car tariffs, specifically, are his most powerful threat in negotiations with foreign leaders.)

Bottom line: Just one of these trade wars would be enough to consume a normal president. One senior adviser told me he worries Trump has bitten off more than he can chew. Trump's obsession with the stock market makes all this even more fraught. Sources close to Trump tell me he knows these trade conflagrations could make last week's stock market volatility the new normal. We'll soon learn whether this molds any of these high-stakes decisions.

3. Donald, Chuck & Nancy: The Sequel

Photo: Aaron P. Bernstein/Getty Images

Here we go again. On Tuesday at 11:30 am, President Trump plans to meet with Democratic leaders Nancy Pelosi and Chuck Schumer to see if they can cut a deal to keep the government open.

  • Over the past two days, we've emailed and spoken to more than a dozen Democrats and Republicans in close touch with leadership. None were optimistic that Tuesday's meeting could yield a durable deal.

Bottom line: The problem is simple: Trump wants $5 billion for his border wall, and Pelosi and Schumer don't want to give it to him.

  • Especially not Pelosi, who won't even commit to the $1.6 billion Schumer has already offered. She has offered a one-year funding extension at current levels ($1.3 billion for border security).
  • Pelosi is more ideologically progressive than Schumer, oversees a more progressive conference than he does, has a Speaker's vote on the floor in January, vehemently opposes Trump's immigration policies, and has no incentive to give Trump anything.

The two likeliest scenarios, according to these sources:

  • Possibility 1: A partial government shutdown (about 25% of the government). It's not clear how Trump would reopen the government, given Democrats are unlikely to pay for his wall.
  • Possibility 2: Yet another short-term funding extension to push the problem to next year.

A senior Democratic Senate aide summed up the week ahead: "Democrats aren't going to move on the $1.6 billion in the Homeland Security bill. A shutdown around the holiday makes no sense for the Republicans. And we have the backstop of Speaker Pelosi passing a continuing resolution [short-term funding extension] as her first act, putting Republicans in a terrible spot."

  • "My actual prediction out of the meeting is jumbled posturing from both sides leading to more chaos and an eventual continuing resolution," the source added.
  • Trump has wanted his border security money to come without restrictions — a sticking point with Democrats, who are willing to appropriate funds for border security measures, but not for Trump's wall.

Between the lines: Notice how quiet Republicans have been about the shutdown fight? It's because they don't want to deal with this right now; they want to go home for Christmas. They are united in their enthusiasm about getting out of town ASAP — and that leaves Trump with little leverage.

Behind the scenes: You'll hear Democrats say — and some Republicans, too, privately — that Trump should be happy with $1.6 billion for border security because that's what he asked for in his 2019 budget. But here's an anecdote that illuminates the reality:

  • During a White House meeting in June, Republican Sens. Shelley Moore Capito and Richard Shelby discussed border security with Trump and several White House officials, including Budget Director Mick Mulvaney.
  • Capito told Trump they'd be able to deliver the $1.6 billion in wall funding he requested. According to a source with direct knowledge, Trump replied, "Who asked for $1.6 billion?" (The answer: Trump’s 2019 budget, which Mulvaney prepared.)
4. Sneak Peek diary

The most important meeting this week happens Tuesday at 11:30 am — the Trump-Pelosi-Schumer huddle I mention above, to figure out whether they can cut a deal to prevent a government shutdown.

  • The House has a light week.It may take up some noncontroversial bills and could take up the farm bill, according to a GOP leadership source.
  • The Senate will vote Monday to move to confirm Justin Muzinich to be Deputy Secretary of the Treasury, according to a GOP leadership source.

President Trump's schedule, per a White House official:

  • Monday: Trump has lunch with Mike Pence.
  • Tuesday: Trump meets with Nancy Pelosi and Chuck Schumer, and has lunch with Defense Secretary James Mattis.
  • Wednesday: Trump hosts an event on "opportunity zones."
  • Thursday: Trump meets with Secretary of State Mike Pompeo and has a discussion with governors-elect.
5. 1 fun thing: Argentina and Trump’s funny money

Illustration: Lazaro Gamio/Axios

When Argentine President Mauricio Macri hosted Trump at the G20 summit in Buenos Aires last week, Trump said he'd "been friends with Mauricio for a long time, many years."

  • But as Bloomberg's Tim O'Brien reported, that history wasn't always sunny. Trump met then-teenage Mauricio Macri while wrangling with his father, a top Argentine developer, over a contentious Manhattan real estate partnership.

The Trump-Macri encounter at the G20 reminded some sources of a highly unusual conversation between Macri and then-Secretary of State John Kerry a few months before the 2016 election.

Behind the scenes: Macri hosted Kerry and a number of senior U.S. officials at the presidential mansion, the Casa Rosada, in Buenos Aires. It was August of 2016, shortly after Democratic convention, and Hillary Clinton was soaring in the polls. The people there talked about Trump like he was a comical sideshow.

And Macri told a story everyone in the room found hilarious. Here it is, as recalled by one source in the room and confirmed, in broad detail, by another source in the room and a third source briefed on the conversation:

  • When Macri was running for president, he got a phone call out of the blue. "This is Donald Trump," Macri told the people in the room, impersonating the future president and pretending to hold a phone to his head. "I've been watching you."
  • The call amazed Macri, he told listeners. "Trump goes on to say, ‘I remember you fondly and I remember the business deal,'" one participant recalled. "And Macri says, 'Fondly? Fondly, you son of a gun?'"
  • Trump told Macri he would help him. "Yeah, yeah," Macri replied, as if he didn't think much of it at the time.
  • Some days after the call, a big FedEx envelope came in the mail with a check from Trump to Macri's campaign. One source thought the check was for $500; another thought $5,000.
  • Then came the punchline: Macri told the room that when his team went to deposit the check, it bounced.

The response: The White House did not comment. A representative for the Argentine government said, "The Public Communications Secretariat of the Argentine Government denies that this conversation took place."

Postscript: The conversation certainly did take place; it's not conceivable that our three sources could have colluded to make this up.

  • While Trump didn't break U.S. law by sending a check to Macri, it was illegal for the Argentine politician to accept a foreign contribution.
  • Yes, but: Mark Jones, a Latin American scholar at the Baker Institute, told Axios it's not so simple. "Traditionally in Argentina, most campaign donations aren't reported," he said. "The laws have been more or less irrelevant because historically most Argentine donations are done under the table with effectively everyone knowing that people cheat."
Jonathan Swan