Squawk Pod: US-China Trade Leverage, Affirm CEO Max Levchin on Consumer Spending, and GOP Tax Package

US-China Trade Negotiations and Leverage

• 🇨🇳 Michelle Caruso-Cabrera reports on her trip to China, noting a weak economy with deflation and a reliance on real estate and exports.
• 🇺🇸 She observes that while China criticizes President Trump, there's an expectation of a bipartisan hawkish attitude towards China from the U.S.
• ⚖️ Despite China's economic challenges, Caruso-Cabrera believes the U.S. has more leverage in trade talks due to China's self-inflicted economic wounds and lack of accountability to its populace.
• 📈 Both sides are eager for deescalation in trade, but the U.S. faces the challenge of integrating national security concerns with trade policy.

Affirm CEO Max Levchin on Consumer Spending and Payments

• 💳 Max Levchin, CEO of Affirm, notes an inconsistency where consumers are stressed about the economy but continue to shop, buy, and pay bills on time.
• 📊 He attributes this resilience to a strong jobs market and rising wages, stating that employment is the key metric for a credit business.
• 🚀 Affirm is experiencing strong growth across all categories, taking market share from credit cards by offering 0% interest promotions, which merchants are increasingly adopting.
• 🌐 Levchin sees a secular trend towards using tools like Affirm to replace traditional credit cards, with potential for international expansion and integration into other payment networks.
• 💡 Affirm is expanding its credit reporting to help consumers build and improve their credit history, reporting repayment information to Experian and TransUnion.

GOP Tax Package and Revenue Challenges

• 💰 The Trump administration is considering raising taxes on individuals earning $2.5 million or more to 39.6% to fund the GOP tax package.
• 💼 A carve-out for small business owners is included to address concerns about penalizing them with a higher tax rate.
• 📈 Lawmakers need revenue raisers to fund the extension of the 2017 tax law and other proposals, with estimates for the package costing over $9 trillion.
• 🏠 A proposal to raise the SALT cap to $30,000 was shot down by four House Republicans, highlighting the challenges in passing the bill due to small margins.
• 📊 The tax bill is expected to face a lengthy markup process, starting with a vote in the House Ways and Means panel.