Pelosi, Trump strike a bipartisan tone to start the new Congress, but is cooperation a real possibility?

This is a rush transcript from "Journal Editorial Report," January 5, 2019. This copy may not be in its final form and may be updated.

PAUL GIGOT, HOST: Welcome to the "Journal Editorial Report" as we mark a brand-new year and the return of divided government in Washington. Nancy Pelosi reclaiming the speaker's gavel Thursday and reminding her fellow lawmakers that Congress is a co-equal branch of government amid the ongoing standoff with President Trump over border wall funding.

Here with a look at what to expect from the 116th Congress, Wall Street Journal columnist and deputy editor, Dan Henninger, Columnist Kim Strassel, editorial page writer, Kate Bachelder Odell, and assistant editorial page editor, James Freeman.

So, Kate, Nancy Pelosi is back and I guess you have to give her credit because, look, there were a lot of people who were saying, criticizing her and she routed her opponents. How did she do it?

KATE BACHELDER ODELL, EDITORIAL PAGE WRITER: Well, Paul, she just consolidated her base. There were 15 members who voted against her, but I read that as they given a pass to do so because they were in tough districts and she could win without them and didn't need their support. It would have been an entirely scenario if she did. I don't read that as opposition so much, you know, being allowed to walk. But, look, I think she did it by basically agreeing to tilt left on a lot of major issues on the next two years.

GIGOT: It's interesting there's no real Freedom Caucus opposition to Pelosi. There hasn't been in previous Congress'. Democrats seem to fall in line. It's very interest to watch. Is that just because they figure, we have power, let's use it, or what's behind that?

ODELL: I think that's a philosophical question, and that they are better at power consolidation and power management than the right is. I think that, look, Pelosi has made gestures in their direction. We'll have a lot of hearings on Medicare for All and Pelosi says she supports them. That's a risk going to the American public and saying that's an idea that we are flirting with.

GIGOT: Kim, what do you expect out of the Pelosi Congress this year? What do you expect them to focus on? A year from now, what would they have done?

KIM STRASSEL, WASHINGTON COLUMNIST: Well, they will focus on a lot of their priorities, passing bills that would be largely symbolic because, of course, they will not pass in a Republican Senate and they will not be signed by Trump. But bills on health care, maybe a Medicare for All-type bill, bills on energy, renewable energy, all the things that they will want to set the ground work for their presidential nominee going forward.  Beyond that, it's going to be investigations, investigations, and then where we go from the Mueller probe and everything, and just ongoing attacks against President Trump.

GIGOT: I guess, Dan, that's -- I mean, I think investigations is where they are going to go. That's what the base wants. That's what the Democratic presidential candidates will be stressing. And once you start the machinery of investigations, and you get the Mueller report, then maybe it's going to be very hard to stop towards a goal of impeachment?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: Yes. As you were suggesting earlier, where do you draw the line on the Democratic left? That will be one of Nancy Pelosi's biggest challenges, trying to decide, if she's able to decide, whether to rein in these investigations and the full-out relentless assault on Donald Trump because there's going to be a point beyond, which certainly Trump supporters will crack back against that, and possibly people more in the center will wonder is the Democratic Party about nothing else than trying to take down the president of the United States.

GIGOT: I think Pelosi will try to counter that image because she doesn't want it to be the only defining image.

She will try to push some legislation, James. Is there any possibility at all, any possibility at all, any possibility, of any bipartisan cooperation here?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: I hold on hope for maybe an immigration deal. I suppose you could see an infrastructure deal, which I think we should be more concerned about as taxpayers but --

GIGOT: What would be immigration deal?

FREEMAN: The great deal sitting out there, it's been sitting out there for a while now, give President Trump the border wall he wants, in return, a lot of people brought here as children illegally to stay here, allow more ways for workers to come on a temporary basis. If you wanted to give President Trump his entire $25 billion, I think you could get a lot of good pro-immigration agenda through. The question is, do Democrats actually want to solve this problem or do they like this fight for political reasons? And the fact that they have continued to resist any wall funding, any trades, suggests they like the fight and not a solution.

GIGOT: Infrastructure, you mentioned that. But the parties are far apart on that.

FREEMAN: Yes.

GIGOT: The Democrats want a trillion dollars of public money, public money.

FREEMAN: Right.

GIGOT: The Republicans are saying a lot less and we'll leverage private money with that. That's a huge difference in funding.

FREEMAN: I think you could get President Trump to agree to spend a lot of taxpayer fund on this. The big sticking point that Democrats will not accept is a streamlining of the process of building that limits their ability to use environmental rules to stop development.

GIGOT: Faster permitting for, for example.

Dan, what about you, any hope for bipartisan cooperation? Are you more optimistic than James?

HENNINGER: Not in the least. Not in the least.

(LAUGHTER)

No, I think the left, the Democratic left has bitten their mouth. They think they are running the party now and that they are going to be running Nancy Pelosi's Congress as well. I think they are so determined to take down President Trump that they're not -- I think a lot of these new members don't think they are there to get things done, they're to take down the president. There are moderate Democrats, who ran from states like New Jersey, Michigan, who perhaps will be uncomfortable with a strategy like that and may push for legislation, and it's going to be a real challenge for Nancy Pelosi to manage the two sides of the party.

GIGOT: Kate, briefly, drug price control, both the president and the Democrats seem to want that. Is there a chance they'll go ahead with that?

ODELL: Yes. Paul, you mentioned bipartisan cooperation but that frightens me a little bit. The main area is price controls on drugs. I think that would be terrible for U.S. innovation. Let's hope they don't agree too much.

GIGOT: All right.

So still ahead, from the Pelosi Congress to the emerging 2020 presidential field, Karl Rove joins us with a preview of the Democratic playbook in 2019. How the White House should respond.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, D-CALIF., SPEAKER OF THE HOUSE: I pledge that this Congress will be transparent, bipartisan and unifying, that we will seek to reach across the aisle in this chamber and across divisions across our nation.

PRESIDENT DONALD TRUMP: Hopefully, we're going to have a lot of things that we can get done together. And I think it's actually going to work out. I think it will be a little bit different than a lot of people are thinking. So I congratulate Nancy. Tremendous, tremendous achievement.

(END VIDEO CLIP)

GIGOT: Speaker Nancy Pelosi and President Trump Thursday both striking a bipartisan tone as the 116th Congress convenes. So as Democrats take control of the House and gear up for 2020 presidential fight, is cooperation in Washington a real possibility.

Wall Street Journal columnist and Fox News contributor, Karl Rove, served as senior adviser to President George W. Bush.

Karl, happy New Year. Good to have you here.

KARL ROVE, COLUMNIST & FOX NEWS CONTRIBUTOR: Thank you, Paul.

GIGOT: Let's talk about Nancy Pelosi. You remember she was there once before when George W. Bush was president. What do you expect out of her this Congress?

ROVE: Well, I'm frankly up in the air about what to expect because, on the one hand, she had exactly the right notes that she struck there in her remarks -- let's try and find ways to work together -- but on the other hand, her actions and her rhetoric around the shutdown don't give a lot of confidence that she's going to be looking for ways to bring things together into compromise and to give everybody a chance to win something to move ahead. Because the language about the wall -- no money at all, it's immoral, it's inefficient, it's an expensive waste of money -- all of these things don't portend well for getting a deal on the shutdown quickly.

GIGOT: It doesn't give her a lot of running room. You need an opening if you are going to compromise and she didn't give herself much of an opening.

ROVE: I'm not certain that she's been in different position earlier. I think one of the problems with this was the president, well intentioned, had a session in the Oval Office in mid-December with Schumer and Pelosi, in which everybody sort of got locked in their positions. She was -- she had a lot of difficulty inside the Democratic caucus. This happened early enough that she was able to solve the problem by saying, no money for the wall ever, and that sort of locked her in a position and now it's going to be hard to get her out of it. She had to do that in order to assure that she didn't fight a battle both with Democrats newly elected from Trump districts, who were concerned that she would be too liberal, and the left- wing of the party, the Ocasio-Cortez wing, which she concerned that she would be too centrist. She took care of the problem with the hard left but she may have locked herself in a position that will be hard to get out of.

GIGOT: Looking, of course, across the next year, if you are Nancy Pelosi, saying, how can I lure Donald Trump, who, let's face it, he's not a very ideological president in terms of his political philosophy. How can I lure him into certain bipartisan deals where my party would be happy getting 50 percent of what we want? Where would you push?

ROVE: Well, I would push -- James Freeman talked about the immigration reform. If I were the Democrats, I would say, look, let's give him money for the wall and let's get something like a DACA fix in return, the DREAMers fix in return, because the wall will -- will diminished in people's minds. The DACA fix, which is like a 70 or 80 percent winner, depending on how you word the question, and it will accrue to the advantage of both Democrats and Republicans, but it's going to be Democrats who will be the people who laid it out on the table and said we are willing to deal with you in order to get it.

GIGOT: What would your advice be to President Trump, how to deal with Democrats? Because my thinking is that the more they investigate him and move toward impeachment, assuming they do, the more Trump will have to rely on Republicans to salvage his presidency, if, for example, they do impeach him in the House and goes to Senate, so it makes him less likely to compromise.

ROVE: It's very important for Republicans, particularly in the House, to make a -- to treat the Democrat suggestions, like Medicare for All and free jobs and the Green New Deal and so forth, treat it seriously and attack those proposals on the merits. The White House would be great to be involved in that but the one thing that requires discipline and focus, and this White House has neither discipline nor focus when it comes to messaging. But the Republicans have got to treat these issues seriously in order to showcase the differences between what the Democrats are attempting to do and the Republican response. And the Republican response has got to be not only do the Democrats have bad ideas but the Republicans are going to have to give a sense on what it is they would do in lieu of these kinds of things. I think it a lot of this is going to depend upon how Republicans in the Congress, particularly in the House, responds. If I were the president, I'd pick a couple of things and try and get them done that need to get done, like, let's pass the budget in time, let's fund the government, and then spend, as most presidents do when they don't have control of Congress, on the things over which there's executive authority or the president has a predominant authority, as in the case of foreign affairs. Look for ways to accentuate that the Democrats are being unfair with all of their investigations. The more it looks like he's the victim here, the better off he is. But he's got to be a responsible and reasonable victim and not merely a counterpuncher, which it's going to be difficult for him to restrain himself from doing.

GIGOT: We just have about a minute or so left. But you see Democrats starting their campaign for the presidency. The first one in, Elizabeth Warren, Senator from Massachusetts. What do you think of her prospects?

ROVE: She's got high name I.D. so, right from the state, she's going to be formidable. We will have a serious of six primaries this year and she's going to probably fare well in those virtual primaries before voters ever show up in Iowa and New Hampshire. The first primary is for talent. She got an early strike there by hiring Bernie Sanders' Iowa guy to work for her. Message, she came out strong with a message on billionaires and corporations controlling Americans, screwing the little man and little woman. Money, we will see how well she does well. That's going to be one of the attractions for Robert Francis O'Rourke, that he had $80 million from small donors. But she's also a formidable fundraiser. Later in the year, we will see organization. We'll see the use of social media. She's not particularly adept in that. She comes across as a little inauthentic.

GIGOT: Right.

ROVE: Yet, another strength of Robert Francis O'Rourke. Then we have the debates, which will start in June. Now all of that will combine to create some buzz about somebody. She has name ID. and a pretty strong image, so I think she will end the year in a pretty good place. But there's no guaranty that she's the nominee. Remember, Barack Obama trailed Hillary Clinton nationally until he won in Iowa and it brought him to the top of the heap.

GIGOT: All right, it'll be fun to watch, Karl. Thanks very much.

ROVE: Thank you.

GIGOT: When we come, back Elizabeth Warren makes it official. Our panel's take on just how well her brand of left-wing populism will play and who is likely follow her into the Democratic presidential race.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. ELIZABETH WARREN, D-MASS.: America's middle class is getting hallowed out and opportunity for too many of our young people is shrinking. So I'm in this fight all of the way. Right now, Washington works great for the wealthy and well-connected. It's just not working for anyone else.

(END VIDEO CLIP)

GIGOT: That was Senator Elizabeth Warren Monday following her announcement that she's forming an exploratory committee for a 2020 presidential run.  The Massachusetts Democrat looking to counter President Trump's populism of the right with a left-wing economic version of her own. So will it resonate with voters and who is likely to follow her in to Democratic race this year?

We're back with Dan Henninger, Kim Strassel, Kate Bachelder Odell and James Freeman.

So, Kim, the message, you saw the video and her early message, what do you make of it?

STRASSEL: Well, look, as you just said, Elizabeth Warren is trying to do Trumpism but from the left. Now, there are very important policy differences there. This is a woman who is all about Medicare for All. She would like to see the federal government actually manufacture its own prescription drugs. She's obviously in favor of much higher taxes. She wants to put vast new restrictions on corporate America, including requiring companies over a certain size to actually get a federal charter and put 40 percent of its board made of its workers. So these are some very radical ideas that are about expanding the size of government and, therefore, are very different. But to the extent --

(CROSSTALK)

GIGOT: Right. But, Kim, here's the thing I want to ask you. Is that going to play in a Democratic primary? You and I are not going to go there. We don't want that. What about a Democratic primary?

STRASSEL: Well, yes, absolutely. This is a party where the ascendant wing of it is a progressive left and these are all their ideas. This is -- she's the person that they have been waiting for, along with maybe a Bernie Sanders, and they are the part of the party that wields a lot of clout these days.

GIGOT: Kate, talk about her strengths as a candidate. Is it messaging, is it money, is it intellect? What are the strengths that she brings?

ODELL: The strength are that she's interested in public policy. I think she actually has developed a pretty serious set of proposals, that while we don't agree with, offer a competing vision to what Republicans want to do.  I mean, the biggest risk here, though, is -- I know it's -- it's obviously not a strength -- but I encourage the viewers to go watch the video of her drinking a beer in her house because it's revealing of what a bad retail politician she is. She's gets a Michelob Ultra out of fridge and offers one to her husband. He sort of looks at her like, why would we do this.  And it really is --

(LAUGHTER)

ODELL: -- revealing that she's not good on the stump and not good at connecting with people one-on-one, even though I think she has a pretty bright policy mind.

GIGOT: OK. But here is the thing, Dan, this proposal -- I mean, Medicare for All, a lot of them are for. (INAUDIBLE), a lot of them are for. Green New Deal, a lot of them are for. But the thing that stands -- where she stands out right now is her proposal to reorganize American capitalism.  Most big companies are chartered at the state level, like Delaware, in particular, which offers a lot of maximum freedom. The main thing that CEO's are responsible for is to the owners, the shareholders, the people who gave them the capital, all right? She wants to make those CEO's accountable not to shareholders predominantly but to what she calls stakeholders, who would be employees, for example, who would be community people, who would be customers, a much broader universe of people, including a lot of political restrictions on what they could do.

HENNINGER: Yes. She calls it the Accountable Capitalism Act. And in addition to the federal charter, she wants to put 40 percent of employees on the corporate board, restrictions on corporate campaign contributions.  This is an idea, as Kim was suggesting, of the progressive left, and it probably is an idea that kind of has some resonance with younger people, college kids, who haven't worked in the private sector in companies that have to function day after day. Elizabeth Warren's suggestion here, her expectation is that there are enough people dissatisfied with the capitalist system in the United States that they would consider her candidacy seriously, which is difficult to do at the moment when the American capitalism system seems to be booming.

GIGOT: Why would you give money to a corporation, invest in a corporation, where you are not going to be -- the CEO's are going to be accountable to everybody else except for you?

FREEMAN: Yes. I think Dan has hit the big problem with her candidacy -- well, the second-biggest problem. We will get to first in a minute. But This issue, where you see in the clip, she sounds a lot like some Republicans, like Marco Rubio, who developed a plan for how you deal with the slow-growth Obama economy. And they're describing an economy that doesn't really exist, thank goodness, at the moment. Things may change.  But they're basically giving a 2016 message. Her biggest problem, though, I think is that her play for identity politics, her bogus claim of Native American status, I think in a Democratic primary is a mortal wound, because to endorse her, that party would have to say identity politics, which have put so much stock in, is a fraud and a joke and a political tool used when appropriate for our purposes, but ignored when it's not useful to us.

GIGOT: Dan, you disagree with that. You think that might help her, her attempt to say, see, I'm also Native American.

HENNINGER: Well, not necessarily. Identity politics matters a lot on the left now. Her biggest problem is her message was basically negative, it's a downer, it's a pessimistic message. Most presidential candidates have to find a way to appeal to your better angels. Barack Obama was very good at that, even as he attacked the wealthy. She doesn't seem to have that skill.

GIGOT: OK. Thank you all.

Still ahead, trade tensions with China casting a cloud over the economy as we begin the New Year. As talks with Beijing resume next week, is a deal on the horizon?

(COMMERCIAL BREAK)

GIGOT: Trade tensions with Beijing casting a cloud over the economy as we begin 2019. Apple slashing its revenue forecast for the first time in more than 15 years amid falling iPhone sales in China. Trade talks are scheduled to resume next week in the hopes of reaching a deal before March 1st when U.S. tariffs on Chinese imports are set to rise.

John Murphy is senior vice president for international policy at the U.S. Chamber of Commerce.

Good to see you again, John.

Let's talk about first the Apple announcement, the big blow-off on the stock market after it happened. What does this tell you about the risks for the U.S. economy from a Chinese slowdown?

JOHN MURPHY, SENIOR VICE PRESIDENT FOR INTERNATIONAL POLICY, U.S. CHAMBER OF COMMERCE: Turns out the well economy is well connected.

(CROSSTALK)

GIGOT: Imagine that.

MURPHY: Who would have thunk it? That major multinational companies are earning revenue all around the globe. If you look at the Fortune 100, about half of all their revenue comes from overseas. And China has been one of the fastest-growing markets for many of these companies. And it's not just Apple. It's a host of other companies that are seeing the softness. So in transportation sector, in industrials like autos, there's this softness. Bank of America, just this past week, said that tariff and trade war effects have knocked 6 percent of share value of S&P 500 in the past year. The economy in the U.S. is strong but these are warning signs.

GIGOT: So if you had a recession in China, a lot of people say, great, China, they're now our adversary, they should suffer, that's fine. But what you're saying, if that happened, you'd see that the consequences for that for American businesses and American workers as well?

MURPHY: Absolutely. And it happens directly and indirectly. A few years ago, someone wrote a book about Chinamerica, you know, in the name, trying to convey the point that are economies are connected. They are in many ways. It's not just these big multinationals whose investments in China are throwing off valuable revenue. It's small or mid-size companies in the U.S. that maybe are importing key components from China. So the knock-on effects come directly and indirectly through third-country markets as well.

GIGOT: If there's a silver lining here, I guess it could be slowdown in growth in China and the potential effects in the United States would give both sides an incentive to sit down, as they are going to do starting next week with a March 1st deadline, and try to knock out a deal that both sides can live with and say they got something out of?

MURPHY: I think that's absolutely right. Both sides are focused on this and concentrating in a new way. And we do have a U.S. delegation going to Beijing next week to begin these negotiations. The U.S. is focusing on theft of intellectual property. It's focused on industrial subsidies, trying to give some hefty subsidies to key sectors that it regards as important to the future of their economy, the so-called Made in China 2025 Initiative. These things will be at the focus of these negotiations. The U.S. wants to see real serious enforceable commitments to cut subsidies and discussion of new sales of U.S. goods, whether soybeans or jetliners, or what have you. The U.S. is focused on those fundamental reforms.

GIGOT: You know, the old line -- I've covered this story for a long time.  And the old thing, well, we will buy more soybeans, more jet planes, this or that, more liquefied natural gas, that's all fine, nothing wrong with that. That's not going to do it this time, in my estimation. The U.S. wants more and I think U.S. business wants more. What should we -- what are -- what do your companies want to see from this negotiation?

MURPHY: Paul, you're absolutely right, that's not going to cut it. Bob Lighthizer, the U.S. trade rep., is focused very much on the fundamental reforms. I do think one of the challenges we are looking at right now is subsidies provided to these key sectors. They're provided by the Chinese central government but also by provincial governments in China. The U.S. is looking for ways that those can be cut and in a verifiable, enforceable way, in addition to the intellectual property protections that I mentioned, so that's certainly where the focus is going to be.

GIGOT: I think you will see the Chinese are going to say, OK, fine, these will be -- we will do this and they might even change legislation in some cases, for example, having to do with joint ventures, allowing more ownership by foreign companies than 50 percent, or I.P. theft. But it seems to me that enforcement is going to be the key, that we have to be able to say, here is how we can track you if you break the agreements, and then have some mechanism for -- for retaliating.

MURPHY: Yes, this is exactly where people are trying to come up with creative new solutions. Now the threat of tariffs is out there, but for us, in the U.S. business community, you know, at the end of the day, tariffs are a tax paid by Americans, American consumers and businesses.  What can we do that isn't tariff-based?

GIGOT: Quick question, because we don't have much time, but the new NAFTA right now, does the administration have the votes to pass that in this Congress?

MURPHY: Well, no. Nobody knows yet. And Democrats have been lining up in the Congress saying that they will be looking for more on the enforcement of labor provisions and possibly some other issues. But, honestly, members of Congress are just starting to focus on this. We, in the business community, who support the agreement, because we need that certainty of the access to the two most important export markets, I think we have a steep road to climb here, but we will be out there trying to explain to members of Congress just how important the markets are and how we need continuity.

GIGOT: All right, John Murphy, thank you very much.

Still ahead, Wall Street's wild ride continues amid fears of a global slowdown. A stronger-than-expected job's report sends stocks swinging.  What the market volatility signals about the U.S. economy in the New Year.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: Our country is doing better by far than any other country in the world from an economic standpoint. We are the talk of the world. And we had glitch in the stock market last month but still up, I guess, about 30 percent from the time I got elected and it's going to go up. Once we settle trade issues and once a couple of other things happen, it's going to go up. It's got long way to go.

(END VIDEO CLIP)

GIGOT: President Trump this week touting the strength of the American economy and downplaying recent swings in the stock market. U.S. employers dramatically stepped up hiring in December, adding a remarkable 312,000 new jobs, an encouraging end to 2018. So what can we expect in the New Year?

We are back with Dan Henninger, Kim Strassel, Kate Bachelder Odell, and James Freeman.

So, Brother Freeman?

JAMES FREEMAN, ASSISTANT EDITORIAL PAGE EDITOR: Yes, sir?

GIGOT: Opportunity for you to spike the football with this job's report.  Big, big number.

FREEMAN: It is kind of nice for those of us who urged a cut in the corporate tax rate and reduction in red tape from Washington for years and years to see results that are, I think, beautiful, as the president might say.

GIGOT: Wages up, too.

FREEMAN: This December job report, almost nothing in it you couldn't celebrate.

GIGOT: Even the --

(CROSSTALK)

FREEMAN: -- revisions to previous, meaning more there were more jobs created than we thought earlier --

GIGOT: Great. Went up to 3.9 from 3.7, that's OK?

FREEMAN: It's good because it's more people coming to labor force. You now have more than a million people in the prime working years since President Trump got elected coming back to labor force or joining it. This is what we have been hoping for, labor force participation going up, jobs up, wages up. Really great news. And especially interesting because we've heard so much about the tax cuts were just going to cause a sugar high, just the first quarter or second quarter boom, second quarter boom won't last, and now it looks like surprising strength at the end of the year.

GIGOT: Let me be spoil-sport here. That's my specialty. People will say, yes, job market strong number, but it's a lagging indicator. And we see a lot of other indicators. The manufacturing index really fell off, global growth really slow.  You saw the Apple numbers, stock market. Financial markets have been tightening, credit markets tightening. It's going to be slower in 2019?

DAN HENNINGER, COLUMNIST & DEPUTY EDITOR: It could be slower in 2019. The big issue looming is, in fact, the trade negotiation with China. As President Trump just said himself in the clip we looked at, the stock market had this little, as he called it, a glitch in December.

(LAUGHER)

GIGOT: Bigger than glitch in my 401(K), I tell you that.

HENNINGER: But he said, you know, it'll change once we get these trade issues behind us. You just talked to John Murphy about the issues, what's going on here with China. And what the United States wants from the Chinese and Xi Jinping, in my mind, is a significant structural change in the Chinese economic model. If you think that's going to happen by early March, which is the deadline President Trump has set, after which he will impose tariffs if he doesn't get what he wants, then I think we are going to a long-term tariff regime. You are really talking about a very long trade, arduous trade negotiation with the Chinese government.

GIGOT: Kim, if we go to that kind of scenario, where the U.S. slaps on 25 percent tariffs on $200 billion, $300 billion worth of Chinese goods as opposed to 10 percent, and then China retaliates, I think both -- both economies will suffer enormously. There's a big incentive for them, at least both sides, to get the structure of a deal, even if implementation of everything will take some time.

KIM STRASSEL, WASHINGTON COLUMNIST: Yes, of course. As you were talking about with the last interview, Mr. Murphy, these are interconnected economies. There are some people -- and you hear the president saying it, unfortunately, at times, saying, look, their economy is hurting far more than ours is, that's a good thing. Actually, when their economy is economy is hurt, their consumers aren't buying American goods and everyone ends up worse off. They have to understand -- and the president alluded this, he didn't use the word -- what's hanging over the stock market and problematic in our economy is simply uncertainty. And trade is a big aspect of that uncertainty. The Fed another one. But those are the things that if they could get settled and investors and corporations knew what was coming, then we will probably see that reflected in the stock market and, again, in greater growth.

GIGOT: Kate, anything we think may be pro-growth coming out of Congress this year that would help the economy?

KATE BACHELDER ODELL, EDITORIAL PAGE WRITER: The short answer is no, Paul.  I think, if anything, we are going to have to rely on a GOP Senate to stop House proposals that would damage growth in the economy. I'm talking about, you know, more harassment on businesses, trying to stop the Trump deregulatory efforts, which the House is going to certainly try to do, maybe trying to raise the corporate tax rate, which in addition to being higher, would add more uncertainty about whether the rate is going to stay.  So hopefully, there's a check on bad policies. But I don't think anything could be put in the pro-growth column at this point.

GIGOT: Briefly, James, did the Federal Reserve make a mistake by raising rates in November? We had Chairman Powell saying Friday they're going to be cautious in moving ahead, which the market loved?

FREEMAN: I don't think they made a mistake? We might disagree on this, but I think this is a very strong U.S. economy. Fortunately, so far the power of the Trump tax cuts and regulatory tax cuts is bigger than the downside of the Trump tariffs. Maybe that changes after March 1st. But I think there's a compelling argument that Xi Jinping, you don't have to be a thuggish dictator, you can even still be pretty Communist, but you have to realize, like your most recent predecessors, you have to let markets work.

GIGOT: All right. I think they should have paused.

When we come back, freshman Senator Mitt Romney blasting President Trump in an op-ed this week and stoking speculation of a 2020 primary challenge.

(BEGIN VIDEO CLIP)

SEN. MITCH ROMNEY, R-UTAH: We will have some differences. And I expect that each Senator and each representative will express their own views as they think best.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

TRUMP: I was surprised at Mitt Romney. But I just hope he will be a team player. And if he's a team player, that'll be great. I will say this, if he fought really hard against President Obama like he does against me, he would have won the election. I think he's going to end up being a team player. I think he agrees with many of the things that we've done and many things that we have in mind. And we will see what happens.

(END VIDEO CLIP)

GIGOT: That was President Trump this week responding to Mitt Romney's broadside in the "Washington Post." In an op-ed Wednesday, Utah's new junior Senator blasted the president's character, arguing that he has not risen to the mantle of the office. Romney denying that the move is a sign of a possible 2020 primary challenge.

So if it's not a primary challenge potential, setting him up for that, Dan, what is he up to?

HENNINGER: It is a primary challenge. And that's part of the problem with Mitt Romney. I mean, what he said is not credible. You show up first day in Washington and launch this attack on the president of the United States.

GIGOT: Why is it not credible? Do you disagree with much of what he said?

HENNINGER: Because I think Mitt has this -- yes, I disagree with some of it. I want to read just one of his statements as an example. He said, "I will speak out against significant statements or actions that are divisive, racist, sexist, antiimmigrant, dishonest or destructive to democratic institutions." Paul, that is pandering. That's pandering to every buzz word in the anti-Trump left, the idea that they are always suburban people who agree with that. Mitt is trying to assemble his 2020 coalition. It could not be more obvious.

GIGOT: Kim, you know, when you run in a primary challenge, nobody ever wins those. They can do a lot of damage to the incumbent. But I can't recall somebody who won a challenge like that, win a couple of primaries maybe, but you don't win the nomination.

STRASSEL: Yes, everything is stacked against you. The power of sitting president is enormous. And remember, that even if that president hasn't necessarily rallied the entire spectrum of the conservative world around him, the institutions of the presidency are behind him, too, the party apparatus, everything is design today protect them, make it hard for challenger to succeed. Romney has to know that. But all I could say is the animus that drives a lot of Never Trumpers is so huge that it clouds their clear thinking on the success possibilities here.

GIGOT: Kate, one of the things that was striking to me is that Romney didn't really note a major policy difference with the president. He had generals -- talk about character. The question becomes, where would he draw policy lines with the president? Would it be trade, would it be immigration, foreign policy I suppose? But they weren't in that op-ed?

ODELL: Well, that's what stuck out to me about the op-ed, is that he basically said Trump has had accomplishments but they are on things that  all Republicans agree on. And I think that reveals a sort of misunderstanding on why people took a chance on Trump. Would Mitt Romney have released a list of judges that he would have put on the court in the mold of Antonin Scalia? I don't know the answer to that. Would he have repealed the clean power plan or withdrawn from the Paris agreement? I think there are some confounding realities of Trump and is why people took a chance on him, besides his character. Aside from his character, in spite of it. I think Mitt is not really understanding that.

GIGOT: And I mean, if I were advising Romney, and I'm not, but I would suggest, all right, if you want to take Trump, fine, take him on trade, for example, use -- say, we will rein in, Mr. President. I'm going to assembly a coalition to rein in your ability to willy-nilly impose tariffs, OK. You will have to get -- it will have to be a better reason than you woke up one day than impose tariffs and call it national security.

FREEMAN: I think we are all getting toward the point, which is this piece had no point other than to present Mitt Romney as plan B for 2020 if Republican voters tire of Donald Trump.

GIGOT: So it's setting him up for a year from now if thing goes bad with Trump, the economy gets bad, if he's impeached, if the Mueller report is bad, that sort of thing?

FREEMAN: Yes. And no one believes it because Romney has --

(CROSSTALK)

FREEMAN: He's back and forth.

GIGOT: That's not it. Do you believe that? You don't?

FREEMAN: You look at Romney's history where he has embraced or shunned Trump over and over depending on when it was convenient for Mitt Romney.  In fact, if I was his advisor, I would say, the country really lost something when you left the private equity industry. You had, by many measures, a better record than Warren Buffet. Since then, the political record is not impressive.

GIGOT: Dan, last word?

HENNINGER: Well, Mitt Romney, significant figure. He will be a player in Washington for the next year. And he's a very adept guy at doing this sort of thing. It will be impossible to avoid Mitt for the next 12 months.

GIGOT: All right. We have to take one more break. When we come back, our panel's predictions for 2019.

(COMMERCIAL BREAK)

GIGOT: Time now for our panel's predictions for 2019.

Kim, start us off.

STRASSEL: Paul, this is probably what my kids will call the no-duh prediction. But sometimes you have to take easy shots. I will predict that House Democrats impeach Donald Trump this year. They have vowed up and down the campaign trail that's not what they were going to do but, lo and behold, the very first day of the new Congress, you already had legislation from the Democratic side filed to impeach him. I don't think it's going to happen right away. They will hold off until they get a report from Robert Mueller and they see what they get from their investigations. Some of the leaders might not even want it but the pressure from the left will be too great to resist.

GIGOT: James?

FREEMAN: Paul, we have been talking about how we have been enjoying 1980's-style economic growth, job creation. We are also going to enjoy 1980's-style college basketball. My prediction that Georgetown, now couched by 1980's star player, Patrick Ewing (ph), and St. John's, now coached by 1980's star, Chris Mullen (ph), will be back in the NCAA tournament this year.

GIGOT: I sense you're not a Duke or North Carolina fan? Is that it?

(LAUGHTER)

FREEMAN: Absolutely.

GIGOT: All right. Kate?

ODELL: Paul, my prediction is that this year we get deal on young adult DREAMers who were brought to this country illegally. We talked about them a little bit earlier in the show. I think we get this deal, as James Freeman said, it's been out there a long time. It could trade border security and wall funding for the president. And Trump has said he has some compassion towards these individuals who were brought here and now serve in military and go to college. So I think that -- I think this comes after favorable Supreme Court ruling to Trump and I think it would be good for the country.

GIGOT: Dan?

HENNINGER: I'm going to make a prediction about the outcome of the Mueller report. But I could also make a prediction the Mueller report won't come out in 2019. If it's a special investigator, you never know. But if he does issue this report, the two things at the center of it are whether the president's campaign colluded with the Russians at a very high level and whether President Trump obstructed justice. On both of those counts, I think the answer is going to be no.

GIGOT: So no collusion, but impeachment anyway.

That's it for this week's show. Thanks to my panel and to all of you for watching. I'm Paul Gigot. We hope to see you right here next week.
 
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