Senate Battle Looms Over Trump’s Megabill
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The Senate readies for battle on President Trump's tax and spending mega bill. Plus, despite calls to invest locally, the EU mulls buying American as it scales up defense spending. European armies have a lot of work to do over many years.

to get battle ready and to be able to deter, in particular, Russia. So this agreement from the U.S. is undoubtedly on the top of the list of some of what they need. And stock futures rise as Canada drops a tax on tech in a bid to salvage U.S. trade talks. It's Monday, June 30th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today.

It is shaping up to be a key day for President Trump's tax mega bill after Senate Republicans narrowly advanced the measure in a procedural vote over the weekend, securing the backing of 51 of the 53 Republicans in the chamber.

Not among them was Kentucky's Rand Paul, who criticized a proposal to raise the debt limit by $5 trillion. That doesn't sound at all conservative to me, and that's why I'm a gnome. And North Carolina's Tom Tillis, who expressed concern over cutting Medicaid spending and winding down clean energy tax credits he says are crucial to jobs in his state.

That drew strong public backlash from the president, who said he would meet with Tillis' potential primary challengers. And by Sunday, Tillis said he wouldn't run for reelection next year.

Up next is a so-called voterama set to begin this morning in which lawmakers can propose unlimited amendments likely leading to hours of votes. Senate Democratic Minority Leader Chuck Schumer said that would allow his party to put Republicans on the record on a lot of the bill's provisions. If Republicans succeed, proceed and follow Donald Trump over the cliff with this bill tied to their ankles like an anvil, they will not only doom their own communities...

they will doom their political fortunes. We've left a link in our show notes on what is in the mega bill, but some new measures that are worth highlighting include raising the state and local tax or SALT deduction cap to $40,000 until 2030, a new tax on certain wind and solar projects, as well as an abrupt end to tax credits for purchasing EVs in September,

and on Medicaid, new work requirements for recipients and limits on provider taxes imposed by states in order to secure more federal funds.

With Republicans commanding only a narrow majority in the Senate, Journal tax policy reporter Richard Rubin said that today's votes could put a number of lawmakers in the driver's seat. When the bill is at this slim of majority, everybody is a key vote. You've got conservative Republicans, Ron Johnson, Rick Scott and Mike Lee, who want deeper spending cuts.

You've got moderates like Lisa Murkowski and Susan Collins who are concerned about the bill. You've got two Republicans, Rand Paul and Tom Tillis, who are opposed to the bill. And it's a chance for Republicans, if there are blocks of Republicans who want to change things in the bill, this is their chance to do it.

So they're trying to find the right mix of policies that can get 50 votes out of the 53 Republicans. You get Vice President Vance to come break the tie and then it will pass. And then obviously this has to go back to the House. And there's no guarantee that the House just accepts this as is. President Trump has set a July 4th deadline for Congress to get the bill to his desk.

We are reporting that NATO's new 5% defense spending target could help to defuse the transatlantic trade war because much of the money will go toward U.S. arms. That's according to a journal interview with the head of the European Council, Antonio Costa, and comes as EU and U.S. negotiators race to reach a deal before Trump's tariff pause ends on July 9th.

The journal's Lawrence Norman says that while that buy American concession will allow the White House to argue that its trade imbalance with Europe is set to improve, it raises a pair of issues for the continent. The U.S. has begun to use arms sales as a form of leverage in what it wants from Europe and from other countries. And the other issue is actually, frankly, by far the bigger one.

which is that in order for Europe to be able to defend itself, particularly in a crisis situation where the US was engaged in a conflict with China and needed everything for its own military,

the Europeans would be left very vulnerable. Lawrence said that the path to reducing that vulnerability isn't clear-cut. While the likes of French President Emmanuel Macron have argued European industry should benefit as much as possible from increased military spending, American manufacturers still provide unique capabilities. The first step of making Europe able to defend itself is to have a European defense sector that is big and strong enough

If all of the money goes to the US industry, the European defence sector will not expand. And that expansion is necessary. But there is simply no question that Europe needs US arms manufacturers. The F-35s, I mean, Europe does have some fighter jets, but they're nowhere near in terms of production, some would say in terms of quality. The other thing that Antonio Costa mentions is some kind of missile shield for Europe, which would

defend from missile attacks. Again, the technology, the patriots, the U.S. is really a leading force in that. Meanwhile, stock futures are gaining after Canada announced late last night that it's dropping a digital services tax on American tech companies and the trade talks with the U.S. will resume on July 21st. That's after President Trump said on Friday that the U.S. was walking away from discussions.

Canada's finance department was set to collect billions of dollars from U.S. tech companies beginning today with a 3% tax on revenue for selling digital services to Canadians and sales of Canadian user data. Speaking in the Oval Office on Friday, Trump said the U.S. held all the cards in its talks on a new economic and security pact between the two countries. Canada's been a very difficult country to deal with over the years.

You know, we here in Canada, we have a great relationship with the people of Canada, but it's been very difficult. And they put a charge in there a little bit earlier. We found out about it. And we have all the cards. We have every single one. We don't want to do anything bad, but they have economically, we have

Such power over Canada. I'd rather not use it. In a statement yesterday, Prime Minister Mark Carney's government announced it would pause collections and introduce legislation in Parliament to rescind the tax, saying it was doing so, quote, in anticipation of a mutually beneficial, comprehensive trade agreement with the United States. The White House didn't immediately respond for comment.

And despite reaching a trade agreement with the U.S. in early June, China's manufacturing activity is continuing to decline, with the Manufacturing Purchasing Managers Index for June remaining in contraction territory despite improving from May. The world's second-largest economy began to lose momentum three months ago when President Trump introduced sweeping tariffs.

Coming up, as the U.S. and Iran disagree over their next diplomatic steps, we'll look at what could emerge as a key factor if and when they return to the negotiating table. How much support Iran can count on from its longstanding allies. We've got that story after the break.

Bruised by U.S. and Israeli strikes, where can Iran turn for help? Tehran for years leaned on its ties with China, Russia, and North Korea to prop itself up economically and militarily. But as journal correspondent Thomas Grove is here to discuss, Washington's entrance into the conflict has raised the risk for those countries helping out Iran as it looks to rebuild.

Thomas, Iran of late has looked pretty isolated diplomatically, I think it's fair to say. We will get to that more in just a minute. But as you and your colleagues, Austin Ramsey and Tim Martin report, this has not always been the case for Iran, especially when it comes to its ties with China, Russia and North Korea. So these countries really are the most important partners that Iran has, you know, in terms of its economy, in terms of its military sales, arms sales and its nuclear program. So China helped develop Iran.

Iran's uranium mining industry. When you turn to Russia, it built basically Iran's only atomic power plant and also provides the country and that plant with enriched uranium. If you're looking at North Korea, it's more about helping them design underground nuclear sites. They're very good at building tunnels, apparently.

These three partners of Iran, with Iran included, come together as what we've come to know as the Krink Alliance. It's a term that a lot of Western officials throw around whenever we're talking about China, Russia, Iran, and North Korea. And yet, when Israeli and American bombs were falling on Iran...

Those allies didn't exactly rush to Iran's side, did they? We didn't see quite the same level of support as maybe you would expect from an alliance like NATO, for example. No, I think you basically had phone calls between Iran and Russia, for sure, and strongly worded statements from North Korea and China condemning the bombing, even though they didn't call Trump out by name. And most importantly for Iran, you had the foreign minister coming to Moscow and

Russia obviously received him, and Putin was very clear about Russia's own condemnation, but there was no military aid on the table. And so it basically left Iran to kind of figure things out for itself when it came to the United States and Israel. And Iran has a lot to figure out going forward.

Sure it does. I mean, it's at a point where it has to rebuild a lot of its military and it wants to stay on this nuclear track. So obviously it's going to need to turn to its partners for a lot of this. And most importantly here, looking at the kind of funds and money that's going to be needed for that, it's very important that China buys 90% of Iran's oil.

Which, Thomas, is what President Trump has said is going to be permitted here. And speaking of Trump, we've been hearing some mixed signals from Washington about whether there will be more talks with Iran on its nuclear program. Should those eventually move forward, I imagine information that maybe only Iran has at this point about how much enriched uranium it was able to salvage.

the true extent of damage to its facilities, that's going to be a big guide in terms of its thinking going forward on the nuclear front, but so too the kind of support it can count on from its allies. I think that would be very important going forward. I mean, whether or not they can actually rebuild the facilities is

To continue enriching uranium is a big open question. So that's what Iran's thinking about. As for these other countries, as for Iran's partners, they have a whole set of considerations to think about. And they have to weigh how important Iran is for them and how much they don't want to get stuck in the eye of Hurricane Trump. So if you're looking at North Korea, of course, there's a relationship between Kim Jong-un and Trump. I don't know if this is the time for him to really get caught out in that relationship with Trump.

When we're looking at China, this is a country that's in the middle of a trade war, and they may not want to have another...

you know, minus on their balance sheet going forward with Washington. And I think Russia here may have the most to lose. Trump has been very patient with Putin in regards to the Ukraine war and negotiations, peace negotiations that really haven't gained any traction. If there were to be another negative in that relationship, it wouldn't be hard to imagine that Trump could start sanctioning Russia, which is something that Putin would rather not happen, of course.

That was the journal's Thomas Grove. Thomas, thank you so much for the update. Thank you. And that's it for What's News for this Monday morning. Today's show was produced by Daniel Bach. Our supervising producer was Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.