The lawsuit claims that the statutes “reflect a deliberate effort by California to obstruct the United States’ enforcement of federal immigration law.” It also says the laws regulate private entities that want to cooperate with the federal authorities and “impede consultation and communication between federal and state law enforcement officials.”

Mr. Brown called the lawsuit a “political stunt.”

“At a time of unprecedented political turmoil, Jeff Sessions has come to California to further divide and polarize America,” Mr. Brown said in a statement. “Jeff, these political stunts may be the norm in Washington, but they don’t work here. SAD!!!”

California began battling the Trump administration even before Mr. Trump took office, standing in opposition on a number of issues, including marijuana, environmental regulations and taxes. But immigration has proved to be the most contentious fight, with local officials assuring undocumented immigrants that they would do all they could to protect them.

Document: Justice Dept.’s Suit Against California

Last year, California enacted the sanctuary laws, which restrict when and how local law enforcement can cooperate with federal immigration enforcement officers.

Both Mr. Sessions and Mr. Trump have threatened to pull federal grant money from cities and states that have sanctuary laws to protect undocumented immigrants. They argue that the policies flout federal laws and help criminals evade deportation.

And the Justice Department asked 23 jurisdictions across the country this year to provide documentation that they had not kept information from federal immigration authorities, or receive a subpoena for the information. It is also exploring possible criminal charges for local politicians who enact sanctuary policies.

The lawsuit filed on Tuesday evening in Federal District Court in Sacramento is the first against a local or state government over its immigration policies filed by the Justice Department under Mr. Sessions. Department officials said that they would not rule out the possibility of other lawsuits against local governments whose policies interfere with the federal government’s authority on immigration. Colorado, Illinois, New Mexico, Oregon and Vermont have state sanctuary laws, as do cities and counties in more than a dozen states, according to the Center for Immigration Studies.

Advertisement

Continue reading the main story

One, the California Values Act, strictly limits state and local agencies from sharing information with federal officers about criminals or suspects unless they have been convicted of serious crimes. The law, which took effect Jan. 1, was the centerpiece of the State Legislature’s effort to thwart the Trump administration’s immigration policies.

Soon after the law was enacted, Thomas D. Homan, the acting director of United States Immigration and Customs Enforcement, said that the state should expect to see “a lot more deportation officers” and that elected officials who support the policy should be arrested.

“We’ve got to start charging some of these politicians with crimes,” he said. “These politicians can’t make these decisions and be held unaccountable for people dying. I mean, we need to hold these politicians accountable for their actions.”

Mr. Homan and three other immigration and border protection officials filed declarations with the suit claiming that California’s laws had already negatively affected their work.

“The administration is just angry that a state has stood up to them — one that embraces diversity and inclusivity and is the sixth-largest economy in the world thanks to the hard-working immigrants who want to become American citizens,” said Kevin de León, the leader of the California State Senate who wrote one of the sanctuary city laws named in the suit.

State lawmakers also passed the Immigrant Worker Protection Act, which prohibits local business from allowing immigration to gain access to employee records without a court order or subpoena. Mr. Becerra warned that anyone who violated the new law would face a fine of up to $10,000.

In the state budget bill, California lawmakers prohibited new contracts for immigration detention in the state and gave the state attorney general the power to monitor all state immigration detention centers.

The state and several local governments including the cities of San Francisco and Sacramento have also set up legal defense funds to help defend immigrants during deportation proceedings.

Advertisement

Continue reading the main story

“I’m worried about the ‘Dreamers,’ hard-working immigrant families and law-abiding people who are just trying to make their way like the rest of us,” Mayor Darrell Steinberg of Sacramento said this year when asked about the state’s sanctuary legislation. “Civil disobedience is a respectful way to show your love for country.”

Tensions between local and federal officials reached yet another height last week, when Mayor Libby Schaaf of Oakland publicly warned of coming large-scale immigration arrest operations. Mr. Homan compared the mayor to a “gang lookout yelling, “Police!” and said she gave people living in the United States illegally a chance to flee. He said her warning meant that the federal immigration authorities arrested about 200 people rather than the 1,000 they had anticipated rounding up.

Although Mr. Homan and other federal officials have warned about targeting California as it steps up immigration enforcement efforts, the number of people arrested has not drastically increased so far. In December, the most recent month for which data is available, 1,715 unauthorized immigrants in California were arrested by ICE, compared with 1,379 in December 2016.

This is not the first time that the Justice Department has sued a state. During the Obama administration, the department filed a civil rights lawsuit against Georgia for segregating students with disabilities from classrooms and sued North Carolina over a bill to restrict bathroom use for transgender citizens. Mr. Sessions withdrew that lawsuit.

In a call with reporters on Tuesday night, Mr. Becerra said that he was confident California would prevail in court and that state and federal laws were not in conflict.

“In California, our state laws work in concert with federal law,” he said. “Our teams work together to go after drug dealers and go after gang violence. What we won’t do is change from being focused on public safety. We’re in the business of public safety, not deportation.”

Mr. Becerra said that he was not surprised by the news of the lawsuit and that the state had already won legal battles against the Trump administration. “We’ve seen this B-rated movie before,” he said. “We’re not doing their bidding on immigration enforcement and deportation.”

Continue reading the main story

It leaves Mr. Trump surrounded primarily by advisers with strong protectionist views who advocate the types of aggressive trade measures, like tariffs, that Mr. Trump campaigned on but that Mr. Cohn fought inside the White House. Mr. Cohn was viewed by Republican lawmakers as the steady hand who could prevent Mr. Trump from engaging in activities that could trigger a trade war.

Even the mere threat, last August, that Mr. Cohn might leave sent the financial markets tumbling. On Tuesday, Mr. Cohn’s announcement rattled markets, and trading in futures pointed to a decline in the United States stock market when it opened on Wednesday.

In a statement, Mr. Cohn said he had been pleased to work on “pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform.” White House officials said that Mr. Cohn was leaving on cordial terms with the president and that they planned to discuss policy even after his departure.

Mr. Cohn’s departure comes as the White House has been buffeted by turnover, uncertainty and internal divisions and as the president lashes out at the special counsel investigation that seems to be bearing down on his team.

A host of top aides have been streaming out the White House door or are considering a departure. Rob Porter, the White House staff secretary and a member of the inner circle, resigned after spousal abuse allegations. Hope Hicks, the president’s communications director and confidante, announced that she would leave soon. In recent days, the president has lost a speechwriter, an associate attorney general and the North Korea negotiator.

Others are perpetually seen as on the way out. John F. Kelly, the chief of staff, at one point broached resigning over the handling of Mr. Porter’s case. Lt. Gen. H. R. McMaster, the national security adviser, has been reported to be preparing to leave. And many officials wonder if Jared Kushner, the president’s son-in-law and senior adviser, will stay now that he has lost his top-secret security clearance; the departure of Mr. Cohn further shrinks the number of allies Mr. Kushner and his wife, Ivanka Trump, have in the White House.

More than one in three top White House officials left by the end of Mr. Trump’s first year and fewer than half of the 12 positions closest to the president are still occupied by the same people as when he came into office, according to a Brookings Institution study.

Advertisement

Continue reading the main story

Mr. Cohn’s departure will bring the turnover number to 43 percent, according to updated figures compiled by Kathryn Dunn Tenpas of the Brookings Institution.

For all the swings of the West Wing revolving door over the last year, Mr. Cohn’s decision to leave struck a different chord for people. He is among the most senior officials to resign to date.

Mr. Trump’s announcement last week that he would levy tariffs on aluminum and steel imports was the most immediate catalyst for Mr. Cohn’s departure, according to people familiar with his thinking. A longtime proponent of free trade, Mr. Cohn believed the decision could jeopardize economic growth. The president, urged to consider the risks of losing Mr. Cohn by several advisers, appeared unconcerned, insisting that he could live without his economic adviser as he makes a more aggressive return to the nationalist policies that helped sweep him into office as the 2018 midterm elections approach.

Mr. Cohn was familiar with Mr. Trump’s nationalist stance on trade, and the president repeatedly asked aides, “Where are my steel tariffs?” over the last eight months. Since last summer, a process for debate and information flow to the president had been in place as he made decisions. But that process has been in tatters since Mr. Porter left the White House, several aides said on Tuesday.

What’s more, people close to the president said, Mr. Cohn had harmed his own ability to negotiate by telling Mr. Kelly last week that if the tariffs went forward, he might have to resign. The president was told by Cohn critics that Mr. Cohn had made the issue about himself, as opposed to Mr. Trump’s policies. That led to Mr. Trump souring on Mr. Cohn by the time his resignation was submitted on Tuesday. But the president was still infuriated by Mr. Cohn’s decision, according to multiple people who discussed it with the president after it was announced. In several conversations that Mr. Trump had with people on Tuesday, he denounced Mr. Cohn as a “globalist.”

Newsletter Sign Up

Continue reading the main story

Thank you for subscribing.

An error has occurred. Please try again later.

You are already subscribed to this email.

View all New York Times newsletters.

• See Sample
• Manage Email Preferences
• Not you?
• Privacy Policy
• Opt out or contact us anytime

The resignation followed conversations Mr. Cohn held with the president in recent weeks about the possibility of replacing Mr. Kelly as chief of staff, said people who were briefed on the matter. The president never formally offered Mr. Cohn the job, those people insisted, but Mr. Trump had discussions with him about whether he would be interested.

On Tuesday, before Mr. Cohn’s announcement, Mr. Trump dismissed talk of chaos in his White House while acknowledging that he deliberately fostered a fractious atmosphere. “I like conflict,” he said at a news conference with the visiting prime minister of Sweden. “I like having two people with different points of view. And I certainly have that. And then I make a decision. But I like watching it. I like seeing it. And I think it’s the best way to go.”

But he insisted that he had no trouble recruiting or retaining people to work for him, despite widespread reluctance among Republicans to join his staff.

“Believe me, everybody wants to work in the White House,” he said. “They all want a piece of the Oval Office. They want a piece of the West Wing.”

Advertisement

Continue reading the main story

People close to Mr. Cohn said that he had planned to stay for roughly a year, and that he had accomplished a number of things he cared about, including the $1.5 trillion tax cut.

A onetime silver trader who eventually became the president of Goldman Sachs, Mr. Cohn was an unlikely addition to the administration. A lifelong Democrat known for having progressive social views, he had no political expertise and barely knew Mr. Trump. But during an unconventional job interview, Mr. Trump was impressed with Mr. Cohn’s knowledge of economics and the markets, say people who were briefed on the discussion.

As his chief economic adviser, Mr. Cohn quickly ingratiated himself to the president. He gave blunt, practical advice, say people familiar with their interactions, and built a team of experts on issues like infrastructure and taxes. At one point, he was part of a moderate-minded coalition of staff members — including Mr. Kushner and Ms. Trump, also an adviser — who pushed for the preservation of workplace rights for gay, lesbian, bisexual and transgender people. He also pushed Mr. Trump to remain in the Paris climate accord, a battle he ultimately lost.

He argued frequently over Mr. Trump’s “America First” approach to trade, jousting most recently with the White House aide Peter Navarro and Commerce Secretary Wilbur Ross over the harm he believed nationalist economic policies would generate.

Shortly after his inauguration, Mr. Trump withdrew the United States from the Trans-Pacific Partnership, an Obama-era trade agreement with a number of Asian nations. Then, on at least three occasions last year, Mr. Cohn rebuffed Mr. Navarro’s attempts to withdraw from the North American Free Trade Agreement. Mr. Cohn was also part of a group of White House aides who effectively blocked the metal tariffs on several occasions.

Some of Mr. Cohn’s struggles on the job were painfully public. During an interview with CNBC, he once described working for Mr. Trump as a “dream come true.” Yet as the top economic adviser to a president who is often contradictory on matters of policy, he sometimes had to finesse Mr. Trump’s errors, a role that critics regarded as damaging to Mr. Cohn’s reputation.

Mr. Cohn’s rapport with Mr. Trump has been tenuous at times.

In August, after violent nationalist protests in Charlottesville, Va., that led to a woman’s death, Mr. Cohn was so troubled by the president’s response that he wrote a resignation letter, according to people briefed on the document. That time, Mr. Trump persuaded him to stay. But, loath to hide his feelings on the matter, he publicly criticized his boss, saying in a Financial Times interview that the administration “can and must do better” to condemn hate groups.

Late last year, Mr. Navarro was placed under Mr. Cohn’s supervision and asked to copy him on emails, effectively neutering his effect on policy for a time. But a tumultuous period in the White House in February resulted in Mr. Navarro’s re-ascendance, and with that, his protectionist policy agenda.

Mr. Cohn, who officials said has not set a firm departure date, will probably take a month or so to regroup after leaving, according to someone familiar with his thinking. Possibilities he has considered for a next step, said this person, include opening up his own investment firm or, according to two people familiar with his thinking, a more senior job in the Trump administration.

Continue reading the main story

Senate Bill 7026, named the Marjory Stoneman Douglas High School Public Safety Act, would raise the age to purchase a firearm from 18 to 21, require a three-day waiting period for most gun purchases, and ban the sale or possession of “bump stocks,” which allow semiautomatic rifles to fire faster.

Russia has said it has “no information” about what could have caused a former agent convicted of spying for Britain to collapse in Salisbury, Wiltshire.

But the Kremlin said it was willing to co-operate in the police investigation.

UK police are trying to identify what substance left Sergei Skripal, 66 – who was granted refuge in the UK in 2010 under a “spy swap” – and a 33-year-old woman critically ill in hospital.

The pair were were found unconscious on a bench at a shopping centre on Sunday.

Dmitry Peskov, Russian President Vladimir Putin’s spokesman, told journalists that Moscow was prepared to help with the investigation.

“We see this tragic situation but we don’t have information on what could have led to this, what he was engaged in”, he said.

• Sergei Skripal: Who is the former Russian colonel?
• Putin, power and poison: Russia’s elite FSB spy club

Wiltshire Police said the pair, found at The Maltings shopping centre in Salisbury, had no visible injuries – but that officers were investigating whether a crime had been committed.

Meanwhile, police have closed the nearby Zizzi restaurant “as a precaution” following the incident.

Temporary Assistant Chief Constable Craig Holden said: “They are currently being treated for suspected exposure to an unknown substance.

“The focus is trying to establish what has caused these people to become critically ill.

“We are working with partners to prioritise this diagnosis and ensure that they receive the most appropriate and timely treatment.”

He said the police’s “major incident” response was not a counter-terrorism investigation – but that multiple agencies were involved and police were keeping an “open mind”.

Image copyright
PA

Assistant Commissioner Mark Rowley of the Metropolitan Police, the retiring head of counter-terrorism policing in the UK, said the case would become a counter-terrorism investigation “if necessary”.

He told BBC Radio 4’s Today programme: “It’s a very unusual case – and the critical thing is to get the bottom of its causes as quickly as possible.

“We’ll throw all the technical, scientific, investigative resources at these sort of cases to [establish] if there is any sign of foul play”, he said.

Col Skripal, who is a retired Russian military intelligence officer, was jailed for 13 years by Russia in 2006.

He was convicted of passing the identities of Russian intelligence agents working undercover in Europe to the UK’s Secret Intelligence Service, MI6.

You may also be interested in:

• Sunken US WW2 warship found under Coral Sea
• Bombarded Syrian enclave ‘beyond critical’
• A routine abduction – of a 13-year-old girl

He was one of four prisoners released by Moscow in exchange for 10 US spies as part of a swap and was later flown to the UK.

He and the woman, who police said were known to each other, are both in intensive care at Salisbury District Hospital.

A number of locations in the city centre were cordoned off and teams in full protective gear have used hoses to decontaminate the street.

Workers in respirators and hazardous material suits searched bins close to the scene where the two collapsed.

On the restaurant closure, police said Public Health England had reiterated there was no known risk to the wider public.

As a precaution, they advised that if people felt ill they should contact the NHS on 111, or ring 999 “if you feel your own or another’s health is significantly deteriorating”.

Neighbours at Col Skripal’s home in Salisbury said police arrived around 17:00 GMT on Sunday and had been there ever since.

They said he was friendly and in recent years had lost his wife.

Image copyright
PA

An eyewitness to the scene where the pair were found, Freya Church, told the BBC she saw them sitting on the bench: “An older guy and a younger girl. She was sort of leant in on him, it looked like she had passed out maybe.

“He was doing some strange hand movements, looking up to the sky…

“They looked so out of it I thought even if I did step in I wasn’t sure how I could help.”

The possibility of an unexplained substance being involved has drawn comparisons with the 2006 poisoning of Alexander Litvinenko.

The Russian dissident and former intelligence officer died in London after drinking tea laced with a radioactive substance.

A public inquiry concluded that his killing had probably been carried out with the approval of the Russian President, Vladimir Putin.

Sir Tony Brenton, former British Ambassador to Russia when Mr Litvinenko was fatally poisoned, said there were parallels with this latest incident.

He told Today: “We don’t know about this current case – if indeed it is proved that the Russians were at the back of it, then we need to look for actions that we can take.

“Where I see it, it is very hard to establish what those actions can be.”

Get news from the BBC in your inbox, each weekday morning

A spokesman for the Russian Embassy in the UK, when asked for comment on the Salisbury incident, said: “Neither relatives nor legal representatives of the said person, nor the British authorities, have addressed the embassy in this regard.”

Mr Litvinenko’s widow, Marina Litvinenko, told BBC Radio 4’s The World Tonight the latest incident felt like “deja vu” – and called for those receiving political asylum to be “completely safe”.

She said: “It just shows how we need to take it seriously, all of these people asking for security and for safety in the UK.”

Analysis

By BBC security correspondent Gordon Corera

The parallels are striking with the 2006 Litvinenko case. He, too, was a former Russian intelligence officer who had come to the UK and was taken ill for reasons that were initially unclear.

In that case, it took weeks to establish that the cause was deliberate poisoning, and it took close to a decade before a public inquiry pointed the finger of blame at the Russian state.

Officials are stressing that it is too early this time to speculate on what happened here or why.

The police are not even yet saying a crime has been committed, but if the similarities do firm up and Moscow is once again found to be in the frame there will be questions about what kind of response might be required – and whether enough was done in the past to deter such activity being repeated.

Former Foreign Secretary Sir Malcolm Rifkind told The World Tonight the police approach in this case suggested there could be a “very sinister background”.

He said: “It could indeed potentially have been the FSB [Russian intelligence services] or the Kremlin could have been behind it.

“It could have been some form of criminal response for other reasons, or it could be some form of personal grievance some individual had against these two people or either of them.

“We don’t know at this stage and it is not going to be useful to speculate beyond that,” he added.

Do you have any information to share on this story? Email haveyoursay@bbc.co.uk.

Please include a contact number if you are willing to speak to a BBC journalist. You can also contact us in the following ways:

• WhatsApp: +447555 173285
• Tweet: @BBC_HaveYourSay
• Send pictures/video to yourpics@bbc.co.uk
• Upload your pictures/video here
• Send an SMS or MMS to 61124

You can receive Breaking News on a smartphone or tablet via the BBC News App. You can also follow @BBCBreaking on Twitter to get the latest alerts.

Image copyright
EPA

A former Trump aide said on Monday he would not co-operate with the inquiry into alleged Russian election meddling but said later he probably would.

Sam Nunberg, who helped launch Donald Trump’s presidential campaign, faces a subpoena to appear before a grand jury.

His first response to special counsel Robert Mueller’s demand was defiance – that he was prepared to face arrest.

But he later told the AP news agency he was probably “going to end up co-operating with them”.

Mr Nunberg, who lost his job in 2015, complained in a series of interviews about being asked to share his email conversations with a long list of ex-campaign aides.

“I think it would be really, really funny if they wanted to arrest me because I don’t want to spend 80 hours going over emails,” he told MSNBC earlier.

While he thought investigators believed they had something on Mr Trump, he argued that the subpoena was unfair and added he would like Robert Mueller’s team to narrow its scope of inquiry.

Mr Mueller is investigating whether there were any links between the Trump campaign and Russia, or any effort by the White House to obstruct justice.

Image copyright
Getty Images

White House spokeswoman Sarah Sanders would not be drawn on Mr Nunberg’s remarks on Monday, saying: “I’m not going to weigh in on somebody that doesn’t work at the White House.”

Airing grievances or spilling secrets?

Analysis by Anthony Zurcher, BBC Washington

Refusing to comply with a grand jury summons could result in contempt of court and obstruction of justice charges – and, eventually, a prison sentence. It’s a steep price to pay to make a point about the scope of Robert Mueller’s inquiry.

If Sam Nunberg wants to know how bad it could get, he might familiarise himself with the story of Susan McDougal, who served 18 months in jail for refusing to co-operate with independent counsel Ken Starr’s investigation into then-President Bill Clinton’s Arkansas real estate deals.

Throughout Monday he soaked up the media spotlight and aired grievances against old campaign colleagues.

If Mr Nunberg can be believed, his comments shed light on the direction of Mr Mueller’s investigation and its apparently wide-ranging questions.

In other words, Mr Mueller’s investigation is digging deep – and probably won’t be wrapping up anytime soon.

Who is Nunberg?

Sam Nunberg worked on the Trump campaign in 2015 until he was fired in August that year over racially charged Facebook posts.

He was later sued by Mr Trump for $10m (£7.2m) for breach of confidentiality.

The lawsuit was “amicably settled” out of court, a lawyer for the Trump Organization said at the time.

Mr Nunberg told CNN on Monday: “I’m not a Donald Trump fan. He treated me like crap.”

Image copyright
Sam Nunberg

‘Arrest me’

In a volley of extraordinary interviews with US media on Monday afternoon, Mr Nunberg said he had met Mr Mueller’s team for five-and-a-half hours over the weekend.

He said he had had enough of the investigators’ “pretty ridiculous” questions.

Mr Nunberg told CNN they had asked him if he had ever heard Russian spoken around Trump Tower.

“I’m not co-operating. Arrest me,” Mr Nunberg said on live television. “You want to arrest me? Arrest me.”

He said he would not appear before a grand jury to testify on Friday.

Mr Nunberg rejected any suggestion he himself had colluded with Russians to help Mr Trump win the 2016 presidential election.

• All you need to know about Trump Russia story
• What does the special counsel do?

‘They suspect something’

Mr Nunberg appeared to contradict himself during Monday’s television interviews, suggesting that Mr Trump may have “done something”, while insisting the president was innocent.

“I suspect that they suspect something about him [Mr Trump],” he told CNN, referring to Mr Mueller’s investigators.

Mr Nunberg added: “Trump may very well have done something during the election with the Russians. If he did that, I don’t know.”

“Mueller thinks that Trump is the Manchurian candidate, and I will tell you I disagree with that,” Mr Nunberg told CNN, referring to a 1959 novel about a US politician brainwashed into becoming a pawn of foreign conspirators.

But Mr Nunberg also told CNN’s Jake Tapper: “Donald Trump did not collude with the Russians!

“It’s the biggest joke to ever think Donald Trump colluded with the Russians.”

• The tactics of a Russian troll farm

Trump and Moscow women

Mr Nunberg said he had been told by former Trump bodyguard Keith Schiller that a Kremlin-connected Russian “had offered to send women up to Trump’s room” at a Moscow hotel during the 2013 Miss Universe beauty pageant.

But he said Mr Trump “didn’t want it”.

“Trump is too smart to have women come up to his room,” Mr Nunberg said.

Unsubstantiated allegations linking Mr Trump to Russian prostitutes surfaced in a research file that was part of an attempt to dig up dirt on the then-Republican candidate during the 2016 election.

The dossier was compiled by an ex-British spy, Christopher Steele, through a Washington DC research firm that was hired by a conservative website and later by the Clinton campaign.

‘He knew’ about Trump Tower meeting

Mr Nunberg said Mr Trump was aware at the time of a June 2016 meeting at Trump Tower when a group of Russians offered his campaign staff damaging information about Hillary Clinton.

“You know he knew about it,” Mr Nunberg told CNN.

“He was talking about it a week before. I don’t know why he went around trying to hide it.”

The White House has repeatedly denied Mr Trump knew anything about that meeting.

The Trump Tower encounter appears to have become a focus of the Mueller investigation.

BEIJING (Reuters) – China aims to expand its economy by around 6.5 percent this year, the same as in 2017, while pressing ahead with its campaign to reduce risks in the financial system, Premier Li Keqiang said Monday.

The goal was kept unchanged even though the economy grew 6.9 percent last year and exceeded the government’s target. Sources previously told Reuters that China will maintain its growth target at“around 6.5 percent”.

Economists had already expected the world’s second-largest economy to lose some momentum this year as the government deepens its push to contain a build-up in corporate debt, while a war on pollution and a cooling property market weigh on its manufacturers.

Reinforcing views that Beijing’s attention remains firmly fixed on credit risks and better quality growth, when Li unveiled the GDP target he omitted previous wording saying growth could be“higher if possible.”

In his annual work report, Li also said China has cut its budget deficit target for the first time since 2012, suggesting Beijing will be more watchful of fiscal spending while not tapping the brakes so hard that it risks a sharper slowdown.

“Policy wise, the report definitely has a tightening bias,” said Betty Wang, senior China economist at ANZ in Hong Kong.“In line with expectations, the government is pushing through their reform agenda.”

But last week’s escalation in trade tensions with the United States has jumped to the top of the list of uncertainties facing China this year.

President Donald Trump said he would impose hefty tariffs on imported steel and aluminum to protect U.S. producers, risking retaliation from major trade partners like China and sparking fears of a global trade war.

Li said China opposes protectionism and supports the settlement of trade disputes through negotiation, but will“resolutely safeguard” its legitimate rights and interest.

Related Coverage

• China confident it can reach 2018 growth target: cabinet research head
• China cuts budget deficit ratio for first time since 2012
• China says supports negotiation to settle trade disputes

Yet, China will keep its yuan currency basically stable, Li said in remarks to the opening of the annual meeting of parliament.

He said a steady rise in import and export volumes can be expected this year, a view unchanged from a year ago. No export target was given for the third straight year.

“We can expect continued recovery of the global economy, but there are also many factors that bring instability and uncertainty,” the premier said.

“The policy changes of the major economies and their spillover effects create uncertainty; protectionism is mounting, and geopolitical risks are on the ascent,” Li said.

China’s economic and financial risks“are generally under control” but more needs to be done to resolve issues such as local government debt, Li said. He also said China will improve supervision over shadow banking, internet finance and financial holding companies, and step up risk controls at financial institutions.

DEFICIT TARGET TRIMMED

Li said China has cut its budget deficit target to 2.6 percent of GDP from 3 percent in 2017. Most analysts had expected it to be maintained or trimmed only slightly.

However, since the economy has been expanding at such a strong pace, analysts said the cut was again more symbolic of Beijing’s intention to further control debt growth.

“The actual figure is even lower than we expected…a 2.6 percent deficit would be about 2.3 trillion yuan ($363.5 billion) in absolute terms, which equals to the 2016 level,” said ANZ’s Wang.“It shows the government’s determination to control leverage in the economy.”

Heavy government infrastructure spending was a major driver behind China’s forecast-beating growth last year, but Beijing has been cracking down recently on some projects launched by local governments as it seeks to curb their spending.

Despite the lower deficit ratio, the absolute amount of the deficit is expected to remain unchanged at 2.38 trillion yuan ($376 billion), according to the finance ministry’s annual budget report.

MONETARY POLICY NEUTRAL

Li also reiterated that China will keep its monetary policy“prudent” and“neutral”, neither too loose nor too tight, and will maintain reasonably steady liquidity, he said.

While the central bank has been gingerly raising money market rates to discourage riskier lending practices, it has also kept markets well supplied with funds when there are worries of a deeper cash squeeze, and bank lending hit a fresh record last year.

Li also said he expects reasonable growth in broad M2 money supply and total social financing this year, without stating a target.

The National Development and Reform Commission, the state planner, said separately that outstanding total social financing (TSF) and M2 will grow at a similar pace this year as in 2017.

TSF grew 12 percent last year, in line with the target, but M2 growth slowed to 8.2 percent, below the goal of around 12 percent. ANZ had expected both targets to be set at 10 percent or lower this year.

“If I remember it right, it’s the first time that they don’t have a specific target in two decades. It shows authorities now prefer a tighter stance on monetary policy,” Wang said.

“Overall both monetary and fiscal policy will be tighter than last year, because the government wants to control financial leverage and overall debt levels.”

China also set its consumer inflation goal at“around 3 percent”, in line with last year, as widely expected.

Stability will be the watchword this year as President Xi Jinping pursues his vision of turning China into a“modestly prosperous” nation by 2020.

To hit the 2020 goal, the economy needs to expand at least 6.3 annually over the next three years, officials have said.

Xi also wants China to become a“strong power” on the world stage by 2050.

In the government’s 2018 budget report, defense spending saw its biggest increase in three years.

China will also continue to cut more steel and coal production, deepening its vow to make“skies blue again”, as Beijing chases quality over dizzying, polluting growth.

The ruling Communist Party last month set the stage for Xi to stay in office indefinitely, with a proposal to remove term limits from the constitution.

Key Xi ally, former top graft buster Wang Qishan, sat on the same row as Standing Committee members on the front stage of the Great Hall, despite having stepped down from the elite seven-man body which runs China in October. He is expected to become vice president, with a specific role dealing with the Trump administration.

Graphic: China’s economic trends – tmsnrt.rs/2iO9Q6a

Reporting by Kevin Yao and Sue-Ling Wong; Additional reporting by Xiaochong Zhang, Elias Glenn, Stella Qiu, Cheng Fang, Lusha Zhang, Shu Zhang, Cate Cadell, Tom Daly, Muyu Xu, Yawen Chen, Christian Shepherd, Ben Blanchard; Writing by Ryan Woo; Editing by Kim Coghill