President Trump tweeted about a phone call this morning with Chinese Chairman Xi Jinping. There will be a G20 meeting between Trump and Xi. So, extending our conversation from yesterday…. the “magnanimous panda” approach appears confirmed.

[White House] President Donald J. Trump spoke with President Xi Jinping of China this morning. The two leaders discussed the importance of leveling the playing field for U.S. farmers, workers, and businesses through a fair and reciprocal economic relationship. This includes addressing structural barriers to trade with China and achieving meaningful reforms that are enforceable and verifiable. The leaders also discussed regional security issues. The two Presidents look forward to meeting again in Osaka, Japan at the G20 Summit. (read more)

With Chairman Xi Jinping traveling to North Korea for talks with his captive Kim Jong Un prior to the G20; and with the meeting between Xi and Trump confirmed; it certainly looks like Beijing is deflecting the weakness of their economic/trade position by shifting the optic toward a geopolitical magnanimous panda.  The scale of the uprising in Hong Kong was also a likely influence on the margins.

What we don’t know is whether Xi will tell/threaten Kim Jong Un to wait-out President Trump, with warnings that Trump may not be around to save him after 2020…. If Xi takes that approach with Kim it means his thinking is similar; if so, the Chairman is taking a big gamble on his own economic survival by trying to wait-out President Trump.

However, if Xi tells Kim Jong Un that Kim’s captivity is over, then the denuclearization of North Korea will be the visible outcome.  In this scenario Xi will play the role of magnanimous panda and *guide* Kim into the West.  South Korean President Moon Jae-in will be heralded as the hero so that Xi doesn’t look like he lost to Trump.

President Trump has threatened more tariffs and more consequential action as it relates to non-tariff barriers, IP protection, forced technology transfers etc as a result of China reneging on their prior agreement. In essence, President Trump has put Chairman Xi under threat. Beijing’s traditional and cultural position would be no-meeting and no negotiation while under threats.

Chairman Xi agreeing to meet with President Trump at the G20 would normally be a sign of weakness due to Trump threats.  This indicates that some outcome from the meeting with Kim will flip “weakness” to “strength” in the eyes of China.

My best guess would be the magnanimous panda play.

However, watch out for the delay and stall approach to wait-out Trump until 2020.

An interesting and moderately positive development in the ongoing fiasco surrounding the prosecution of Paul Manafort.  According to the New York Times, Attorney General William Barr’s top deputy, Jeffrey Rosen, sent a letter to New York state prosecutors saying Main Justice was monitoring the planned transfer of Mr. Manafort.

Following the DOJ letter, the decision to transfer Manafort to Rikers Island was reversed.

(Via New York Times) … [L]ast week, Manhattan prosecutors were surprised to receive a letter from the second-highest law enforcement official in the country inquiring about Mr. Manafort’s case. The letter, from Jeffrey A. Rosen, Attorney General William P. Barr’s new top deputy, indicated that he was monitoring where Mr. Manafort would be held in New York.

And then, on Monday, federal prison officials weighed in, telling the Manhattan district attorney’s office that Mr. Manafort, 70, would not be going to Rikers.

Instead, he will await his trial at a federal lockup in Manhattan or at the Pennsylvania federal prison where he is serving a seven-and-a-half-year sentence for wide-ranging financial schemes, according to people with knowledge of the matter. (more)

The decision to transfer Manafort to Rikers Island was yet another transparent effort by political operatives within the justice system to use extreme measures against their political opposition…. Unfortunately, the Obama legacy -via the weaponization of law enforcement- continues.

George Zimmerman, Officer Darren Wilson, The Baltimore Six, Paul Manafort, Mike Flynn and Roger Stone were/are simply targets for political retaliation by career political operatives, political ideologues, now embedded within a severely corrupt justice system.

Perhaps the decision to stop some of the extremism is a small indication U.S. Attorney General Bill Barr is attempting to restore some semblance of justice to a thoroughly corrupt enterprise.

While previously pledged support for the Northern Triangle region related to Homeland Security and combating organized crime will continue, the State Department suspends any further financial assistance ($200 million) until the migration crisis is resolved.

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[Transcript at 01:28] “Next, I have a quick update for you on U.S. foreign assistance to the Northern Triangle countries of El Salvador, Guatemala, and Honduras. As you know, in March, the President concluded these countries have not effectively prevented illegal migrants from coming to the United States.”

“At the Secretary’s instruction, we continue to implement the President’s direction regarding foreign assistance for El Salvador, Guatemala, and Honduras. We completed a review, and previously awarded grants and contracts will continue with current funding. State Department assistance in support of priorities of the Departments of Justice and Homeland Security priorities to help the Northern Triangle governments take actions that will protect the U.S. border and counter transnational organized crime will also continue.

We will not provide new funds for programs in those countries until we are satisfied the Northern Triangle governments are taking concrete actions to reduce the number of illegal migrants coming to the U.S. border.

Working with Congress, we will reprogram those funds to other priorities as appropriate. This is consistent with the President’s direction and with the recognition that it is critical that there be sufficient political will in these countries to address the problem at its source. As Secretary Pompeo has said, these nations have the responsibility to take care of the immigration problems in their home country.”  (continue reading transcript)

(Tweet Link)

President Trump will be officially kicking off his 2020 re-election bid tomorrow night in Orlando, Florida, at the Amway center.  While the MAGA rally is scheduled to begin at 8:00pm ET, campaign organizers have had such an overwhelming demand for attendance, they have turned the entire day into a MAGA festival called: “The 45 Fest”.

The Amway center, home to the NBA’s Orlando Magic, will hold between 20,000 to 30,000 depending on layout.  However, jumbo screens are being constructed outside the arena for those who attend the festivities but don’t make it inside.

There will be live music, food booths and trucks, street vendors and a day of MAGA festivity prior to the main event at 8:00pm.  According to local media people began lining up Monday morning and plan to camp out overnight amid a mass of MAGA patriots and supporters.

ORLANDO – With tents, sleeping bags and coolers of water in tow, Donald Trump supporters began lining up early Monday for Tuesday’s campaign rally in Orlando, nearly two full days before the event.

Outside the Amway Center, where President Trump will officially kick off his 2020 re-election bid at 8 p.m. Tuesday, about two dozen people and counting had staked out a spot along Division Street as of Monday morning. The line had grown to about 50 as of 3 p.m.

“This is the big one,” said Jennifer Petito, 54, of Melbourne. “This is the mother of all rallies.” Petitio, who was wearing a pink “Women for Trump” hat and a red-and-white striped fanny pack, was second in line. She said she got there around 2 a.m. — 42 hours before the rally’s start. (read more)

Author of ‘The Coming Collapse of China’, Gordon Chang, appears on Fox Business to discuss the mounting U.S. trade tensions with China, the fallout from the protests against Carrie Lam in Hong Kong, and the announced visit by Xi to North Korea.

Chang also sees the visit by China’s Chairman Xi Jinping to North Korea as a strategic and purposeful moment for Beijing; an attempt to find footing against the overwhelming economic punishment being delivered by U.S. President Donald Trump.

Well, well, well….  Against the backdrop of everything we have been discussing about the nature of the U.S. – China – North Korea geopolitics; and considering the current position of all the players; THIS is a very interesting development:

BEIJING (Reuters) – Chinese President Xi Jinping will visit North Korea for two days from Thursday, state media in both countries reported on Monday, making him the first Chinese leader to visit in 14 years.

Neighboring China is reclusive North Korea’s only major ally, and the visit comes amid renewed tensions between the United States and North Korea over efforts to persuade Pyongyang to give up its nuclear weapons.

“Both sides will exchange views on the (Korean) peninsula situation, and push for new progress in the political resolution of the peninsula issue,” China’s official broadcaster CCTV said in a lengthy report that led the evening news. (read more)

The possibility here is one most CTH readers will immediately recognize.  Is this the predictable face-saving approach Chairman Xi Jinping has selected?

For two-and-a-half years U.S. President Trump has been working on two connected objectives: (1) removing the threat posed by North Korea by severing the ability of Beijing to use the proxy province as a weapon (Kim is hostage to China); and (2) deconstructing the growing economic influence of China.

Both issues are directly connected to national security; and both issues are being approached by President Trump through the use of economic leverage to achieve national security results.

At first blush, there’s always a possibility of Chairman Xi going to see Chairman Kim in dragon mode… looking for a way to weaponize the DPRK despite the budding relationship between Chairman Kim (hostage) and U.S. President Donald Trump.  However, that dragon perspective is blunted by the open media indications that the talks are centered around denuclearization.   So that puts more weight on the second possibility.

The second possibility, the more optimistic possibility, is that we have finally reached that point in the U.S. -vs- China economic confrontation where Chairman Xi is now facing defeat and attempting to save face, and gain a better economic outcome, by releasing his hostage.   This would be an incredible, almost unfathomable, win for President Trump; and an astounding visible affirmation that the year’s long strategy has been successful.

When we began watching this journey in 2017, there were indications President Trump was working specifically to create an outcome of a hostage release.  And in the years that have followed there have been multiple highly-nuanced indications of the strategy Trump was following.  This visit by Chairman Xi to North Korea in advance of the G20 summit has all the indications of this could very well be the culmination; ending exactly where President Trump has intended. As we noted in this graphic two years ago:

Caution is the word of the day.  After all, this is the cunning and duplicitous China we are talking about here…. they have a history of using deceit and stall tactics to achieve victory.  However, President Trump has shown he is well aware of what lies behind the panda mask.

That said, it’s worth watching very closely now to see the details of the G20 and whether Xi and Trump actually meet.

Beijing has announced Chairman Xi and South Korean President Moon Jae-in are scheduled for a meeting….  and we know on the issue of DPRK hostage release Chairman Xi will need to save face very carefully.

One way for Xi to avoid the appearance of acquiescence to Trump would be for him and Beijing to place the victory at the feet of Moon Jae-in instead of President Trump.   I would almost guarantee, if indeed Xi is now giving up his hostage, China will position themselves as magnanimous panda and South Korea as the beneficiary.

“Peace is the Prize” ~ Donald Trump

Ultimately, I don’t think President Trump really cares about who gets credit for the victory and hostage release of Chairman Kim.  The world will know, though the media may not assign, the victory is only because President Trump has outwitted Chairman Xi and his communist regime…. and Trump did that though strategic economic pressure.

We should be able to get some indications from public and media discussion ahead of the G20 summit in Japan this month, as to how -specifically- the hostage release will take place; and/or the terms and conditions within that release.   Will Chairman Xi meet with President Trump?

…or will Xi tell Kim (or an emissary) to inform Trump there will be no meeting, but the face-saving terms and reasons are understood by all the principals.

Incredible development.

Lastly, as it relates to the continued U.S. -vs- China trade and economic confrontation, if Chairman Xi expects POTUS Trump to retreat from the massive geopolitical leverage he has created that won’t happen.

President Trump has been openly, albeit with coded messages, telling the world North Korea is no longer a threat.  The secondary purpose of making those statements is to blunt the value of Xi giving up his hostage.  In essence, Trump has been telling Beijing: it’s a victory already achieved, so magnanimous panda isn’t providing Trump anything of measurable value.

Remember, two connected objectives: (1) removing the threat posed by North Korea by severing the ability of Beijing to use the proxy province as a weapon; and (2) deconstructing the growing economic influence of China.  With #1 achieved, President Trump still fully intends to get #2.  Heck, Trump has spent 30-years openly advocating for the principle of restoring American wealth.  That means the economic pressure will continue until Beijing is defeated.

Charles Payne, filling in for Maria Bartiromo, interviews White House Manufacturing and Trade Policy advisor Peter Navarro.  Unfortunately the interview begins with a discussion of tariff polling….  The vast majority of Americans have no understanding of the impact of tariffs and/or MAGAnomic policy; they only know the economic outcomes they can feel.

Mr. Navarro walks through how tariffs interact with global supply chains and the financial manipulation by multinational corporate interests.

Secretary of State Mike Pompeo appears on Fox News Sunday to debate antagonistic DC Swamp Guard Chris Wallace.  The primary topic was the recent attacks on shipping tankers by Iranian elements in the Gulf of Oman.

Additionally, Secretary Pompeo discussed the protests in Hong Kong against the growing influence from Beijing; the issues with North Korea to achieve a positive outcome with Kim Jong Un; the New York Times story on U.S. active measures against Russia; and the nonsensical -hypothetical- foreign opposition research issue.

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Secretary Pompeo also appeared on Face The Nation:

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The latest set of statistics from the Bureau of Economic Analysis (BEA) shows all of the professional pundit claims of higher prices on imported goods due to Trump tariffs are simply disconnected from reality.  In actuality the year-over-year prices of import products are actually dropping:

U.S. Import prices fell 0.3 percent in May, the first monthly decline since a 1.4-percent drop in December. Import prices advanced 1.8 percent from December to April before the downturn in May. The price index for overall imports decreased 1.5 percent over the past 12 months, matching the drop in January. These were the largest over-the-year declines since the index fell 2.2 percent in August 2016. (See table 1.)

The U.S steel and aluminum tariffs have been in effect globally since 2017. Tariffs on softwood lumber (Canada) & durable appliances (S. Korea), same duration.  Additionally the first set of tariffs on China is now well over a year old; and the second set of expanded tariffs on China began a month ago; again, no material impact to the delivered price.

Despite two years of claims by the professional media that tariffs would lead to higher prices for U.S. consumers, as you can see above the reality is quite different.

In part this is driven by lower fuel and energy costs.  Additionally, China is attempting to subsidize its affected industry; and several nations, including China, are attempting to retain export status by adopting monetary policies that devalue their currency.  All of these efforts at countering the U.S. tariffs are having a deflationary impact.

[…] Imports by Locality of Origin: The price index for imports from China edged down 0.1 percent in May following a 0.2-percent drop the previous month. Import prices from China have not recorded a monthly advance since the index rose 0.1 percent in May 2018. Prices for imports from China declined 1.4 percent over the past year, the largest 12-month drop since a 1.6-percent decrease in February 2017.

Import prices from Japan recorded no change in May, after a 0.1-percent decline in April. Prices for imports from Japan also recorded no change from May 2018 to May 2019.

The price index for imports from Canada declined 1.0 percent in May, driven by lower fuel prices. (Link)