The synergy, flow and timing of the U.S. trade and economic team is just a marvel; a brilliant assembly of perfectly in-tune economic and trade professionals.

As President Trump touched down in the U.K. to attend the two-day NATO summit, United States Trade Representative Robert Lighthizer announces the completion of a Section 301 review of France’s Digital Services Tax (DST).

After determining the value of the French tax on U.S. internet services at $2.4 billion; Lighthizer announces a 100%  countervailing duty on a carefully selected $2.4 billion in French imports.

Obviously the agenda for the bilateral NATO meeting between U.S. President Trump and French President Emmanuel Macron just changed.  LOL, you have to love Team USA.

Oh, but wait, wait… it gets better….

We have to remember, THIS $2.4 billion U.S. tariff against France would be on top of the $7.5 billion (per year) countervailing duty recently won from the Airbus subsidy case in the WTO…. and by law France cannot retaliate.

Oh my, President Trump strolls into the NATO bilat with Macron while holding a $10 billion legally justified countervailing tariff position.  How’d ya like ‘dem grapes?

Remember those stunts Macron pulled at the G20 meeting in France when he first showed up unannounced at the hotel for lunch to discuss “climate issues“; and then invited the Iranian Foreign Minister to a goofy external bilat; trying to set-up/pressure POTUS?

Oh comeuppance thy time is now.

Washington, DC – The U.S. Trade Representative has completed the first segment of its investigation under section 301 of the Trade Act of 1974 and concluded that France’s Digital Services Tax (DST) discriminates against U.S. companies, is inconsistent with prevailing principles of international tax policy, and is unusually burdensome for affected U.S. companies.

Specifically, USTR’s investigation found that the French DST discriminates against U.S. digital companies, such as Google, Apple, Facebook, and Amazon. In addition, the French DST is inconsistent with prevailing tax principles on account of its retroactivity, its application to revenue rather than income, its extraterritorial application, and its purpose of penalizing particular U.S. technology companies.  A report available on USTR’s website sets out the findings of the investigation.

“USTR’s decision today sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on U.S. companies,” Ambassador Robert Lighthizer said. “Indeed, USTR is exploring whether to open Section 301 investigations into the digital services taxes of Austria, Italy, and Turkey. The USTR is focused on countering the growing protectionism of EU member states, which unfairly targets U.S. companies, whether through digital services taxes or other efforts that target leading U.S. digital services companies.”

USTR is issuing a Federal Register notice explaining that, for the reasons set forth in the report, the French DST is unreasonable, discriminatory, and burdens U.S. commerce. The notice solicits comments from the public on USTR’s proposed action, which includes additional duties of up to 100 percent on certain French products.

The notice also seeks comment on the option of imposing fees or restrictions on French services. The list of French products subject to potential duties includes 63 tariff subheadings with an approximate trade value of $2.4 billion.  The value of any U.S. action through either duties or fees may take into account the level of harm to the U.S. economy resulting from the DST. (more)

Macron: “No matter what I try, he just keeps winning”…

May: “Oh, Emmanuel you don’t have to tell me. If you only knew”…

Macron: “What is this, this mysterious power, he has?”..

May: “I hear they call it MAGA something-or-other”…

Macron: …{{{heavy sigh}}}

May: “You need to call Justin now. He’s picking us off one by one”…

Chopper pressers are the best pressers.  Earlier today President Trump paused to talk to the press pool prior to departing the White House for the NATO summit in the U.K. [Video and Rough Transcript Below]

.

[Rough Pool Transcript] – President Trump … we’re fighting for the American people. It has not been a fair situation for us because we pay far too much as you know. Secretary Stoltenberg said we were responsible — I was responsible — for getting over $130 billion extra from other countries that we protect, that weren’t paying. They were delinquent. So we’ll be talking about that. We’ll be talking about a lot of things.

We are leading the world now on the economy, and we have been almost since I became president. But we are substantially ahead of anybody else. Nobody’s even close. You know that very well. And I look forward to having a number of very, very productive days for our country. We’ll be working hard. Do you have a question?

[Inaudible question about Hong Kong and China deal]

Well it doesn’t make it better but we’ll see what happens.

[Inaudible question about Wednesday’s impeachment hearing]

So the Democrats, the radical-left Democrats, the do-nothing Democrats, decided when I’m going to NATO — this was set up a year ago — that when I’m going to NATO, that was the exact time. This is one of the most important journeys that we make as president. And for them to be doing this and saying this and putting an impeachment on the table, which is a hoax to start off with. If you notice, there was breaking news today.

The Ukrainian president came out and said very strongly that President Trump did absolutely nothing wrong. That should be case over. But he just came out a little while ago and said President Trump did absolutely nothing wrong and that should end everything. But it will never end it because they want to do what they want to do. They’re getting killed in their own districts. I think it’s going to be a tremendous boon for the Republicans.

Republicans have never, ever been so committed as they are right now and so United. So it’s really a great thing in some ways but in other ways it’s a disgrace. It’s a disgrace for our country.

[Inaudible question about Afghanistan trip]

I loved going to Afghanistan. It was great meeting with — as you know, we had some good meetings with a lot of people including Ghani, you know that, right? And he was terrific. It was great meeting with him. But my trip to Afghanistan was very successful. Now we’re going to London and it will be NATO, and we’re meeting with a lot of countries, and they’re going to have to do a little more burden-sharing.

QUESTION: Is a China trade deal still possible this year?

The Chinese are always negotiating … [unclear words] … we are, and frankly I could be other places that I could do all by myself and be even happier, and you understand what that means. But the Chinese want to make a deal. We’ll see what happens.

[Inaudible question about his Brazil tariff tweet]

Well, Brazil has really discounted — if you take a look at what’s happened with their currency, they’ve devalued their currency very substantially by 10 percent. Argentina also. And I gave them a big break on tariffs but now I’m taking that break off because it’s very unfair to our manufacturers and very unfair to our farmers. Our steel companies will be very happy, and our farmers will be very happy.

QUESTION: Why don’t you send one of your lawyers to represent your point of view before the House impeachment inquiry?

Because the whole thing is a hoax. Everybody knows it. All you have to do is look at the words of the Ukrainian president that he just issued, and you know it’s a hoax. It’s an absolute disgrace what they’re doing to our country. Thank you. Thank you very much.

[END]

Whenever we discover a financial analyst who understands the new dimension in U.S. economics (rare) it is worth revisiting them from time-to-time. Allianz chief economic adviser Mohamed El-Erian was one of the first MSM pundits to: (a) accept the disconnect between Wall Street and Main Street via de-globalization; and (b) begin to explain why that matters in the era of Trump.

El-Erian appeared this morning on Fox Business News to discuss President Trump’s re-imposition of steel and aluminum tariffs on Brazil and Argentina. Additionally El-Erian discusses trade tensions, market outlooks, consumer strength, recession fears, and the drag the rest of the world is placing in the U.S. economy.

.

The U.S. economy is strong; all the fundamentals are solid. However, the multinationals on Wall Street -invested overseas- are more exposed. There is nothing that China and the EU can do to stop the de-globalization process; and efforts to stimulate their economy, more quantitative easing (pumping money) while the global supply chains are being shifted, are futile… they need “structural reform.”  The multinationals are holding cash, waiting to see how it plays out.

The more a nations’ economy is dependent on exports, the more exposure they have to the inherent downsides of de-globalization. U.S. companies that are invested in these nations will naturally see diminishing returns on investment over time; some rapidly. President Trump’s trade policy is controlling the speed of that investment contraction.

The exposure of the multinationals keeps the stock market twitchy, yet the Main Street USA economy is thriving.

China’s economy is dependent on selling products to the U.S. in order to receive dollars. China takes those dollars and then purchases industrial goods from Europe. If China gets less dollars they purchase less from Europe. In essence both China and the EU are dependent on receiving dollars from a maintained trade imbalance. President Trump has begun resetting that imbalance… that is the current status of the global economic flux.

So what is the “structural reform” El-Erian is discussing?  This is where the EU needs to accept their economic model will no longer work if the global economy is changed.

Specifically:

♦The EU has benefited from their one-way tariff system against U.S. industrial goods.  They have also used non-tariff barriers to keep their position.  Now they need to change their perspective and embrace reciprocity in new trade agreements; or else Trump will use the strength of the U.S. market to pummel them with tariffs.

♦The EU has used their one-sided tariff and trade system as a key part of their overly generous social and worker benefits.  If they don’t change the level of social payments and begin to ‘structurally’ change their social benefits, again they will suffer when the one-sided financial benefits are removed.  They won’t be able to afford their social system without the one-sided trade benefit.

♦The EU has over-regulated their industrial base and attached themselves to burdensome regulatory standards; specifically worsened by their Paris climate treaty and changes within their energy programs.  The compliance standards in combination with the increased costs and less global income is a perfect storm for contracting economic growth.

These are the types of EU reforms that are needed in an era where President Trump has purposefully stalled the process of globalization and is resetting global supply chains.  The Trump policies that bring massive amounts of wealth back into the United States has created the dynamic where the EU must adapt or contract.

In essence Titan Trump is engaged in a process of: (a) repatriating wealth (trade policy); (b) blocking exfiltration (main street policy); (c) creating new and modern economic alliances based on reciprocity (bilateral deals); and (d) dismantling the post WWII Marshal plan of global trade and one-way tariffs (de-globalization).

Remember a few paragraphs above when we noted: “President Trump’s trade policy is controlling the speed of that global investment contraction”…. well, here’s an example:

Commerce Secretary Wilbur Ross appears on Fox Business to discuss the status of the U.S-China trade “negotiations” :::nudge-nudge, wink-wink::: and highlights the ‘phase-1’ fulcrum is China committing to the $50b Ag purchase without condition.  Secretary Ross also notes the December 15th date just happens to be “good timing” if the U.S. team is “forced” to put more tariffs on China.  LOL.

Additionally, Mr. Ross notes the challenge of a strong dollar as it relates to allied nations who are stimulating their own economy by sending us even cheaper stuff, ie. Brazil.

Oh my gosh.  First Lady Melania Trump introduces the 2019 Christmas Holiday decorations, and they are spectacular.

Visit the White House Advent Calendar HERE

Given the background activity last week between USTR Robert Lighthizer and Mexican Trade Minister Jesus Seade, and their agreement to set up a trilateral trade and labor dispute panel, President Trump now puts Speaker Pelosi in “check”….

(Tweet Link)

Having lost her labor defense shield (well played by Lighthizer/Seade), Pelosi is now either going to stand her party against the majority of Americans as President Trump pummels them over it… Or she puts the USMCA up for ratification (Trump wins) and it looks like she takes a knee….  Well played by President Trump.

.

There was a considerable buzz when the Rasmussen poll showed 34 percent support for President Trump amid black ‘likely voters’…. but the political media dismissed it.  Then came a more recent Emerson University poll showing 34.5% support from black voters.  With two polls showing a very similar result it was less likely to be an outlier…. But again, the political media dismissed them both.

However, a third poll, this time from NPR/PBS and Marist, confirms the prior two almost identically.  The latest Marist Poll shows 33% non-white support for President Trump:

(Poll Link – pdf)

To be clear these are just polls; however, quite remarkably the Marist poll was 1,224 voters with a 26 percent minority (black and Hispanic) share of the poll – so that’s a significant poll of minority voters.  If President Trump holds anywhere near this level of minority approval going into next years November election there is functionally and statistically  no-way for any Democrat presidential candidate to win in 2020.

Jumpin’ ju-ju bones…. Keep in mind as you review these numbers – U.S. consumer spending accounts for two-thirds of total U.S. GDP.  The sales numbers from Thanksgiving and Black Friday are exceptionally strong, showing confidence by consumers this holiday season.  This is not the ‘recession’ we were promised by pundits.

Continued strong wage growth amid all sectors of the U.S. workforce, particularly in non-supervisory positions, combined with low inflation and low energy costs, means consumers are spending out of ‘household cash flow’ which is considerably higher.

(Via CNBC) […] Spending online on Black Friday, as of 9 pm ET, hit a new record of $5.4 billion, up 22.3% from a year ago, according to data pulled from Adobe Analytics, which measures transactions from 80 of the top 100 U.S. online retailers.

This comes as foot traffic appeared to be lighter at shopping malls across the country on Friday, a day that traditionally has been reserved for people to line up outside of big-box retailers and department stores to score doorbuster deals.

Total spending online on Black Friday is still forecast by Adobe to hit $7.6 billion, which would make the day the second-biggest online sales day ever, after Cyber Monday in 2018, where $7.9 billion was spent.

However, Adobe is still expecting spending on Cyber Monday this year to hit an even bigger record $9.4 billion, an 18.9% jump from a year ago.

Shoppers meantime already spent $4.2 billion online on Thanksgiving Day, a 14.5% increase from last year and a record high, Adobe had said earlier in the day on Friday. While this marks the first year Thanksgiving spending surpassed $4 billion. (read more)

.

President Trump has said he is close to a decision that would designate Mexican drug cartels as officially recognized terrorist networks by the United States.

Remember, within the geopolitical dynamic that benefits all three North American countries, Mexico needs to start taking clear and decisive actions toward all levels of internal corruption if the ultimate economic objective of the USMCA is going to work.

Mexican President Lopez-Obrador is concerned this designation could lead to U.S. military engagement against the cartels.  The Democrats are concerned this designation would mean they could no longer accept campaign donations from the drug cartels; and into this mix of interests, U.S. Attorney Bill Barr is going to Mexico.

MEXICO CITY (Reuters) – Mexican President Andres Manuel Lopez Obrador said on Friday that his government was committed to fighting organized crime, seeking to dispel fears that the United States could take matters in its own hands in the fight against drug cartels.

U.S. President Donald Trump said earlier this week that he plans to designate the Mexican cartels as terrorist groups, a move aimed at disrupting their finances by imposing sanctions.

While this does not directly give the United States authority for military operations in Mexico, many Mexicans are nervous their northern neighbor could use it as a pretext for a unilateral invention.

Lopez Obrador reiterated he would not permit an armed foreign intervention a century after the country was last invaded, arguing that his government was already doing its part to battle criminal gangs.

“Armed foreigners cannot intervene in our territory,” he said, instead offering more cooperation with the United States after a series of recent clashes involving drug cartels, security forces and civilians highlighted the power of the gangs.

Lopez Obrador’s government says its priorities are disrupting the cartels’ cash flows and money-laundering opportunities, and halting illegal arms trafficking into Mexico from the United States.

The Mexican Finance Ministry’s financial intelligence unit has frozen the accounts of 771 people and 1,057 companies, with more than 5.3 billion pesos ($274 million) in total, a statement said.

Mexican officials have had several meetings with U.S. counterparts to discuss how to stop the arms flow, it said, adding that “satisfactory” progress has already been made.

Trump has repeatedly offered military assistance in the fight against drug gangs, which Lopez Obrador has always declined, even after the gangland massacre of a U.S.-Mexican family earlier this month.

U.S. Attorney General William Barr will visit Mexico next week to discuss security cooperation, Mexico’s Foreign Minister Marcelo Ebrard said. The U.S. embassy in Mexico did not respond to a request for comment. (read more)