This is one of those reports that seems small and appears way over there on the periphery. However, if MAGAnomics and trade are important to you, this story is very much worth paying attention to.

As CTH shared last week the White House reached out to EU auto executives to request a meeting.  There is a VERY STRONG likelihood the message within this meeting will surround potential tariffs, and questions from team Trump about the intents of EU (mostly German) automakers against the backdrop of the USMCA.

The potential for auto-tariffs terrifies the EU (specifically Germany), because most of their profits from within the industry come from access to the U.S. market.   Few major markets in the world can afford the scale of automobile purchases as a wealthy U.S.A. does.  The profit margins are much smaller in all other countries.  Without the U.S. market, these auto companies would be in deep financial trouble.  Enter Trump’s leverage:

BERLIN (Reuters) – Top executives from German carmakers Volkswagen, BMW and Daimler are finalizing plans for a White House meeting on trade policy next week, German and U.S. officials said on Thursday.

Officials from the carmakers, asking not to be named, said the meeting was tentatively set for Tuesday, and would include VW Chief Executive Herbert Diess, Daimler CEO Dieter Zetsche and BMW production chief Oliver Zipse.

President Donald Trump has been harshly critical of German automakers and what he sees as an unfair trade imbalance on autos.

He has threatened for months to impose tariffs on vehicles assembled in the EU, a move that could upend the industry’s business model for selling cars in the United States.

However, he has refrained from such a measure while Washington and Brussels undertake talks to cut other trade barriers.

The CEOs plan to make clear they cannot negotiate on behalf of the EU, people close to the matter said last week. (read more)

I love that last line: “CEOs plan to make clear they cannot negotiate on behalf of the EU“, that’s funny; and the best part is Trump knows exactly the silliness of that statement.  Whatever the German auto-sector demands, the EU delivers – P.E.R.I.O.D.

But seriously, the primary question for the U.S. team revolves around seeking to understand how the EU companies will comply with the new U.S-Mexico-Canada  (USMCA) trade pact to avoid the import tariffs.  [Angela Merkel is irrelevant]

The answer is more important to Mexico and the U.S. because no-one is foolish enough to build a manufacturing plant in the left-wing North known as Canada.  So POTUS wants to know how the EU is going to comply with the new 75% origination rules within the U.S. and Mexico agreement.

The outcome of the EU answer(s) will likely determine the scale of tariff that President Trump is considering on the entire industry.  President Trump is actually constructing a 10/25-year economic ‘business plan‘ for the entire country.

Stay tuned…. this is the fun stuff!

President Trump delivers remarks to the media prior to departing the White House en route to Argentina for the G20 summit.  The president remarks about the plea agreement by Michael Cohen to special counsel Robert Mueller.

The New York Post has an article today, surrounding an interview with President Trump, where the topic of declassifying the evidence behind ‘Spygate’ surfaced.

To say there is a massive schism amid supporters of the President on this issue would be an understatement.

On one hand the declassification would potentially, and finally, outline the scale of the FBI/DOJ politicization and weaponization of intelligence against the President – exposing the entire ‘spygate’ scandal in all its glory.  On the other hand that potential is also seen as political leverage against the schemes of DC and all the characters.

Here’s the quotes that matter:

(New York Post) […]  “If they go down the presidential harassment track, if they want go and harass the president and the administration, I think that would be the best thing that would happen to me. I’m a counter-puncher and I will hit them so hard they’d never been hit like that.”

“I think that would help my campaign. If they want to play tough, I will do it. They will see how devastating those pages are.”

“It’s much more powerful if I do it then,” Trump said, “because if we had done it already, it would already be yesterday’s news.”

Trump added Wednesday that his lawyer Emmet Flood thought it would be better politically to wait.

“He didn’t want me to do it yet, because I can save it,” Trump said.

The president also pushed back on the notion that all the Justice Department documents should eventually be released for the sake of transparency.

“Some things maybe the public shouldn’t see because they are so bad,” Trump said, making clear it wasn’t damaging to him, but to others. “Maybe it’s better that the public not see what’s been going on with this country.”  (more)

From the CTH perspective this interview essentially solidifies something we have been outlining for several months: President Trump is applying the consideration of leverage to his decision-making.

Many have refused to accept “leverage” was part of President Trump’s primary determination and decision-making.  CTH has been heavily criticized for even presenting such analysis.  Hopefully, this interview puts an end to those criticisms.

Leverage is the primary filter here; and it’s not just leverage against domestic political enemies.

President Trump has fifty years of business skills in various predatory and adversarial financial deals.  Leverage, or the ability to force an opponent to take an action that benefits your position, is the most valuable weapon in deals; business or politics the same is true.

This type of leverage is extremely valuable and it’s not just against Democrats, Obama and the Never Trump alliance (ie. Sea Island group).  President Trump is in a fight against multiple enemies from all sides, across all aisles and political alignments.  The declassification leverage is like an atomic hammer that strikes everyone in a 360° blast radius.

And it is not limited to domestic adversaries.  This leverage has a geopolitical value.

Think about geopolitical trade deals with Five-Eyes allies.  Think about how President Trump may need an ally to take a position adverse to their preferred interests. The potential for declassification of intelligence documents showing complicit corruption within the U.K. and Australia could destroy politicians external to the U.S.

Think about an ally being asked to take a position on China (trade), Iran (sanctions), Russia (energy), etc.  Movement on any of these geopolitical issues, and many more, can be tilted -in part- based on the threat of sunlight or declassification. Leverage is a tool.

Getting particular democrats to support the USMCA; what’s that worth?

Getting a southern border wall and sensible immigration law; what’s that worth?

What does President Trump value?  What is important to him?

What part of the transactional relationship can be enhanced by leverage?   Pro-tip: it’s not personal; it is not leverage to benefit Trump personally; he doesn’t care about that shallow stuff… his view of the horizon is much longer, much further; much more consequential.

It annoys the heck out of many people, me included, that Donald Trump is willing to absorb so much inbound fire, unnecessarily; which, by extension, means that his supporters are forced to absorb so much inbound and unnecessary fire; but he is.

What is President Trump’s primary objective?   Save the U.S.A. through economics.

Economic security is national security.

I think much of our angst is because we look too short-term; and the media does a great job of convincing us President Trump is selfish.  Perhaps they are correct. Perhaps I’m wrong; but I see this leverage issue as something Trump views as important – obviously; or he wouldn’t approach it that way.

Would President Trump trade a $500 billion per year positive benefit to the U.S. economy in exchange for never outlining the fraud against him?

Would President Trump accept new jobs for a million Americans in exchange for never outlining the 2016 fraud against him?

Yeah.

He would.

Without question.

And he wouldn’t care if it meant he could never win in 2020.

He ain’t a politician.

Piss you off?

Probably.

That’s Trump.

The issue is basic to the construct of the USMCA (NAFTA replacement).

BMW made a multi-billion-dollar investment in Mexico in anticipation of exploiting the NAFTA loophole.  President Trump has closed the loophole.  The new USMCA agreement requires 75% of automobile parts made in North America; and 45% must come from plants with minimum labor costs ($16/hr), or face tariffs upon export to the U.S.

As a result BMW is now considering opening those higher-wage component supply operations in the U.S.

LOS ANGELES (Reuters) – BMW (BMWG.DE) is considering a second U.S. manufacturing plant that could produce engines and transmissions, Chief Executive Harald Krueger said on Tuesday, shortly after a report that U.S. President Donald Trump would impose tariffs on imported cars from next week

[…] BMW is considering changes to U.S. operations as sales in the region grow, Krueger said. BMW has a U.S. vehicle assembly plant, in South Carolina, is planning to open a Mexico factory next year, and is considering changes to its current scheme of importing engines and transmissions.

“We’re at the range where you could think about a second location” in the United States, he said, adding that such a factory would provide a natural currency hedge. (more)

Oddly enough we predicted this likely move in August: […]  At the 30,000 ft level, the USMCA deal positions Mexico to retain their current multinational investments; and through a series of sector-by-sector standards on origination the deal simultaneously closes the fatal NAFTA loophole.  The agreement makes an economic manufacturing partnership between the U.S. and Mexico; and for assembly products third parties will have to produce parts and origination material within the U.S. and Mexico.

U.S.T.R. Lighthizer put some details forward:

♦The NAFTA Loophole closure is explained in Summary Form HERE; with emphasis on the Auto-Sector.  The key is a 75% part origination level for auto-assembly; and a 40-45% level for parts with a minimum $16/hr wage rate.  The source-origination rate (75%) is even higher than all previously forecast negotiation results.

Example of downstream consequences/benefits:  German auto-maker BMW recently built a $2 billion assembly plant in Mexico (almost complete).  Most of their core parts were coming from the EU (steel/aluminum casting components) and/or Asia (electronics).  Now the assembly plant will have to source 75% of the auto-parts from the U.S. and Mexico, with 45% of those parts from facilities paying $16/hr.  Result: BMW will need to modify their supply chain and build auto parts in the U.S. and Mexico.

(USMCA LINK to Article 32 pdf)

Prior to the USMCA both Canada and Mexico structured key parts of their independent trade agreements to take advantage of their unique access to the U.S. market.  Mexico and Canada generate billions in economic activity through exploiting the NAFTA loophole.  China, Asia (writ large), and the EU enter into trade agreements with Mexico and Canada as back-doors into the U.S. market.  So long as corporations can avoid U.S. tariffs by going through Canada and Mexico they would continue to exploit this approach.

The NAFTA loophole was/is a zero-sum issue: Either Can/Mex agree to give veto authority to the U.S. –OR– President Trump had no option to exit NAFTA completely. Well, Canada and Mexico agreed to the former, so there was no need for the latter.

Secretary of State Mike Pompeo delivers remarks to the media following a briefing of senators on Capitol Hill.  The media was primarily focused on the issues surrounding the murder of Kashoggi; and the opportunity to create a wedge issue for the Trump administration.

Many Decepticon senators, benefactors from Qatari (Muslim Brotherhood) financing against the policy of Saudi Arabia, are aligned with left-wing opposition to the President on this issue. Instability in the middle-east is a very lucrative business model for personal financial gain.