President Trump is executing one of the most brilliant geopolitical economic resets in the history of global trade. It really is stunningly remarkable how President Trump has controlled the entire landscape. The consequential phase now begins.

It is fascinating how the financial pundits didn’t see this coming. Perhaps one of the best indicators of where things are today comes from this quote within the South China Post:

“The Administration’s Section 301 tariffs and China’s retaliatory tariffs will now further disrupt – or even break – many thousands of supply chains in both countries.”

[Nelson Dong, a senior partner at Dorsey & Whitney]

The quote by Nelson Dong is stated *as if* shifting/breaking supply chains is a flaw in the approach. It’s not. Exactly the opposite is true; this is a feature of the strategic reset.  A specific and purposeful feature designed by President Trump.

What Dong is predicting is the deconstruction of “one-belt, one-road”.

As President Trump highlighted today, over time (and it won’t take long) there will be an exodus of multinational manufacturing away from China.  Corporations will shift their purchase agreements, manufacturing and assembly plans to ASEAN countries outside the investment ‘risk zone’ that is now China.

Notice some of the nuance (specific references) within President Trump’s tweets. Japan, Vietnam (President Trang Dai Quang), South Korea (KORUS), Philippines and India are positioned to pick-up business.

To counteract the predictable exodus the Chinese state-run enterprises (and banks) will offer incentives to retain the corporate manufacturing business. This process means China, in essence, subsidizes the tariffs:

China has no choice if they want to retain their economic model. Remember, China’s economy is deep (manufacturing) but also narrow. They are dependent on raw materials, customers and market access. {Go Deep}

Additionally, President Trump announces today he has not made any decision on the next phase of 25% tariffs on the remaining $350 billion in Chinese products.  He doesn’t need to.  Merely the possibility of additional tariffs will pause any further investment; and some companies not currently impacted will make decisions to avoid the possibility of impact.

President Trump has walked Chairman Xi into a trap.  There is only downside for China in the current dynamic.  In an effort to avoid the downside, China will bleed cash to retain their economic position…. However, this can only last so long.

President Trump knows the strength of our U.S. position is that our economy is deep and wide.  The U.S. is a self-sustaining economy.  Almost 80% of our internal production and manufacturing is purchased within our own market.

In the big picture – economic strength is an outcome of the ability of a nation, any nation, to support itself first and foremost. If a nations’ economy is dependent on other nations to survive it is less strong than a nation whose economy is more independent.

The reality of China as a dependent economic model; heck, they cannot even feed themselves; puts them at greater risk from the effects of global economic contraction.  However, more importantly it puts China at risk from President Trump’s strategic use of geopolitical economic leverage to weaken their economy.  Trump is exploiting that risk.

As things go forward, China cannot sustain a long-term economic conflict with the U.S.  As each day passes the ASEAN alliance will see their investment grow as companies pull-out of China and invest in S-Korea, Vietnam, Philippines, India etc.  The GDP of our allies (including Mexico) grows, and the controlled GDP of China, as an adversary, shrinks.

(LA Times) GoPro Inc. will move most of its U.S.-bound camera production out of China by summer, becoming one of the first brand-name electronics makers to take such action to minimize the impact of the U.S.-China trade war.

“Today’s geopolitical business environment requires agility,” GoPro Chief Financial Officer Brian McGee said in a statement Monday. “We’re proactively addressing tariff concerns.” The company is still deciding where to put the manufacturing operation. (more)

All of this was entirely predictable.  President Trump and Ambassador Lighthizer told the world what to expect in 2017:

Da Nang, Vietnam – United States Trade Representative Robert Lighthizer today released the following statement in response to President Trump’s speech on trade between the United States and the Indo-Pacific region, at the Asia Pacific Economic Cooperation (APEC) CEO Summit (emphasis mine):

“The President spoke loud and clear: the era of trade compromised by massive state intervention, subsidies, closed markets and mercantilism is ending. Free, fair and reciprocal trade that leads to market outcomes and greater prosperity is on the horizon.

“President Trump understands that too many nations talk about free trade abroad, only to shield their economies behind tariff and non-tariff barriers at home. The United States will no longer allow these actions to continue, and we are willing to use our economic leverage to pursue truly fair and balanced trade.

“I look forward to doing as the President instructed me and to pursue policies that will improve the lives of our workers, farmers and ranchers.” (link)

Looking at the retaliatory response from China today; there’s lots of great news.  China is doing exactly what President Trump quietly predicted.  They are walking directly into his trap.  Trump is a friggin’ genius…. more on that coming.

This video from Steve Hilton last night was very well presented.

CTH was wondering how long it would take for President Trump to point out the brutally obvious…. Thanks to some advanced planning that everyone ignored, there are multiple trade alternatives to China:

Perhaps now people will reference President Trump’s long-game strategy which has been evident since his marathon Asia trip in November 2017.

Long before media pundits starting noticing/considering how serious President Trump was about structurally resetting the entire landscape of a U.S-China trade relationship,  President Trump quietly and methodically laid the groundwork with personal visits to: Prime Minister Shinzo Abe (Japan); President Moon Jae-in (S-Korea); President Tran Dai Quang (Vietnam); and President Rodrigo Duerte (Philippines).

Oh, how quickly the media forgot.

These were not visits as part of multi-national/multilateral G20 or G7 discussions.  The November 2017 tour of Asia was President Trump traveling to meet directly, face-to-face, one-on-one with the manufacturing heavyweights of Southeast Asia.

At every single stop he broadcast the intent of the visit: “We’re talking TRADE”!

These were unilateral meetings; and, in hindsight, clearly designed to structure the foundation of the current U.S-China trade conflict.  You might remember CTH calling this the “golden ticket tour“.   The tour culminated in the November 12-13, 2017, ASEAN summit; but the 10-day tour of Asia was entirely separate from the summit.

After the collapse of the U.S-China negotiations, there’s a reason why President Trump says: “we’re in no rush” to make a deal.

The reality is, though President Trump will continue to provide enticements for U.S. product manufacturing to return, there is an abundant ASEAN base to replace China.

This Art-of-The-Deal strategy is an aspect that almost no-one is paying attention to.

Of course, to consider this strategy the media would have to admit that President Trump has just executed one of the biggest global and geopolitical trade strategies of all time….

Nah, can’t be.  Wait, wha?

It’s clear from the responses of nations who were visited in November 2017 and 2018, that some anticipation toward this trade outcome was likely.

Now ask yourself, how much did those golden tickets just appreciate in value?

Additionally, remember that innocuous Ivanka Trump visit to India. Again, November 2017:

Strategery.

….. And the important new Trump terminology: “Indo-pacific”?

Da Nang, Vietnam – United States Trade Representative Robert Lighthizer today released the following statement in response to President Trump’s speech on trade between the United States and the Indo-Pacific region, at the Asia Pacific Economic Cooperation (APEC) CEO Summit (emphasis mine):

“The President spoke loud and clear: the era of trade compromised by massive state intervention, subsidies, closed markets and mercantilism is ending. Free, fair and reciprocal trade that leads to market outcomes and greater prosperity is on the horizon.

“President Trump understands that too many nations talk about free trade abroad, only to shield their economies behind tariff and non-tariff barriers at home. The United States will no longer allow these actions to continue, and we are willing to use our economic leverage to pursue truly fair and balanced trade.

“I look forward to doing as the President instructed me and to pursue policies that will improve the lives of our workers, farmers and ranchers.” (link)

…. Which led to a very unusual November 2018 “Trilateral” meeting….

An important trilateral meeting between President Trump, Prime Minister Abe and Prime Minister Modi which forms an important economic alliance for President Trump’s Indo-Pacific economic strategy.  As we noted when it happened: “this larger geopolitical strategy is the counterweight to China’s One-Belt/One-Road (red dragon) maneuver.”

[Transcript] Buenos Aires – PRESIDENT TRUMP: Thank you very much. It’s a great honor to be with Prime Minister Modi of India, and, as you know, Prime Minister Abe of Japan. And we just had a great meeting, and we’re having now what we call a “trilat.”

The relationships between our three countries is extremely — extremely good, extremely strong. I think, with India, maybe stronger than ever. And with Japan, I think, stronger than ever. We’re doing very well together. We’re doing a lot of trade together. We’re doing a lot of defense together, a lot of military purchases.

And we’re going to now have a little discussion between the three of us. So thank you very much.

Mr. Prime Minister.

PRIME MINISTER MODI: (As interpreted.) I feel this is a very good occasion for our three countries — countries which have shared values, democratic values — Japan, America, and India together. We will be playing a big role together for world peace, prosperity, and stability.

I’m also happy that both the countries are our strategic partners. Both of them are very good friends. And the three countries together — it is a matter of good fortune that we will work together.

When you look at the acronym of our three countries — Japan, America, and India — it is “JAI,” which, in Hindi or in India, in general, is for “success.” In a way, this “JAI” — “success,” this message — is a good message that goes out. It’s a good beginning.

And together, as I said earlier, we’ll be playing a very big role to work together for world peace, prosperity, and stability.

PRIME MINISTER ABE: (As interpreted.) I am very delighted to hold the first-ever Japan-U.S.-India trilateral summit meeting today. Japan, the U.S., and India share fundamental values and strategic interests. And I certainly hope to further reinforce our trilateral partnership and to continuing our close cooperation toward realizing a free and open Indo-Pacific.

By having three of us working together, we’ll bring more prosperity and more stability in the region, as well as globally.

PRESIDENT TRUMP: Thank you very much.

Thank you very much everybody. END – 2:43 P.M. AST

Wait…. so you’re saying this was the plan all along?

The talks with China began with Trump anticipating a pre-determined outcome?

You mean…  for almost two years, this was the design… and, like, everything was going in a totally different direction than was visible on the surface?

He…

The whole time?..

And….

No-one could see it?

Seriously?

YUP !

“Rucky Day, Rucky Day”

…”Complicated business folks,… Complicated business.”…

Boy howdy, Maria Bartiromo has the big picture of the 2015/2016 political weaponization of the intelligence apparatus exactly right.  In this interesting interview with Senate Judiciary Chairman Lindsey Graham both Bartriromo and Graham discuss the scale and scope of the 2015/2016 effort to stop Trump.

Interestingly, in a shift of tone, Senator Graham outlines what this surveillance operation means when contrast against the structures of our constitutional government.

Traditionally Lindsey Graham would bury any issue adverse to the institutions of the DC administrative state.  So there’s two possibilities here:  (A) Graham has fundamentally changed his outlook toward the dangers of the institutions within government; or, (B) Graham is doing a full ‘Castellanos‘ and embracing the controversy in order to control the risk to the administrative state with intent to protect it. [The latter is tradition]

The best way for DC to protect itself from the mob’s approach is to lead it themselves. The modern GOPe club has used this defense sending agents to the front of the grassroots anger in order to control the outcome. [Fast-n-Furious, IRS targeting, Benghazi, etc.]

♦When the common sense Tea Party movement formed in 2009 and 2010 it contained a monumentally frustrated grassroots electorate, and the scale of the movement caught the professional republican party off-guard.

♦When Donald Trump ran for the office of the presidency in 2015 and 2016 he essentially did the same thing; he disrupted the apparatus of the professional republican party.

The difference between those two examples is one was from the bottom up, and the second was from the top down. The commonality in the two forces resulted in the 2016 victory.

It took a few years for the heavily armored old guard of GOP to formulate a plan to retain their control. In the example of the Tea Party, the republican power structures moved in 2011 through 2014 to co-opt the vulgarian movement and impede their disruptive influence. Senate Majority Leader Mitch McConnell was at the forefront of those power moves. {Go Deep} and {Go Deep} The basic issue for the GOP was retention of power.

McConnell and crew tamped down the fire. A few years pass and the issues that spurred the Tea Party movement remained unresolved. In 2015 Donald Trump taps in to that exact same Tea Party frustration toward the control authority within one-half of the DC UniParty; again, the professional republican apparatus was disrupted.

From the first moment candidate Trump announced his platform positions; from the very first poll *after* those platform positions were announced; Donald Trump was leading the republican field in every-single-poll from August of 2015 through today. Center stage throughout 2015 and 2016 and President of the United States as an outcome therein.

Yes, the “movement” rebranded and now MAGA wins the presidency.

However, think back to the 2015 instructions from republican insider Alex Castellanos as he described how the RNC could eliminate the disruptive influence of Donald Trump:

[…] “The best way to do it is how Brutus killed Caesar. Get real close, snuggle up, and shiv him in the ribs”… (link)

For the past two years it’s been a never-ending game of whac-a-mole as each of the establishment minded embeds surfaces at different times. Within the dynamic, the one commonality within the internecine conflict inside the Trump administration is the establishment GOP -vs- Trump MAGA.

It’s like having an independent MAGA administration that contains establishment terror cells. Each cell acts independently, but each cell also acts based on a common objective: retain the UniParty.

When you think about the actual structure of the National Republican Party -vs- the state party machines; it’s enough to make you wonder if the mid-term outcome and lack of structural fight was not part of this dynamic. After all, “their” party was taken over by a new MAGA base and a new pragmatic political leader, Donald Trump.

The same UniParty dynamic is visible in the way the FBI/DOJ and aggregate intelligence community were weaponized against Donald Trump – with Democrats and Republicans participating in the unlawful processes. Now, in the downstream consequence phase, we see a UniParty defense approach to block Trump from revealing what happened.

I’m not sure people fully completely understand this dynamic within “spygate”. It was not a targeting operation by democrats; republicans were just as complicit. The ongoing goal to eliminate candidate and president Trump is *not* partisan.

I hope Senator Lindsey Graham has encountered something that has fundamentally changed his core sense of identity.  I truly hope that is the case.  However, in the modern era of DC politics I cannot reference an example where the outlook of the individual, the guiding principles, changed inside a politician.

Check the audience at 01:25 (look fast):

.

CTH has been in this modern-era conservative battle for a long time.  We have the GOPe battle scars, and a thousand points of betrayal to reference.

The genuine Tea-Party/MAGA movement has the same ideologies and objectives.  It is the ‘Monster Vote’.  It is also the most important political movement in our lifetime.  However, we will not promote ‘hope-porn’ and fantasy proclamations amid sudden appearances of political altruism.

We fight for DC change; we support our President, and we accept the battle-space as it exists; not as we wish it to be.

Proceed with cautious optimism…

National Economic Council Chairman Larry Kudlow appears on Fox News to debate Chris Wallace over the U.S-China trade reset.  As customary Wallace completely ignores the dynamic of communist China as a state run economy, and not a free market system; thus presenting the fictitious Wall Street position about bad tariffs.

Chairman Kudlow notes the bigger issues of President Trump confronting the enforcement mechanisms that must be in place if a trade agreement (FTA) between a free-market system (USA) and a state-run system (China) are going to work…

.

Washington, DC – U.S. Trade Representative Robert Lighthizer today released the following statement regarding additional action under Section 301 of the Trade Act of 1974:

“Earlier today, at the direction of the President, the United States increased the level of tariffs from 10 percent to 25 percent on approximately $200 billion worth of Chinese imports. The President also ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.”

The process for public notice and comment will be published shortly in the Federal Register. The details will be on the USTR website on Monday as we begin the process prior to a final decision on these tariffs.  (link)