Within the German economy the auto-sector holds the largest political influence.  Because of this dynamic all German politicians kneel at the knee of the big industrial auto manufacturers.  It has been said that losing support from within the auto-sector is much worse on a German politician than losing support from party or parliament.

Because of this dynamic; and specifically because the German auto-sector is dependent on the United States as their biggest customer, President Trump holds leverage over German Chancellor Angela Merkel.  This makes Fraulein Merkel unhappy.

President Trump wants three EU issues resolved: 1) Germany to contribute the minimum 2% of GDP for their own NATO defense.  2) Germany/EU to support enhanced sanctions against Iran; and  3) President Trump wants all German/EU protectionist trade barriers and tariffs lowered or eliminated – and new trade deals negotiated.

To gain momentum on these initiatives, President Trump is using the economics of trade as leverage.  Trump has suggested a 20% tariff on all EU automobiles shipped into the U.S. [The same standard now likely proposed toward Canada]  The German auto-sector, and as a consequence the German economy, simply cannot survive without low cost access to the U.S. market, their biggest customer.

Immediately following the election (December 2016), President Trump warned BMW (and others) about opening a manufacturing plant in Mexico; Trump suggested such a decision might backfire.  BMW ignored the warning and contracted with Mexico for an auto plant with intentions to use NAFTA to bring the completed cars to market.

The plant is anticipated to be operational in 2019; however, it is now increasingly likely that NAFTA will be dissolved and President Trump is threatening a 20% auto-tariff to any imported cars.   Accordingly, despite the prior warning, BMW is now going bananas:

BMW was planning on using the NAFTA loophole to assemble EU auto parts in Mexico for duty-free transport into the U.S.   However, now there’s a likelihood the BMW sedans planned to be built in Mexico could be subject to U.S. tariffs and they cannot gain benefit from the NAFTA loophole.

BMW builds SUV’s in Spartanburg, South Carolina.  The reason they build them there is due to a 25% pre-Trump existing tariff on imported SUV’s.   It looks like BMW made a bad decision to build an car plant in Mexico; although their position as expressed within the Reuters article fails to mention this aspect at all.   Obviously they don’t mention the 2016 warning from President-Elect Trump either.  {{{snicker}}}

Meanwhile, President Trump just keeps applying more layers of winnamin leverage upon the desk of German Chancellor Angela Merkel:

Poland has offered to host a smaller contingent of U.S. forces; and Poland already fully meets their obligations to NATO defense spending.    Funny how that happens.

The Pentagon is analyzing the cost and impact of a large-scale withdrawal or transfer of American troops stationed in Germany, amid growing tensions between President Trump and German Chancellor Angela Merkel, according to people familiar with the work.

The effort follows Trump’s expression of interest in removing the troops, made during a meeting earlier this year with White House and military aides, U.S. officials said. Trump was said to have been taken aback by the size of the U.S. presence, which includes about 35,000 active-duty troops, and complained that other countries were not contributing fairly to joint security or paying enough to NATO.

Word of the assessment has alarmed European officials, who are scrambling to determine whether Trump actually intends to reposition U.S. forces or whether it is merely a negotiating tactic ahead of a NATO summit in Brussels, where Trump is again likely to criticize U.S. allies for what he deems insufficient defense spending.  (read more)

Anyone noticing a pattern?

Interestingly, two Canadians are able to connect the dots very easily.

Ezra Levant of Rebel Media and Manny Montenegrino, President & CEO Think Sharp Inc. discuss the dynamic and obvious comparisons and parallels.

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“Complicated business folks,… Complicated business”

Interesting how two different articles (Reuters HERE) and (CBC HERE) hit on the same issue; a call between Prime Minister Justin from Canada and U.S. President Trump.  According to both reports Justin from Canada reached out prior to the listing of the counter tariffs to the U.S. Steel and Aluminum duties.

BEDMINSTER, N.J./OTTAWA (Reuters) – U.S. President Donald Trump spoke with Canadian Prime Minister Justin Trudeau late on Friday to discuss trade and other economic issues, White House Press Secretary Sarah Sanders said on Saturday.

During the call, Trudeau told Trump that Canada had no choice but to announce reciprocal countermeasures to the steel and aluminum tariffs, according to a separate statement issued by Canada late on Friday. The two leaders agreed to stay in close touch on a way forward, the statement added.

Separately, Trudeau also spoke with Mexican President Enrique Pena Nieto on Friday to discuss the Mexican elections on July 1. The two leaders also discussed the North American Free Trade (NAFTA) negotiations and agreed to continue working toward a mutually beneficial outcome.  (read more)

Note anything missing?

There’s no mention of any response, in any way, not even inferred, from President Trump.  The report is uni-directional….  Justin is doing all the talking…. Meaning POTUS Trump is going silent and deep; which is his exact historic pattern.  Not good news for Justin and Chrystia from Canada.

Portends a seismic hammer-blow on the next phase…. auto-tariffs.

Here’s the CBC version:

(Via CBC) Two days before Canada’s retaliatory tariffs against U.S. steel, aluminum and some consumer goods are set to take effect, Prime Minister Justin Trudeau spoke with U.S. President Donald Trump by phone explaining Canada had no choice but to act.

According to a readout of the call provided by the Prime Minister’s Office, Trudeau began the conversation by expressing his condolences for the victims of the mass shooting at an Annapolis, Maryland, newspaper before going on to talk about trade.

“As he has said in past conversations and in public,” the readout said. “The Prime Minister conveyed that Canada has had no choice but to announce reciprocal countermeasures to the steel and aluminum tariffs that the United States imposed on June 1, 2018.”

Trudeau also spoke by phone with President Enrique Peña Nieto of Mexico. Trudeau updated the president on Canada’s tariffs on U.S. imports, according to the readout, which also said the two leaders discussed “the North American Free Trade negotiations and agreed to continue working toward a mutually beneficial outcome.”  (read more)

Same/Same…. only worse… note the absence of something like ‘President Trump thanked the Prime Minister for’; or “the two leaders plan to”… etc. blah, blah, blah.

Nothing.

Silence.

What you do speaks so loudly I cannot hear a word you’re saying.

Paris Treaty discussions… same/same.

Silence.

TPP discussions…. same/same.

Silence.

Now NAFTA… same/same.

Silence.

The absence of words in Trump-speak-strategy is a much more predictive indicator than a policy outline or interview.  If Trump is talking, you’ve got a chance for a deal.  When Trump stops talking, it’s over.  Trump doesn’t bluff.  Further words become annoying.  Wastes time.  POTUS Trump lets people read into the absence of words.  When Donald Trump goes silent, POTUS Trump already knows what he is going to do, the rest is just timing of it….

Silence is deadly in negotiations with Trump.  You would think people would catch on to that by now; however, thankfully they never do.

The Art of the Deal:  Dishonesty.  The fatal flaw.

Take trust out of the deal, and no deal.

Now, take the worst case scenario you could ever fathom for Justin from Canada; and the Canadian economy….

Double it….

Double it again….

You still haven’t scratched the surface of how apex predators relish delivering consequences…. and how ‘killers’ is not just a campaign adjective; it’s also a policy verb.

Consider your business affairs accordingly.

Trump doesn’t bluff.  Deal, or no deal; there’s no room to care about feelings.

Retiring ICE Director Thomas Homan had a message for congress, politicians and media on his last day in office.   Namely all need to get their facts straight.

There has been a great deal of speculation about who President Trump will nominate to replace retiring Supreme Court Justice Anthony Kennedy.  Earlier today President Trump revealed he will announce the nominee on Monday July 9th:

Democrats and far-left activists have vowed to do everything possible to stop any nominee from being confirmed.  All political opposition is beyond bananas on this issue.

President Trump has stated his intention to make the nominee from a previously compiled list, with a few additions.  The potential nominees are:

• Amy Coney Barrett of Indiana, U.S. Court of Appeals for the Seventh Circuit
• Keith Blackwell of Georgia, Supreme Court of Georgia
• Charles Canady of Florida, Supreme Court of Florida
• Steven Colloton of Iowa, U.S. Court of Appeals for the Eighth Circuit
• Allison Eid of Colorado, U.S. Court of Appeals for the Tenth Circuit
• Britt Grant of Georgia, Supreme Court of Georgia
• Raymond Gruender of Missouri, U.S. Court of Appeals for the Eighth Circuit
• Thomas Hardiman of Pennsylvania, U.S. Court of Appeals for the Third Circuit
• Brett Kavanaugh of Maryland, U.S. Court of Appeals for the District of Columbia Circuit
• Raymond Kethledge of Michigan, U.S. Court of Appeals for the Sixth Circuit
• Joan Larsen of Michigan, U.S. Court of Appeals for the Sixth Circuit
• Mike Lee of Utah, United States Senator
• Thomas Lee of Utah, Supreme Court of Utah
• Edward Mansfield of Iowa, Supreme Court of Iowa
• Federico Moreno of Florida, U.S. District Court for the Southern District of Florida
• Kevin Newsom of Alabama, U.S. Court of Appeals for the Eleventh Circuit
• William Pryor of Alabama, U.S. Court of Appeals for the Eleventh Circuit
• Margaret Ryan of Virginia, U.S. Court of Appeals for the Armed Forces
• David Stras of Minnesota, U.S. Court of Appeals for the Eighth Circuit
• Diane Sykes of Wisconsin, U.S. Court of Appeals for the Seventh Circuit
• Amul Thapar of Kentucky, U.S. Court of Appeals for the Sixth Circuit
• Timothy Tymkovich of Colorado, U.S. Court of Appeals for the Tenth Circuit
• Robert Young of Michigan, Supreme Court of Michigan (Ret.)
• Don Willett of Texas, Supreme Court of Texas
• Patrick Wyrick of Oklahoma, Supreme Court of Oklahoma

SOURCE

My only hunch is that the nominee will be female.

With new spark plugs, Kuddles was thrilled to discuss the latest economic key performance indicators.  National Economic Council Chairman Larry Kudlow talks about the health and growth of the U.S. economy with Maria Bartiromo.

Today Canada released an updated list of retaliatory tariffs designed as countermeasures to the U.S. Steel and Aluminum tariffs [SEE HERE] which will begin Sunday, July 1st.

Additionally, Foreign Minister Chrystia Freeland, Innovation Minister Navdeep Bains, and Employment and Labour Minister Patty Hajdu, announced they would initiate an emergency program to use Canadian taxes compensate workers, expand unemployment benefits, and subsidize impacted industry.  Yes, in a transparent display of political ideology (throwing capitalism directly out the window), Canada doubles-down on centralized government subsidies to offset market impacts.   Brilliant ‘eh!

Chrystia Freeland made the announcement on the floor of a Hamilton steel factory Friday. In a rare backdrop, Ms. Freeland actually entered a factory with machines and things, to deliver the carefully choreographed political message (video below – watch the last minute to understand).

Team U.S.A. have applied tariffs to Canadian softwood lumber, Steel and Aluminum as Canada refuses to negotiate new terms for NAFTA where North American products are prioritized.  Canada demands the ability to continue importing Asian, mostly Chinese, products for their assembly-based market.

With the latest counter-move by Justin and Chrystia from Canada, it is increasingly likely President Trump will levy a 20% tariff on imported Canadian automobiles.  Last month (May) the Canadian economy dropped over 31,000 Full-Time jobs.

Here’s the full video of the announcement.  The Q&A Session starts at 16:40 and is really the only part that matters:

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Canada has put themselves into a tough spot.  The current Canadian government cannot support any NAFTA agreement that requires the actual manufacturing of goods in North America. Both Canada and Mexico have structured their economies to import goods from Asia, mostly China, and use their access into the U.S. market to trans-ship their final goods.

Chinese central government, as well as Asian and EU corporations, pay Canada and Mexico (through trade agreements) for U.S. market access.  Essentially Mexico and Canada are trade brokers or pass-throughs.  Neither Canada nor Mexico have the actual raw material, infrastructure or processes in place to manufacture goods in North America; they both generally only assemble parts made overseas into finished products.

Because of this structural flaw, the Canadian government is doubling down on their intent to keep the status quo in place. However, this approach also makes it a futile exercise to continue talking about renegotiating NAFTA.

Mexican elections are being held July 1st (Sunday), it is yet to be determined if Andres Manuel Lopez Obrador (AM LO), Mexico’s virtually guaranteed-to-win next president, will support a Mexican withdrawal from NAFTA.

Earlier today President Trump delivered remarks celebrating the six month anniversary of the U.S. Tax Cuts and Jobs Act.   Today is also the last business day of the second quarter.

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Long time CTH readers might note in 2015 when we first saw candidate Trump’s economic policy initiatives, we began outlining the sequential economic possibilities if President Trump won. So far, all is going according to plan – STUNNINGLY According To Plan.  Seriously, go back and look –FEBRUARY 2016– two-and-a-half years ago.

The possibilities were obvious.  As a result we predicted repeatedly that Q2 of 2018 would be the beginning of the largest period of U.S. GDP and wage growth in the past 30 years.  Q2 2018 ends tomorrow and the results of Q2 will be announced in the next few weeks.  Everything is happening in a logical sequence as a result of Trump’s MAGAnomic plans.

We are now in the third MAGAnomic phase where all international trade agreements are being structured around ‘reciprocity’.  Eventually, if President Trump can continue the pressure, all global trade barriers and tariffs will be removed.

This is history.

We are living in most consequential economic period in modern history.

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On the six-month anniversary of the tax cut/tax reform legislation passage, Treasury Secretary Steven Mnuchin sits down with Maria Bartiromo to discuss the current status of all MAGAnomic initiatives.

Tomorrow is also the last day of the second quarter (April, May June), and today is the last business day of Fiscal Year 2018 third quarter (fiscal years start Oct. 1st).

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Segment two below. Ivanka Trump joins Secretary Mnuchin to discuss results.

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In segment three. NEC Chairman Larry Kudlow joins Secretary Mnuchin.

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Following the groundbreaking ceremony, President Trump delivered remarks to a Wisconsin audience to commemorate the opening of the massive high-tech industrial complex.