There is an article from Bloomberg which finally concedes the obvious economic and trade dynamic within a U.S. -vs- China confrontation.  The media paradigm shift is based on new statements from Chinese Ministers admitting they cannot win a trade confrontation with U.S. President Trump.

The summary reason is simple, we have discussed it frequently:

China is a production-based economic model, they do not have the ability, or wealth, to consume their own durable goods production; they rely on exports.

The U.S. is a more balanced economy; we consume 80% of our own production.  We are self-sustaining, China is not.

Without a market to sell their products, the Chinese economy cannot survive.

Conversely, China has focused so intensely on durable-goods manufacturing, their consumable goods market (food) is dependent; they cannot feed themselves.  The U.S. can survive without exporting food, China cannot survive without importing food.  The U.S. economy can survive without importing durable goods; the Chinese economy cannot survive without exporting durable goods.  This is the unavoidable trade reality.  As a consequence President Trump has all the factual leverage.

In stunning, and carefully worded economic writings, Chinese academics and economic ministers are now talking about the inherent weakness of the Red Dragon policies:

(Bloomberg) Xi Jinping vowed to match Donald Trump blow for blow in any trade war. Now as one gets closer, some in Beijing are starting to openly wonder whether China is ready for the fight — an unusually direct challenge to the leadership of the world’s second-largest economy.

The essays have raised concerns that the ruling Communist Party underestimated the depth of anti-China sentiment in Washington and risked a premature showdown with the world’s sole superpower. Such views push the bounds of acceptable public debate in a nation where dissent can lead to censure or even jail time, and are particularly bold given Xi has amassed unrivaled control while leading China to a more assertive role on the world stage.

[…] “It seems like Chinese officials were mentally unprepared for the approaching trade friction or trade war,” Gao Shanwen, chief economist for Beijing-based Essence Securities Co., whose biggest shareholders include large state-owned enterprises, wrote in one widely circulated commentary.

[…]  The essays have been noticed by key officials. Gao’s piece was circulated last week among bureaucrats at the Commerce Ministry, which has been on the front lines of the trade dispute, said one agency official, who asked not to be named because the discussions were private.

Other officials expressed skepticism about the senior leadership’s strategy in discussions with Bloomberg News last week. One Finance Ministry official said the country had made a “major misjudgment” of the U.S.’s commitment to a long-term confrontation with China.

[…]  “People are going to look back at this year as the pivot point when Xi Jinping overreached and sparked an international backlash against the party and China’s development model on multiple fronts,” said Jude Blanchette, China practice lead at Crumpton Group in Arlington, Virginia, and a former Conference Board researcher in Beijing. “There can’t be a domestic backlash because most of what they spend their time doing is thinking about how to stop that.”  (read full article)

Plant your trees in another man’s orchard, and don’t be surprised if you end up paying for your own apples!

Again, the key dynamic: The U.S. economy can survive without importing durable goods; the Chinese economy cannot survive without exporting durable goods.  This is the unavoidable trade reality.

Now, frame that in a similar way for NAFTA.

The Canadian and Mexican economy (due to NAFTA) cannot survive without importing cheap durable goods from China to use in their assembly-based economies, and then trans-ship into the U.S market.   However, the U.S. economy can survive, it can actually expand BIGLY, without accepting trans-shipped assembled goods from Mexico and Canada

Put simply, without NAFTA, the assembly processes just moves INTO the U.S because the market *is* the United States.  We are the $20 trillion customer. We hold the leverage.

Example:

NOTE: “Donnelly said in his opening remarks that there was already a rise in product being diverted to Canada in recent years and signs of even more since the U.S. tariffs began this year.”..

This is evidence of multinationals exploiting the NAFTA loophole to avoid U.S. tariffs. This fatal flaw is at the very heart of the issue within the U.S. trade policy inside NAFTA.  As long as Mexico and Canada remain gateways for foreign good assembly and shipment into the U.S. there will never be a way for the U.S. to demand fair and reciprocal trade.

Canada knows their decades-long designed economic position as shipment/assembly trade-brokers is the central issue is the heart of the confrontation with USTR Lighthizer, Commerce Secretary Ross and President Trump.  As multinational corporations seek to avoid Trump tariffs they only exacerbate the issue.

If Canada and Mexico don’t try to stop their duplicitous NAFTA benefit scheme, they will end up with even bigger trade surpluses and become even bigger targets for President Trump.  In essence, the reason for Canada and Mexico being subject to even more encompassing Trump tariffs’ grows.

If Canada and Mexico do nothing to stop this influx; Trump will levy more than just steel and aluminum tariffs; he’ll likely tax their auto-sector.

As a consequence Canada moves do back-down Red Dragon:

The Canadian government is preparing new measures to prevent a potential flood of steel imports from global producers seeking to avoid U.S. tariffs, according to people familiar with the plans. The Canadian dollar weakened and shares in Stelco Holdings Inc. soared.

The measures are said to be a combination of quotas and tariffs aimed at certain countries including China, said the people, asking not to be identified because the matter isn’t public. The moves follow similar “safeguard” measures being considered by the European Union aimed at warding off steel that might otherwise have been sent to the U.S. It comes alongside Canadian counter-tariffs on U.S. steel, aluminum and other products set to kick in on July 1.  (read more)

The bottom line is U.S. market access is what all production countries need for their goods and the sustainability of their economies.  The same dependency dynamic applies to German autos and Angela Merkel.

Trump wants three key issues resolved with Germany and he’s holding all the leverage to achieve it.   1) He wants Germany to pay for more of NATO defense and quit shirking their own responsibilities.  2) He wants the EU protective trade restrictions removed; and 3) He wants full EU support for sanctions against Iran.

The way for Trump to achieve these three objectives against the EU is through the threats on the auto-sector (20% tariff); which mostly impact Germany.   Chancellor Angela Merkel is the EU:

EU Parliament

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Immediately before lunch with members from congress, President Trump delivers remarks in response to the Supreme Court removing a challenge to the administration travel restrictions and vetting process. In a 5-4 decision the Supreme Court upheld the president’s authority to restrict travel from countries who are not compliant with U.S. vetting requirements.

The Supreme Court has upheld President Trump travel restrictions and rejected the challenge to the Trump administration’s September 2017 travel ban. (full ruling pdf below). Response from the White House – Statement from the President Regarding Supreme Court Ruling:

Today’s Supreme Court ruling is a tremendous victory for the American People and the Constitution. The Supreme Court has upheld the clear authority of the President to defend the national security of the United States.

In this era of worldwide terrorism and extremist movements bent on harming innocent civilians, we must properly vet those coming into our country. This ruling is also a moment of profound vindication following months of hysterical commentary from the media and Democratic politicians who refuse to do what it takes to secure our border and our country.

As long as I am President, I will defend the sovereignty, safety, and security of the American People, and fight for an immigration system that serves the national interests of the United States and its citizens. Our country will always be safe, secure, and protected on my watch.  ~ President Donald Trump

https://www.scribd.com/embeds/382627070/content?start_page=1&view_mode=&access_key=key-K5Cu2mnU7gDcuAYFnuvA

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This has to be one of the single funniest French retorts in the history of commerce.  If President Trump follows through on auto tariffs, France will strike back.  Let that sink in.

Oh noes,… your next Peugeot, Citroen or Renault purchase might cost more.  D’oh.

PARIS (Reuters) – Europe will hit back if U.S. President Donald Trump follows through with a threat to slap import tariffs on European-made cars, France’s finance minister said on Monday. Trump escalated already burning trade tensions on Friday by threatening to hit all imports of cars assembled in the European Union (EU) with a 20 percent tariff.   (more)

The EU is the most protectionist trade bloc in the world.  The German auto-sector is the most protected trade sector inside the EU.  The hypocrisy is silly.

The EU, Germany specifically, needs access to the U.S. market to survive.  Angela Merkel has already conceded this point in the EU concessionary position to abandon all auto tariffs; in exchange for removal of Steel and Aluminum tariffs.

The only reason Merkel was so quick to the trigger is because without access to the U.S. market, the German economy begins the contraction cycle currently being experienced by Canada.   It’s the same reason why Germany abandoned the Paris Climate Treaty within weeks of the official U.S. withdrawal.

President Trump doesn’t want to necessarily tax German auto imports, but he is more than willing to use the tariff hammer to crack the protectionism within the EU market.

[Harley Davidson] said on Monday it would move production of motorcycles shipped to the EU from the United States to its international facilities and forecast the retaliatory tariffs would cost the company $90-100 million a year.

Reacting to the news, Le Maire said: “Whatever allows jobs to be created in Europe goes in the right direction. We don’t want a trade war, but we will defend ourselves.” (link)

Note the hypocrisy.  EU trade positions to protect their jobs is “going in the right direction“, but Trump trade positions to protect U.S. jobs is, well, not ok?

Harley Davidson is doing what companies and manufacturers should do, build within the market they are selling to.   If the EU applied the same standard they cheer Harley Davidson for, Germany would immediately begin expanding auto production facilities inside the U.S.   See how that works.

Drop all restrictive trade barriers and no country can compete on an even playing field with the U.S.  We lead the world in innovation; we have lower energy costs, abundant raw materials; highest returns on investment; and with organic upward pressure on wages, we will once again achieve the worlds fastest growing skilled labor force.

CNBC – […] Fifty-four percent of Americans say the economy is good or excellent, the highest recorded by CNBC in the 10 years of the survey. Just 43 percent say the economy is fair or poor, the lowest in the history of the survey. Positive views on the economy have surged 20 points since the election. And for the first time, the percentage of Americans saying the economy is excellent outstrips the percent saying it is poor. Americans look for a strong 4 percent gain in their home values in the next year, equaling the highest percentage previously recorded in 2007.

The president’s economic approval numbers come with some support from Democrats, said Jay Campbell with Hart Research Associates, the Democratic pollster for the survey. “There is component of Democratic base that’s willing to acknowledge the improving economy and willing to give Trump a certain amount of credit for it,’’ Campbell said. “A large number still disapprove of Trump on the economy but 30 percent of Democrats is not nothing.”  (read more)

Tonight President Trump heads to West Columbia, South Carolina for a campaign event supporting Henry McMaster. President Trump’s remarks at the joint MAGA rally are anticipated for 7:00pm EDT.

Fox News Livestream Link – NBC Livestream Link – Alternate Livestream Link

Earlier today President Trump and First Lady Melania welcomed King Abdullah II bin Al-Hussein and Queen Rania Al Abdullah of Jordan back to the White House.  This is the second official visit of King Abdullah and Queen Raina.

In the background it is likely much of the executive conversation surrounds the current issues with Iran, the state of Syria, Israel and the Palestinian Authority as it pertains to regional stability overall and Jordan specifically.   In the quiet distance, and entirely overlooked by Western -mostly U.S. media, President Trump has been positioning the EU via economic leverage against Iranian influence.

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[Transcript] PRESIDENT TRUMP: Thank you very much. It’s a great honor to have the King and Queen of Jordan with us. They’re friends. We’ve known each other now for quite a while. Long before this.

But you have done an incredible job on the refugees and the camps and taking care of people. And I just want to say while our nations have a very good relationship, we now have a great relationship. But the job you do on a humanitarian basis is fantastic. And I would like to thank you very much.

KING ABDULLAH II: Thank you. And if, sir, I could thank you and the United States and the people of America for all the support you’ve given our country. If the rest of the world just took a little bit of your humility and your grace to help us, we’d be in a lot better position.

But if it wasn’t for the United States — just on behalf of myself and my people, thank you so much for all that you’ve done.

PRESIDENT TRUMP: Remember, he used the word “humility” with respect to me, so I am very happy with that word. That’s probably the nicest compliment I’ve been given in a long time.

No, the job you do is fantastic. And yes, we do — we spend a lot of money, but we spend a lot of money in a lot of places. And people don’t do the job that you do, so I want to thank you very much.

KING ABDULLAH II: Thank you, sir. Thank you.

PRESIDENT TRUMP: Okay. Thank you very much, everybody.

Q Mr. President, do you regret signing the executive order?

PRESIDENT TRUMP: No, no. The executive order was great. It was something that I felt we had to do. We want children staying together. The law has been this law for a long period of time. You would understand this better than most because of the great job you do in your country.

No, it was — there was a false story, fake news in the New York Times. Just the opposite: I wanted to sign that. In fact, I was saying yesterday, before I read this phony story in the New York Times, that I was very, very happy that I signed that.

And it also — it shows. You know, we’re all talking about humanity, whether it’s what you’re doing in Jordan or whether it’s what we’re doing here. The laws are obsolete. The laws are horrible having to do with the border, both in terms of security and in terms of taking care of people.

President Obama had a big problem. In fact, a lot of the pictures used they thought would be — I guess, I don’t know what you folks did. You used pictures from 2014. They were all taken during the Obama administration. But the Bush administration had the same. It’s the same laws. They’re a disaster. The laws have to be changed. And whether it’s North Korea or whether it’s so many different things like trade, we’re taking care of a lot of problems that should have been taken care of over the years.

Well, one of the highest on the list is immigration. And we have to change our laws. We have to make them sensible. They came in to see me last week; they said, “We’d like to hire 5,000 more judges.” Five thousand. You ever hear of thing like that? Judges. Well, we’re appointing 145 judges here, and everyone goes through this extreme vetting process. You’re talking about 5,000. Where do you find 5,000 people to be judges? And you know what it leads? It leads to graft. It leads to a lot of other things.

We want a system where, when people come in illegally, they have to go out. And a nice simple system that works. You know, Mexico holds people for four hours, for five hours, for two hours, and they’re gone. We have people for four, five, six years and they never leave. So we want to have a great immigration.

What we have is very simple. We want strong borders and we want no crime. Strong borders. We want no crime. The Democrats want open borders and they don’t care about crime, and they don’t care about our military. I care about our military. That’s what we want and that’s what we’re going to get. And we’re going to get it sooner than people think.

Thank you very much. Thank you everybody. Thank you. Thank you.

Thank you all very much.

Q What about the Middle East? Chances of peace better in the Middle East?

THE PRESIDENT: We’re doing very well in the Middle East. We’re doing very well in the Middle East, yes.

Thank you. Thank you very much.

Q When do you want to release the Middle East peace plan?

THE PRESIDENT: I can only say this — and His Majesty knows we’re doing very well in the Middle East. A lot of progress has been made in the Middle East. A lot. And it really started with the end of the horrible Iran deal. That deal was a disaster, and things are a lot different since we ended that. A lot different.

Thank you all very much.

END 2:14 P.M. EDT

Those who know how to notice the Trump Doctrine at work will clearly see a very familiar pattern amid the latest geopolitical strategy currently underway by President Trump.

The president is using economic leverage against the majority EU influence agents, vis-a-vis EU trade positioning within the auto-sector which directly targets Germany¹. The Trump Doctrine as currently deployed is structuring a two-fold win/win. Leveraging EU auto-sector trade tariffs will likely end up with Germany removing all trade restrictions.

The removal of a looming 20% trade tariff benefits the German auto-sector; secondarily it reaches the economic goal of the administration to remove all trade barriers, ie reciprocity. Win #1 (majority benefit EU, minority benefit U.S).

However, in exchange for that benefit President Trump will likely request full EU (France and Germany specifically) support toward renewed and increased sanctions against Iran. Win #2 (majority benefit U.S. foreign policy).

¹ What is particularly interesting about this approach, in this instance, is how President Trump actually created leverage from nothing.  The “threat of” the 20% reciprocal auto tariff is leverage.  The threat would not have as much predictive authority if the Steel and Aluminum tariff did not precede it.  The EU is now forced to accept that even when President Trump proposes something (previously under any other administration they would have ignored), under President Trump it *could* likely happen.  So they must arrange their affairs accordingly.

Whoopsie – During a debriefing session between Canadian Foreign Minister Chrystia Freeland, Canadian politicians and business leaders, the chief NAFTA negotiator for Canada Steve Verheul accidentally told the group, while cameras were rolling, there were no actual NAFTA negotiations taking place.

When a seemingly shocked participant then asked a follow-up question about how could Steve Verheul reconcile that admission against earlier statements about an upcoming  Memo of Understanding (MOU), Ms. Freeland quickly shut down the discussion -in french- until the cameras left the meeting.  [Watch Video Segment Here]

Council Question: “Do you still meet your counterparts? Do you still have committees that are working?  What is the status of the negotiations?

Steve Verheul: “We don’t have any active negotiations. I haven’t talked to them in a little while.”

Council Question: “Since, …since?”

Steve Verheul: “Two or three weeks. Um, I’ll have the odd conversation, but no real engagement, no real negotiation session.”

Council Question: “And when we hear that you were close to a kind of MOU [Memo of Understanding] what was the basis of that?”

Chrystia Freeland: awkward interruption in French. (watch below)

What became evident within the exchange is the Canadian government trying to hide the lack of NAFTA progress from concerned citizens inside Canada.  In essence, the Canadian government is lying to their citizens about the possibility of a NAFTA agreement.

The Canadian economy contracting.  Last month the Canadian economy dropped 31,000 full-time jobs.  Amid an economy one-tenth the size of the U.S, that would be a comparative single-month job loss of 310,000 in the United States.

By contrast the U.S. economy is firing an all cylinders as massive investment flows into America.  In the same month the Canadian economy dropped 31k FT jobs, the U.S. economy added over 223,000 new jobs.

Ms. Freeland and Justin from Canada are trying to keep their electorate from comprehending what is about to happen.  The video segment is a brief window into the collective desperation amid a central cast of left-wing economic characters who are focused on feelings and political sensibilities.

The accidental video snippet was also captured and tweeted:

Two words:…. “Wilbur Ross”

Seek first to understand.  During an assembly of Canadian left-spectrum pundits the U.S. and Canada relationship is the topic; the backdrop is the economic consequences, trade and NAFTA.   In this group the high-minded Canadians express their views, their wounded sensibilities, and yet simultaneously highlight an important strategic flaw.

Within their political frame-of-reference, they cannot fathom the tenuous nature of their dependency.  They think they are more important than they are. Their inability to accept the weakness of their economic position is based on their feelings. Pride is very dangerous in negotiations amid apex predators. If you are prideful you provide a strategic advantage for the opposition.  In negotiations, President Trump doesn’t care about ‘feelings’ or opinions toward his approach.

The Canadian economic position is ‘not to lose‘, the Trump position is to win.  There is a huge strategic difference within those two perspectives.

President Trump is hosting a roundtable MAGAnomic meeting in Las Vegas with business leaders and professionals.  The discussion centers around ongoing benefits from the tax reform initiative; the administration policy toward trade rebalancing; and the ongoing America-First investment and business development plans.

UPDATE: Video Added

Anticipated start time 4:20pm EDT:

WH Livestream Link – RSBN Livestream Link – Alternate Livestream Link