The NAFTA sell-off is underway. Relax. No big deal. The “NAFTA Reality Correction” is approximately 5 to 7%. Multinationals hold greatest exposure. Everything is temporary.
(LINK To Story)Twists and turns as Wall Street paper economy shifts toward ultimate equilibrium with Main Street real economy. Real company P&L results (MAGA) will eventually replace speculative stock valuations. Volatility is the norm while navigating the space between.
President Trump and First-Lady Melania Trump travel together to Ohio today. Melania will be visiting Cincinnati Children’s Hospital while the president will be delivering remarks on tax reform. Anticipated start time 2:30pm EST
UPDATE: Video Added
First, the essential problem with NAFTA was an evolution over time. In its current form NAFTA became an exploited doorway into the coveted U.S. market. Asian economic interests, large multinational corporations, invested in Mexico and Canada as a way to work around any direct trade deals with the U.S.
By shipping parts to Mexico and/or Canada; and by deploying satellite manufacturing and assembly facilities in Canada and/or Mexico; China, Asia and to a lesser extent EU corporations exploited a loophole. Through a process of building, assembling or manufacturing their products in Mexico/Canada those foreign corporations can skirt U.S. trade tariffs and direct U.S. trade agreements. The finished foreign products entered the U.S. under NAFTA rules.
Why deal with the U.S. when you can just deal with Mexico, and use NAFTA rules to ship your product directly into the U.S. market?
This exploitative approach, a backdoor to the U.S. market, was the primary reason for massive foreign investment in Canada and Mexico; it was also the primary reason why candidate Donald Trump, now President Donald Trump, wanted to shut down that loophole and renegotiate NAFTA.
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Oh dear, Prime Minister Rainbow Sparkle-Socks is issuing threats now.
“We aren’t going to take any old deal,” Trudeau said Friday at a town hall in Nanaimo, British Columbia. “Canada is willing to walk away from Nafta if the United States proposes a bad deal.
We won’t be pushed around.” (link)
The backdrop is important context here. Prime Minister Twinkles has been watching Trump, Ross, Mnuchin and Lighthizer closely. Two months ago Twinkles attempted to launch economic leverage by entering direct trade discussions with China; but there’s a problem – Twinkles actually believes Beijing is ‘playful panda’. PM Rainbow-brite doesn’t grasp that Playful Panda is a mask. [Wrong place for leverage.]
Trudeau is willing to open his door to Chairman Xi without realizing once inside Beijing will hold open the door for arriving goods, and shuttle out the Canadian manufacturers. Attachment to China is a one-way proposition; and China only indulged Canada from the context of using the Canadian NAFTA door, as a tariff workaround to gain entry to the U.S. market.
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With the new year comes more Main Street winning; and the distinction between Wall Street’s economy and Main Street’s economy becomes stunningly clear.
The January jobs report showed a gain of 200,000 U.S. jobs, and more importantly, a 2.9% year-over-year growth in wages. –SOURCE– [Biggest wage rate jump since the phoney trillion stimulus-funded growth mid-2009.] We continue to remind of our two-year prediction that stunning wage growth will evidence in Q2 of 2018 (April-July)… today’s report is only the preview of that wage growth cycle.
Construction reported by the biggest gain by sector with 36,000. Bars and restaurants added 31,000 and health care was up 21,000. Manufacturing also showed a gain of 15,000 and durable goods-related industries added 18,000.
“Perhaps the biggest positive surprise on hiring is the continued surge for the goods-producing sector with manufacturing and construction leading the way,” said Mark Hamrick, Bankrate.com’s senior economic analyst. (link)
It can be a little confusing to listen to business or economic news analysts discussing the current state of the economy. They are all generally positive, but the inherent delivery of their forecasts is cast against the backdrop of their experience. Almost no-one, currently in the business of economic analysis, has experience, life skills, analytical training or educational understanding based on anything other than a Wall Street economic outlook.
Business Schools stopped teaching the principles of Main Street economics forty years ago. All modern analytical tools, and the data-systems therein, were structurally built upon an economic theory that establishes Key Performance Indexes based on Wall Street economic models. Titans of industry were replaced by fast-talkers pushing paper.
The paper economy and the monetary policy therein, has been the underlying architecture of economic analysis for decades. Within this process Main Street U.S.A., was assigned the role of a “service driven” economy. Institutionally everyone accepted this reality. Thus, those same voices are conflicted and cannot reconcile today’s economic shifts.
The Atlanta Federal Reserve is now estimating the potential growth for the first quarter of this year at 5.4%. This is a stunningly high projection when historic assumptions are factored. However, in the new MAGAnomic economy, it’s high, but not out of line.
The Main Street economic engine is roaring back to life. Real consumer spending jumped from 3.1 percent to 4 percent in the latest quarter. Consumer spending is approximately two-thirds of our GDP. However, the real key figure is ‘investment”. Private fixed-investment growth surged from 5.2 percent to 9.2 percent, that’s where the growth projections should be focused. Trump’s MAGAnomic policies are driving investment in the U.S. economic base. The current growth in private investment has doubled.
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Earlier today President Donald Trump delivered remarks during the House and Senate GOP conference in White Sulpher Springs, West Virginia.
The presidential message was simple MAGA (Making America Great Again), and the remarks delivered by the President solidify, and represent, an institutional shift of the Republican party apparatus to reflect new values -within a new era- as highlighted by the policies and perspectives of President Trump.
The President has shifted the GOP toward the People’s Party. After a year of policy implementation, the modern era GOP is is POTUS Trump’s party now.
Commerce Secretary Wilbur Ross appears on CNBC to discuss ongoing trade initiatives including NAFTA, China and the more broad Asia background. Additionally, Wilburine discusses growth in GDP and anticipated economic enhancements from the tax cut legislation.
President Donald J Trump has released the following video as a recap of the 2018 State of Our Union. Our union is strong because of the people within it.
NAFTA renegotiation round six ended yesterday in Canada will no substantive progress on the most contentious trade issues. One negotiation chapter on corruption was closed, but there was little to no agreement on much else.
Each of the primary Trade Representatives gave a closing statement at the conclusion of Round #6. U.S.T.R. Lighthizer blasted Canada for attempting to inject schemes, fraud and deceptive dealing within the negotiations. Princess Rainbow Sparkles from Canada tried to pretend the Canadian proposal was realistic. It was all awkward. Hopefully President Trump will soon get us out of this nonsense. Lighthizer Transcript below video: