The latest set of statistics from the Bureau of Economic Analysis (BEA) shows all of the professional pundit claims of higher prices on imported goods due to Trump tariffs are simply disconnected from reality.  In actuality the year-over-year prices of import products are actually dropping:

U.S. Import prices fell 0.3 percent in May, the first monthly decline since a 1.4-percent drop in December. Import prices advanced 1.8 percent from December to April before the downturn in May. The price index for overall imports decreased 1.5 percent over the past 12 months, matching the drop in January. These were the largest over-the-year declines since the index fell 2.2 percent in August 2016. (See table 1.)

The U.S steel and aluminum tariffs have been in effect globally since 2017. Tariffs on softwood lumber (Canada) & durable appliances (S. Korea), same duration.  Additionally the first set of tariffs on China is now well over a year old; and the second set of expanded tariffs on China began a month ago; again, no material impact to the delivered price.
Despite two years of claims by the professional media that tariffs would lead to higher prices for U.S. consumers, as you can see above the reality is quite different.
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President Trump has taken the leverage of economics to levels of geopolitical strategy never seen before.  Nowhere is the genius strategy more clear than in the way Trump has positioned the trade reset and confrontation with China.
In hindsight every move since early 2017 including:  (1) the warm welcome of Chairman Xi Jinping to Trump’s Mar-a-Lago estate; (2) the vociferous praise poured upon Xi; (3) the November 2017 tour of Asia; (4) the direct engagement with North Korean Chairman Kim Jong Un; the strategic relationship with Japanese Prime Minister Shinzo Abe; and a host of smaller nuanced moves have been quietly building toward a conclusion.
The upcoming G-20 summit is the last chance for Trump and Xi to reconcile considerable differences and President Trump has the strongest strategic position any Chinese official has ever faced.
After Beijing walked away from previous agreements between USTR Robert Lighthizer and Vice-Premier Liu He, Trump initiated a series of punishing economic consequences that had to have been well planned in advance.
The economy in China is reeling from the pressure applied; and stunningly it has only been a month since the consequence phase began.
In addition to tariff increases, the U.S. blacklisted Huawei Technologies Co., threatened other major Chinese tech companies and essentially cut-off China from the international supply chain it needs to sustain itself.  Beijing responded by drawing up a list of “unreliable entities” and making threats against any enterprise that would walk away from business engagement with China.  The totalitarian response has worsened the situation, and more companies have announced their intent to decouple from Beijing.
An important aspect, missed by most observers, is the ideology and outlook within any Chinese engagement. Quite simply, if it does not benefit China it is not done.  Therefore any negotiation with China is challenging because Beijing will cede no ground they view as already won.
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Too funny…. apparently Mexican Economy Minister Graciela Marquez didn’t watch what happened to China (or Canada) when they made similar threats of retaliation against President Trump’s tariffs.  Seriously.


President Trump wants the border secure, yes. However, President Trump would also welcome a trade tariff battle with Mexico (they can’t win); so this isn’t a technically a threat from the position of POTUS:

(Reuters) – Mexico will be ready to retaliate in kind if the U.S. government imposes tariffs on Mexican exports to the United States, Mexican Economy Minister Graciela Marquez said on Friday.

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Earlier today President Donald Trump delivered remarks on expanding health coverage options for employers and workers through health reimbursement arrangements (HRAs).
Under the rule, employers will be able to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that workers purchase in the individual market. The rule will particularly benefit small businesses that face costs in offering a traditional group health plan and businesses that do not currently offer coverage.

[Transcript] THE PRESIDENT: (Applause.) Thank you. Thank you. This is very nice. (Applause.)
AUDIENCE MEMBER: Happy Birthday, Mr. President! (Applause.)
THE PRESIDENT: Thank you.
AUDIENCE MEMBER: Happy Birthday, Mr. President!
THE PRESIDENT: Beautiful. Wow.
AUDIENCE: (Sings “Happy Birthday.”) (Applause.)
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More indications of the growing financial exit to avoid the predictable response from totalitarian moves by Beijing.  [Backstory – Backstory] Now we see reports growing of mass financial moves out of Hong Kong, as billionaires see the looming shadow of Red Dragon closing in…

HONG KONG (Reuters) – Some Hong Kong tycoons have started moving personal wealth offshore as concern deepens over a local government plan to allow extraditions of suspects to face trial in China for the first time, according to financial advisers, bankers and lawyers familiar with such transactions.
One tycoon, who considers himself potentially politically exposed, has started shifting more than $100 million from a local Citibank account to a Citibank account in Singapore, according to an adviser involved in the transactions.
“It’s started. We’re hearing others are doing it, too, but no-one is going to go on parade that they are leaving,” the adviser said. “The fear is that the bar is coming right down on Beijing’s ability to get your assets in Hong Kong. Singapore is the favoured destination.”

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Earlier today President Donald Trump delivered remarks introducing a ‘Second Chance’ hiring and workforce development initiative. The ‘Second Chance’ program is the follow-up initiative to complement the ‘First Step Act’ which the President signed last year.
‘Second Chance’ is a way to give everyone an opportunity to reestablish themselves economically and support their family financially.  This was really an uplifting and enjoyable event at the White House. [Video and Transcript]

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[Transcript] THE PRESIDENT: Thank you very much. Please, please. Great occasion.
I want to welcome everyone to the White House. We’re here today to announce a vital new action that we’re taking to help former inmates find a job, live a crime-free life, and succeed beyond their wildest dreams. (Applause.)
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If you’ve got the time this is well worth watching.  Larry Kudlow is Chairman of the National Economic Council and delivers a strong voice amid the economic team of assembled by President Trump.
Kudlow provides value because he comes from the Wall Street economic punditry networking group that just doesn’t understand MAGAnomics, or ‘America First’ Main Street policy.   President Trump has taught Kudlow a great deal.  So Kudlow’s value is heightened by his ability to explain Trump’s Main Street policy to his old Wall St. tribe; who genuinely have no concept of Main Street policy (hence, they’re always puzzled).

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Earlier today President Donald Trump hosted a bipartisan group of eight Governors and Secretary of Labor Alex Acosta as part of the ongoing workforce freedom and mobility initiative.
In combination with the vocational job development program, the president has committed to eliminating workforce barriers and expanding flexibility and mobility for American workers.  The initiative includes partnerships with states on occupational licensing reform, child care, paid family leave, and vocational skills training.

[Transcript] – Cabinet Room – THE PRESIDENT: Okay, thank you very much. And today, I’m delighted to welcome the governors from both parties to discuss the best ways to reform occupational licensing laws, advance childcare policies, and provide quality job training to all Americans so we can easily have some really phenomenal jobs, access to the jobs market and really fulfilling careers, and fulfilling careers of a lot of people.
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Against the intense leverage being applied by President Trump, last week Beijing doubled-down and threatened punishment against any company that would leave China and begin manufacturing elsewhere.
The totalitarian response was predictable and expected.  However, also predictable was the corporate response to the threats.
As we shared:  “China is counting on prior western investment being so significant that a corporation will be reluctant to withdraw. However, in this outlook Beijing seriously underestimates the free market because communist controlled China doesn’t understand the action of a inherently free market.
The first loss is the best loss. If walking away from an investment provides more financial security and stability than attempting to retain a grip on a tenuous position – corporations will walk away.” (more)
Now today – “Nintendo Moves Some Switch Production Out of China”:

TOKYO— Nintendo Co. is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, said people who work on Nintendo’s supply chain.
It is another example of manufacturers adapting to the tariff threat. Taiwan’s Foxconn Technology Group said Tuesday that it was ready to move assembly of Apple Inc.’s iPhones out of China if necessary, and Japan’s Sharp Corp. , which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam.

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Yesterday Secretary of State Mike Pompeo held a press conference to answer questions about the U.S-Mexicos migration and border security agreement. After reviewing some info from today, I’m inserting a graphic into Pompeo’s transcribed responses to better understand the “45 days” aspect. [Video and Transcript]

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[Transcript – (emphasis mine)] SECRETARY POMPEO: A couple things this afternoon. First, I’ll give some remarks later this week that are consistent with what we’ve been working on for my entire time here in the Indo-Pacific.
I’ll be speaking to a group of Indian business leaders in preparation for the trip that I’ll take in a couple weeks where I’ll be visiting India, an important part of President Trump’s strategy in the Indo-Pacific. And I’m looking forward to the opportunity both to give the set of remarks about how it is our relationship is so closely tied economically, but also importantly the things that the United States and India can continue to do to build out what is an incredibly important relationship for both countries.
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