Earlier today Treasury Secretary Steven Mnuchin appeared on CNBC for an extensive interview from the Davos, Switzerland, World Economic Forum.
Good grief. What is so hard to understand about the statement: “economic security is national security”?
Commerce Secretary Wilbur Ross, the coolest cat in the crew, appeared tonight for a discussion on economics and trade with Lou Dobbs. Secretary Ross discusses the current status of the economy and how the two trade agreements have established the foundation for a completely restructured U.S. trade relationship for years to come.
Wilburine notes the Europeans are nervous thinking about the wolverine teeth that will soon be heading in their direction. Good Stuff. WATCH:
Earlier today President Trump, together with his trade delegation and the delegation from China represented by Vice-Premier Liu He, signed a new, fully-enforceable Phase One Trade Agreement. This is the first ever trade agreement any nation has attempted to change the dynamic of how a free-market system (USA) can engage with the Communist system within China. [Video Below – Transcript ADDED]
While ‘phase-one‘ was structurally created to set the foundation, and test the principles of enforcement, this historic trade agreement will frame the text that all other free-market nations will follow in their own efforts to come to a substantive agreement with Beijing.
This is a really big deal on a worldwide scale of international commerce. Structurally the biggest changes inside China relate to Intellectual Property protections, U.S. ownership of assets, and changes within the Chinese legal system to stop Forced Technology Transfer.
During the ceremonial remarks Vice-Premier Liu read a statement from Chinese Chairman Xi Jinping to commemorate this historic trade agreement.
Today, we take a momentous step — one that has never been taken before with China — toward a future of fair and reciprocal trade, as we sign phase one of the historic trade deal between the United States and China. Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers, and families.
U.S. Trade Representative Robert Lighthizer is a smart, serious and deliberate professional on a very specific and important mission for the United States. In my opinion Lighthizer is the most under-appreciated member of an exceptionally good economic team. Everything about Lighthizer’s approach is based on enforcement.
Ambassador Lighthizer has been consistent over multiple years, on his intention to create enforceable trade reform between the U.S. and China, or, if needed, decouple the two economies if China fails to accept the necessary structural reforms.
Tonight, as the Chinese delegation arrives, Lighthizer discusses the U.S-China ‘phase-one’ agreement with Lou Dobbs. WATCH:
One of the key sectors gaining benefit from the USMCA trade agreement is the auto sector. Rules on steel and aluminum smelting/origination, and rules on part origination from North America are key aspects to the trade agreement that shifts focus from the import of Asian manufactured parts for assembly to manufacturing in North America.
Essentially, seventy-five percent of the component parts for the auto industry must be manufactured in North America. This shift directly puts U.S. auto-workers at the forefront for job gains & stops the process of using manufactured parts from China, Asia or the EU.
The goal of the agreement was/is to make manufacturing investment in North America the main consideration for auto-manufacturers who want access to the U.S. market. Today, as a direct result of future investment considerations, General Motors and Ford unexpectedly surprise 1,500 auto-workers with the announcement their jobs have gone from part-time to full-time status. Great news for these families:
DETROIT – General Motors’ worker Adarrey “Ace” Humphrey was blindsided Sunday. That’s when his life changed.
Humphrey, 27, has been a part-time temporary worker at GM’s Flint Assembly in Michigan for the last three years. On Sunday morning, he and about 250 of his co-workers crowded into UAW Local 598’s union hall. Most thought they were there for a routine meeting.
The Bureau of Economic Analysis (BEA) has released Q4 (November) import/export data showing a considerable drop in the U.S. trade deficit. [Release Here] Exports increased approximately .7 percent ($208.6 billion) while imports dropped one percent ($251.7 billion. Lowering the overall trade deficit to $43.1 billion.
While the pundits are surprised at the strong result, it should not come as a surprise to many CTH readers. During Q2 (June) and Q3 (July, Aug, Sept) the rate of GDP growth was impacted -in part- by inflated U.S. purchases as companies bought holiday merchandise earlier than normal. This was an effort to avoid looming tariffs, and as a result companies increased their overall inventory. We predicted Q4 purchases (Oct, Nov, Dec) would be lower specifically because of this backlog of retail inventory.
With the massively successful holiday season now over, those inventories have sold. Specifically because the value of imports are deducted from the GDP calculations, there will likely be a much stronger Q4 GDP growth resulting from less import activity.
The Wall Street financial pundits are too focused on the multinational side of the ledger; and they simultaneously don’t review data from a Main Street perspective; therefore they don’t see -or pretend not to see- the common sense equation staring them in the face.
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Any headline that uses the phrase “France Warns” immediately requires a background review to understand the big picture driving French fears.
Just like Canadian Prime Minister Justin Trudeau thinking he could outwit President Trump’s policies on NAFTA trade (he failed), Trudeau’s bestie, French President Emmanuel Macron, has stupidly exhibited similar shortsightedness. In the case of both leaders their weasel moves have put their nations’ into a precarious economic position.
To consider the future for France, it would be wise to remember last year when President Trump arrived to attend the G-7 in Biarritz, France, President Macron was waiting at the Hotel du Palais to ambush Trump for an unscheduled luncheon (pictured below):
This was just one example in a series of scripted weasel-moves played by Macron in an attempt to pontificate his importance for the international audience. Another example from the same event was Macron inviting the Iranian foreign Minister to the G7 for sideline meetings unrelated to the topics being discussed in Biarritz.
In an effort to create leverage against the U.S. position, President Macron never discussed his Iranian invitation -in advance- with the U.S. delegation. It did not go over well.
The EU, and specifically France, have a dependence on foreign energy sources as a result of their ridiculous climate policies and narrow thinking. In essence the EU wants to do business and receive oil from Iran; however, U.S. sanctions against Iran forbid those business deals. Ergo Macron attempted to inject influence and position his interests.
As stated, the ambush approach did not go well, but POTUS played it cool.
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A good day for a MAGAnomic pause and reminder…
In 2015 we discussed candidate Trump’s economic positions and how they would impact the economy. CTH anticipated that MAGAnomics would be reversing three decades of federal reserve monetary policy. After about a year of analysis and discussion, in 2016 CTH presented a theory: “A new Dimension in Modern Economics“.
CTH shared a possibility of what could happen if Trump Economic Policy was shifted to favor Main St. over Wall St. One aspect we presented was how Federal Reserve monetary policy would be oddly disconnected from its ability to influence inflation… Today:
SAN DIEGO (Reuters) – The Federal Reserve could find itself fighting too-low inflation for years to come, San Francisco Federal Reserve President Mary Daly said on Friday, and may need a new policy framework to lift inflation back up to the Fed’s 2% goal.
“We don’t have a really good understanding of why it’s been so difficult to get inflation back up,” Daly said at the annual American Economics Association meeting in San Diego.
Great interview with United States Trade Representative Robert Lighthizer as he described the goals, objectives and outcomes of the USMCA and U.S-China Phase One agreements.
While answering a question about Wall St. journal criticism of the USMCA, Lighthizer discussed the dynamic of Wall Street -vs- Main Street as part of the bigger picture objective in the revised deal. He avoids the words “globalism” -vs- “nationalism” but the sentiment as described is there.
On China Lighthizer emphasizes the “phase one” deal is really a test to see if it is even possible to have an enforceable trade agreement between a communist state-run economy (China) and a free-market economy (U.S).
National Economic Council Director Larry Kudlow appears on Fox Business news to discuss the November jobs report, economic growth and the China trade discussions.
Kudlow highlights the primary point that President Trump has reestablished Main Street USA as the primary focus of policy. U.S. companies invested in the U.S. economy are doing exceptionally well and receiving the majority benefit. U.S. multinational companies who are invested overseas are not benefiting as much. Wall St -vs- Main Street.