There’s always a larger geopolitical dynamic when you assess the economic alliances that President Trump puts together…. Always and underlying plan…  Sometimes it just takes time to surface.
As we have noted, even going back to 2017, Japanese Prime Minister Shinzo Abe always appeared to be the fulcrum for President Trump’s Indo-Pacific strategy.  

Remember the trip to Japan as honored guests of Emperor Naruhito and Empress Masako at the Imperial Palace?  Remember last month’s (May 25th) unprecedented reception with the titans of Japanese business?  Remember the private reception set up by a very nervous U.S. Ambassador William F. Hagerty?  A reception with the most influential business CEO’s in Japan and Southeast Asia? 
Well…

TOKYO (Reuters) – Japan’s Tokyo Electron, the world’s No.3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters.
The decision shows how Washington’s effort to bar sales of technology to Chinese firms, including Huawei Technologies, is ensnaring non-American firms that are not obliged to follow U.S. law.

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Earlier this morning President Donald Trump called in to CNBC to discuss a variety of subjects including: the ongoing trade negotiations with China; the threat of tariffs on Mexico over illegal immigration; the federal reserve; the status of the economy; the duplicity of the U.S. Chamber of Commerce; collusion by democrats; the upcoming G20 summit in Japan, and much, much, more.
During the interview President Trump directly calls out the U.S. Chamber of Commerce for their anti-American position and self-interested advocacy for Wall Street multinational corporations. Additionally, President Trump pushes back against the claim that tariffs lead to higher U.S. prices, citing examples of China subsidizing their exports and low U.S. inflation.  Must Watch:

(LOL… POTUS Trump chomping-at-the-bit to get tariffs on the EU.)

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The headlines are once again examples of an ideological media. “Stunning”, “surprising”, “unexpected”, etc.  However, far from the headline ideology; in a result that is splendidly falling into place for a much more consequential geopolitical landscape; things are going swimmingly…

Reuters Headline: “India’s Modi stuns opposition with huge election win”

NEW DELHI/AYODHYA (Reuters) – Indian Prime Minister Narendra Modi scored a dramatic election victory on Thursday, putting his Hindu nationalist party on course to increase its majority on a mandate of business-friendly policies and a tough stand on national security.
His re-election reinforces a global trend of right-wing populists sweeping to victory, from the United States to Brazil and Italy, often after adopting harsh positions on protectionism, immigration and defense.

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The White House provided a background presser for information about President Trump and First Lady Melania Trump’s upcoming state visit to Japan.  [Transcript below] There are some interesting aspects to the itinerary as outlined; however, first, it’s important to emphasize the context.
As CTH shared earlier: At the highest levels of finance and business; in a process within both private industry and the geopolitical realm of government; a key aspect to every long-term strategic reset is the formation of an alliance.  Every successful titan of industry who has structurally changed history has influenced an alliance toward the effort.

I strongly suspect, in anticipation of the China confrontation; and considering the scale of the consequences therein; President Trump selected Japanese Prime Minister Shinzo Abe as the center of an Indo-Pacific alliance (several years ago).  With the knowledge of USTR Lighthizer heading to Japan with an advance trade team…. now consider:

Via Teleconference – 2:31 P.M. EDT – PRESS OFFICER: Good afternoon, everybody. I’m happy you all could join. We have with us today [senior administration official]. He’ll be providing some brief remarks about the President’s upcoming trip to Japan and a few Q&A afterwards. This will be on background and you can attribute what he says to a senior administration official.

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President Trump is executing one of the most brilliant geopolitical economic resets in the history of global trade. It really is stunningly remarkable how President Trump has controlled the entire landscape. The consequential phase now begins.
It is fascinating how the financial pundits didn’t see this coming. Perhaps one of the best indicators of where things are today comes from this quote within the South China Post:

“The Administration’s Section 301 tariffs and China’s retaliatory tariffs will now further disrupt – or even break – many thousands of supply chains in both countries.”
[Nelson Dong, a senior partner at Dorsey & Whitney]

The quote by Nelson Dong is stated *as if* shifting/breaking supply chains is a flaw in the approach. It’s not. Exactly the opposite is true; this is a feature of the strategic reset.  A specific and purposeful feature designed by President Trump.
What Dong is predicting is the deconstruction of “one-belt, one-road”.
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CTH was wondering how long it would take for President Trump to point out the brutally obvious…. Thanks to some advanced planning that everyone ignored, there are multiple trade alternatives to China:

Perhaps now people will reference President Trump’s long-game strategy which has been evident since his marathon Asia trip in November 2017.
Long before media pundits starting noticing/considering how serious President Trump was about structurally resetting the entire landscape of a U.S-China trade relationship,  President Trump quietly and methodically laid the groundwork with personal visits to: Prime Minister Shinzo Abe (Japan); President Moon Jae-in (S-Korea); President Tran Dai Quang (Vietnam); and President Rodrigo Duerte (Philippines).
Oh, how quickly the media forgot.
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This is the big one.  This is the inflection moment.  Tonight around 5:00pm Chinese Vice-Chairman Liu He will engage with team U.S.A. on the substantive issues around the future of the U.S-China trade relationship.   Trillions at stake.
At midnight tonight the tariffs on Round One of Chinese goods are scheduled to increase from 10 percent to 25 percent.  Round Two is yet determined.  The background for the disposition of TEAM USA was outlined HERE.

Mnuchin – Trump – Lighthizer and Ross

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnunchin previously worked a 150-page outline agreement with China on seven chapters of trade issues covering: Theft of U.S. intellectual property; protection for trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.  Last week China reversed course on all of the substantive agreements. 
Today Vice-Chairman Liu He is going to try to justify to President Trump why China can no longer accept the commitments they made over the past three months.
It cannot be overstated how everything in/around DC must first be filtered through the prism of this inflection point.  At the heart of U.S. politics, the majority of the Senate Chamber is aligned with the Chinese through purchased multinational lobbying interests. Again, there are trillions at stake.  Wall Street through K-Street has paid the Big Club to defend their multinational/financial interests from President Trump.
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[Originally posted in 2017] To understand the China ‘One-Belt / ‘One-World‘ economic trade strategy it becomes necessary to understand how structurally weak the Chinese economy was when created.
People often talk about the ‘strength’ of China’s economic model; and indeed within a specific part of their economy -manufacturing- they do have economic strength.
However, the underlying critical architecture of the Chinese economic model is structurally flawed and President Trump with his current economic team understand the weakness better than all international adversaries.
Lets take a stroll and lightly discuss.
China is a central planning economy. Meaning it never was an outcropping of natural economic conditions. China was/is controlled as a communist style central-planning government; As such, it is important to reference the basic structural reality that China’s economy was created from the top down.
This construct of government creation is a key big picture distinction that sets the backdrop to understand how weak the economy really is.
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The selected facial impressions are buckets of awesome.

The baseline when reviewing economic data from China is to remember the entire economy is controlled by the communist central government.  If they say the economy is “less strong” than previously expected, generally we can anticipate the truth is much worse.
The second aspect to remember is that many U.S. manufacturers made anticipatory advanced purchases, building up inventory ahead of possible tariffs, in the 3rd and 4th quarters of 2018.  Those advance purchases can amplify any manufacturing slow down.

BEIJING (Reuters) – China is expected to report on Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs, adding pressure on Beijing to roll out more support measures to avert a sharper slowdown.
Growing signs of weakness in China — which has generated nearly a third of global growth in the past decade — are stoking worries about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.

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