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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USTR Robert Lighthizer has filed the official notification with the federal register for the increase in Section 301 tariffs from 10% to 25% effective Friday (full pdf below).  Additionally Reuters has exclusive details of the collapse in U.S-China trade talks.
As most CTH readers are aware, Lighthizer has focused heavily on the enforcement mechanisms within the trade talks. [Previous Bookmark] Apparently, when the 150 page draft agreement was presented to the Chinese politburo, Beijing balked at allowing the U.S. to hold controlling enforcement over the trade agreement terms.

The fallback presentation from Vice-Chairman Liu was: we cannot put the binding enforcement mechanisms in writing, you’ll have to ‘trust us’ to honor the agreement; at which time Lighthizer said no-way.

WASHINGTON/BEIJING (Reuters) – The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks.
The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters.

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In the aftermath of GM’s announcement to close the Lordstown, Ohio, auto assembly facility, President Trump worked earnestly to get GM to sell the facility and save jobs for the region.  Today President Trump and GM CEO Mary Barra announce the likely sale to Workhorse Group pending UAW union approval.

Washington (AFP) – General Motors Wednesday announced plans to invest $700 million in Ohio and to sell a shuttered plant to a company that makes electric trucks, drawing cheers from President Donald Trump who has assailed the US automaker for cutting American jobs.

“GREAT NEWS FOR OHIO!” Trump tweeted, revealing the details ahead of the company’s official announcement.

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National Economic Council Director Larry Kudlow appears on Fox Business to discuss the most excellent April jobs report and the continued forecast for U.S. economic growth.
Director Kudlow points out the greatest current economic benefits are being felt in the blue-collar Main Street sector; and rebuts former Vice President Joe Biden’s comments on the administration policy.

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The Bureau of Labor Statistics (BLS) releases the April 2019 jobs report and the results are excellent.  It’s a home run for MAGAnomics as the trifecta continues: Job gains +263,000, Wage growth +3.2%, Inflation low at 1.4%.
With a gain of 263,000 new jobs in April, the overall unemployment rate dropped to 3.6%.  There are more jobs available than people looking for work.  Additionally, the prior two months jobs results were revised upward by 16,000 more than previous reported.

• Total nonfarm payroll employment increased by 263,000 in April, compared with an average monthly gain of 213,000 over the prior 12 months.
• Professional and business services added 76,000 jobs in April. Over the past 12 months, professional and business services has added 535,000 jobs
• In April, construction employment rose by 33,000. Construction has added 256,000 jobs over the past 12 months.
• Employment in health care grew by 27,000 in April and 404,000 over the past 12 months.
• In April, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.77. Over the year, average hourly earnings have increased by 3.2 percent.
• BLS Release Link

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The U.S. economic numbers continue to gain strength.  Ahead of his departure to China for ongoing trade negotiations, Treasury Secretary Steven Mnuchin discusses the current state of the economy with Maria Bartiromo.

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Secretary Mnuchin and USTR Lighthizer arrive in China tomorrow.  This meeting will determine their recommendations to President Trump as to whether a deal can be reached. If no, the potential to re-institute delayed round-two tariffs is possible.
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The professional financial punditry can’t explain it.  Flummoxed academics run around bumping into walls amid economic numbers that continue to defy expectations.  All caused by a simple return to common sense ‘America First’ MAGAnomics.
Low unemployment (3.8%); wages growing (+3.2%); inflation stable (1.6%). These measures all have a cumulative impact on paycheck-to-paycheck Americans. Prices for durable goods are stable and wage growth is exceeding inflation. That means more disposable income in the middle-class…DUH. Which, when combined with the increased pay from lower middle-class tax rates, is exactly the intended outcome of MAGAnomics.

Today the BEA is out with consumer spending results for the first quarter that defy expectations.  Consumer spending on goods increases 1.7%. Overall spending +.09 in March, reaches highest gain in ten years. The deplorables are spending their higher wages.  Go figure.  Meanwhile core inflation drops to 1.6%.  The pundits are shocked.

(Reuters Headline) “U.S. consumer spending roars back, but inflation tame” – WASHINGTON (Reuters) – U.S. consumer spending increased by the most in more than 9-1/2 years in March as households stepped up purchases of motor vehicles, but price pressures remained muted, with a key inflation measure posting its smallest annual gain in 14 months.

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President Donald Trump hosts Japanese Prime Minister Shinzo Abe for a round of golf today, while First Lady Melania Trump hosts Madame Akie Abe in DC.
The relationship between the Trump’s and the Abe’s goes back quite a while and is rooted in a genuine friendship.  The president and prime minister are strong competitors on trade and economic policy; however, the competition is founded on respect.

Prime Minister Abe’s economic policies are rooted in the growth process taught by Edwards Demming.  If you follow their professional business ideology, it is easy to see how President Trump and Prime Minister Abe would face-off around a standard of excellence.
When combined the economies of the United States and Japan account for approximately 30 percent of all global gross domestic product.
This is really old-school business stuff.  Each leader, is essentially an economic policy coach for his country; creating strategies and championing growth in a challenge to see who can succeed the most.  They respect each-other, but this is old school. PM Abe isn’t about to concede to a deal where Japanese growth is ceded; however, he will not cheat to achieve success (unlike Xi).  So friendly adversarial negotiations continue.  Good stuff.
Meanwhile First-Lady Melania Trump and Madame Akie Abe toured some of the historic sites in the capital, including the Washington Monument and US National Arboretum.
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In 2015 CTH outlined candidate Trump’s economic positions and how they would impact the economy.  We anticipated that MAGAnomics would be reversing three decades of federal reserve monetary policy. After about a year of analysis, in 2016 CTH presented a theory: “A new Dimension in Modern Economics“.
The theory was based on a likelihood of what would happen if MAGA 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 National Economic Council Director Larry Kudlow appears on CNBC to discuss the latest first quarter GDP growth rate of 3.2% and the status of the U.S. economy.   Kudlow notes the rate of inflation is disconnected from the GDP growth.

CTH 2016[…]  Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.

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Japanese Prime Minister Shinzo Abe and Madam Akie Abe will be having dinner tonight with President Donald Trump and First Lady to celebrate Melania’s birthday.  The prime minister and the president are close personal friends and will likely play golf tomorrow.
The Trump-Abe relationship existed for many years prior to becoming U.S. President. Their respect for each-other is genuine.  Abe and Trump are competitors on trade and economics and their strategies within that competition are actually fun to watch. The long-standing friendship underpins a very genuine alliance of U.S-Japanese interests.
In advance of the dinner tonight PM Abe and President Trump meet in the Oval Office ahead of a bilateral delegation meeting to discuss trade and regional matters. They also take questions from the media [Video and Transcript Below]

[Transcript] 4:35 P.M. EDT – PRESIDENT TRUMP: Thank you very much. It’s an honor to have my friend, Prime Minister Abe — Japan. We have many things to discuss, including trade, including some of the numbers that just came out this morning. We had a very big number at 3.2 GDP for the first quarter — usually the worst quarter. That also included the little bit of a dispute we had during the quarter. So 3.2 is far above expectation. I guess many people were thinking it would be in the ones, maybe between one and two. And 3.2 is great.
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