Well, well, well….  Against the backdrop of everything we have been discussing about the nature of the U.S. – China – North Korea geopolitics; and considering the current position of all the players; THIS is a very interesting development:

BEIJING (Reuters) – Chinese President Xi Jinping will visit North Korea for two days from Thursday, state media in both countries reported on Monday, making him the first Chinese leader to visit in 14 years.
Neighboring China is reclusive North Korea’s only major ally, and the visit comes amid renewed tensions between the United States and North Korea over efforts to persuade Pyongyang to give up its nuclear weapons.

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Charles Payne, filling in for Maria Bartiromo, interviews White House Manufacturing and Trade Policy advisor Peter Navarro.  Unfortunately the interview begins with a discussion of tariff polling….  The vast majority of Americans have no understanding of the impact of tariffs and/or MAGAnomic policy; they only know the economic outcomes they can feel.
Mr. Navarro walks through how tariffs interact with global supply chains and the financial manipulation by multinational corporate interests.

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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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Apparently Justin from Canada is coming to the White House for a meeting with President Trump…

WHITE HOUSE – President Donald J. Trump will welcome Prime Minister Justin Trudeau of Canada to the White House on June 20, 2019. The visit will reaffirm America’s deep partnership with Canada, and allow the two leaders to address opportunities and challenges related to expanding bilateral cooperation.
President Trump and Prime Minister Trudeau will discuss the shared economic interests of their countries, including the United States-Mexico-Canada Agreement and opportunities to drive more growth and create jobs in both the United States and Canada. The two leaders will also discuss the upcoming G20 Summit, which will take place from June 28 to 29 in Osaka, Japan. (read more)

Last month, Manny Montenegrino had a good discussion with Ezra Levant about the current issues with the relationship between Justin from Canada and President Trump.  Against the backdrop of this upcoming visit, it’s worth revisiting:
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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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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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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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White House Council of Economic Advisers Chairman Kevin Hassett squares-off against Fox Business crew on trade tensions with China, the state of the U.S. economy, the outlook for Federal Reserve policy and his upcoming departure from the White House.
Steve Forbes is disconnected from the reality of what happens with tariffs on China. Beijing first responds to off-set the tariff by lowering the value of their currency, and/or subsidizing the targeted products. There is no price increase to U.S. consumers (check inflation).

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Apparently President Trump was watching the segment, and had a word for Maria Bartiromo, Dagan McDowell, Steve Forbes and Stuart Varney:
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Do not overlook the importance of President Donald Trump publicly calling out the largest DC lobbyist group, and epicenter of Big Club corruption earlier today.  During a widely discussed CNBC interview today President Trump landed two torpedoes directly below the waterline on the U.S. Chamber of Commerce.

The U.S. CoC is the largest influence purchaser in Washington DC, and the benefactor of dozens of the highest politicians in both the House and Senate.  The Wall Street funded CoC, and their President Tom Donohue, was already frustrated at their inability to influence President Trump and White House economic/trade policy.  President Trump is now confronting their self-serving politics directly.
The CoC is the lead U.S. member of the multinational ‘Big Club’, and has driven policies directly against Main Street USA for three decades.  Until now no modern U.S. President has ever been willing, or fearless enough, to take them on…. ‘until now’.  A few days ago the U.S. CoC threatened to sue President Trump over countervailing tariffs.
Today, President Trump hit back hard; this is an excellent development.
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