Earlier today National Economic Council Chairman Larry Kudlow appeared on CNBC for an extensive interview about the current U.S. economy. Jobs growing; wages growing; economy growing; trade deals improving…. Lots of good MAGAnomic stuff:

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(Via CNBC) White House economic advisor Larry Kudlow is extremely optimistic about the U.S. economy.
“The economic boom continues,” he said on CNBC’s “Squawk on the Street” Friday, citing the August jobs report and the month’s wage gain data. “It’s the big story of 2018. Jobs, growth, wages. It doesn’t get much better than that.”

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From a pure economic/financial perspective this Nike  branding campaign doesn’t make sense…. unless, you realize a much bigger picture. A hidden bigger picture.

On its face, it just seems absurd. Why would any major corporation intentionally stake out a branding position that is adverse to their financial interests?
I’ve spoken to some very excellent business actuaries on this late today; and one specific conversation finally helped to make it all make sense.  During that conversation a good ally shared: “a multinational corporation would never make a branding decision adverse to their financial interests. Unless there is a hidden risk unrelated to what is visible on the surface.” ….BINGO, there it is, the lightbulb went on.
A hidden risk that likely has nothing whatsoever to do with Colin Kaepernick.
The bigger risk to Nike has nothing to do with Black Lives Matter, U.S. Consumers, or Antifa-like political advocacy. The bigger financial risk to the Nike Corporation has everything to do with geopolitics and a reset of international trade agreements.
Here’s the hidden aspect with research to back it up.  Nike Inc. has hitched its massive corporate existence to a 10-year business plan that is dependent on the continuance of recently negotiated manufacturing contracts.
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When China announced the One-Road/One-Belt initiative (now banned from discussion in Beijing); in combination with a looming trade confrontation with President Trump; CTH pointed out that sketchy pandas’ bamboo economy was very vulnerable because it was deep, but narrow – simply too dependent on manufacturing and exports.
Slow down the manufacturing sector and, well, there is no fall-back position….. Cue:

BEIJING (Reuters) – China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.
The gloomy findings reinforce views that China’s economy will cool further in coming months, even as the United States ramps up tariffs on Chinese goods. That is likely to prompt more spending and other growth boosting steps from Beijing.

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U.S. Trade Represenative Robert Lighthizer releases a statement announcing the administration is filing a NAFTA Section 2202 trade modification “notification of intent” letter to congress:

Washington, DC – U.S. Trade Representative Robert Lighthizer today issued the following statement regarding the status of trade negotiations with Mexico and Canada:
“Today the President notified the Congress of his intent to sign a trade agreement with Mexico – and Canada, if it is willing – 90 days from now.  The agreement is the most advanced and high-standard trade agreement in the world.  Over the next few weeks, Congress and cleared advisors from civil society and the private sector will be able to examine the agreement.  They will find it has huge benefits for our workers, farmers, ranchers, and businesses.
“We have also been negotiating with Canada throughout this year-long process.  This week those meetings continued at all levels.  The talks were constructive, and we made progress.  Our officials are continuing to work toward agreement.  The USTR team will meet with Minister Freeland and her colleagues Wednesday of next week.”  (link)

Under the original 1993 terms and Chapter 22 of the Implementation Act, Lighthizer notifies congress that trade parties have modified the terms; this is the Section 2202 notification of modification. Ninety days after the date of the notification the U.S. and Mexico can sign the new terms of agreement; congressional approval is not required. [Canada can still join the U.S-Mexico agreement but they need to act fast.]
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Continual emphasis on the severity of Canadian politics is needed to understand the latest developments in the U.S-Canada trade negotiations.
The Trump administration set a deadline of today for Canada to join the U.S-Mexico trade agreement and make the NAFTA replacement agreement a three-way pact.  The concessions needed by Justin Trudeau and Chrystia Freeland to join the agreement were politically devastating.

In order for Canada to accept or join, via a NAFTA 2202 modification, they would need to agree to the U.S-Mexico modification terms. For Canada they would have to:

• open their telecommunications and banking sector (eliminate non tariff barriers).
• eliminate soft-wood (lumber) and aeronautics subsidies.
• begin a process of lowering their assembly use of Chinese/Asian goods.
• accept the rules of origin for North American manufacturing.
• eliminate protectionist tariffs on dairy and farm products.
• accept the U.S-Mexico terms for arbitration and dispute resolution.

President Trump and U.S. Lighthizer are holding all the cards.  As we previously highlighted they don’t care if Canada doesn’t join; the U.S. would likely prefer to send congress a NAFTA 2205 withdrawal notification removing the U.S. from the original 1993 NAFTA construct in combination with a simultaneous 2202 modification notification for the U.S-Mexico side of the agreement.
This would allow the U.S. to go into a one-on-one trade negotiation where six months and a day from the 2205 notice. The U.S. would then apply 25% auto tariffs on Canadian made vehicles while negotiating a bilateral deal. Canada is in a very weak negotiating position; politics are paramount for the Canadian team; their exit needs political cover.  Media need to help the optics for the Canadian team.
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Prime Minister Justin Trudeau speaks Friday, August 31, 2018 about the Canadian perspective on trade negotiations with the U.S. – Everything about the Canadian position is framed through the prism of politics not economics. Virtue signalling is the primary tactic.
Trudeau and Foreign Minister Chrystia Freeland are in a tenuous position, they cannot accept the terms of the U.S-Mexico deal because they cannot afford to drop the protections and carve-outs within their highly controlled and subsidized economy. Canada would have to: drop telecommunications and banking barriers; drop protectionist tariffs on Dairy and agricultural products; and drop subsidies for the lumber and aeronautics industry.

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The financial media is all a flutter based on a Bloomberg report that President Trump is likely to apply tariffs on $200 billion in Chinese goods.  DUH !  Why do they think U.S.T.R. Lighthizer has been conducting open section 301 tariff hearings for the past week?  Of course President Trump is considering tariffs on $200 billion in trade goods; this approach is not exactly a secret.
Then again, most of the financial media are clueless about the larger economic strategy and how China ties into the negotiations with North Korea.  I digress.

The proposed tariffs are a supplemental action in response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation, based on the findings in USTR’s investigation of China under Section 301 of the Trade Act of 1974. Tariffs on $34 billion in goods from China are currently in effect, and tariffs on an additional $16 billion took effect on August 23rd, 2018.
The issue is not *if* President Trump will apply the 301-tariffs, the question is *how* and *when*?
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Ezra Levant of The Rebel Media discusses the background of Justin from Canada politicizing trade negotiations with President Trump eventually leading to a complete collapse of trade diplomacy.

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What happens when the silent majority stand up in full force and elect a president entirely focused on advancing the interests of Main Street over Wall Street?  What happens when that President takes office and begins systematically instituting a comprehensive series of economic policies that are targeted to Make America Great Again?
The middle-class of America benefits.  That’s what happens.  And when economic, trade, and U.S. financial policy are focused to improve the outcomes for the middle-class, the entire landscape of beneficial outcomes within the U.S. economy shifts…. Bigly.

Express Pro Survey – America’s blue collar workers may be one of the most optimistic groups in the country today. According to a new study conducted by The Harris Poll and commissioned by Express Employment Professionals, 85 percent of America’s blue collar workers see their lives heading “in the right direction.”
Sixty-nine (69) percent also say their local communities are heading in the right direction, and 51 percent say the same about the country as whole.

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During analysis of the U.S-Mexico trade agreement terms it became obvious that *if* Canada was going to join the pact they would have to almost completely acquiesce and reverse on their former positions.   It now is entirely plausible that just might happen.
When entering the meeting with U.S.T.R. Robert Lighthizer, Canadian Minister Chrystia Freeland spoke specifically about “Canadian workers”.  Justin from Canada has been very cautious in his word choices also speaking about “Canadian workers”.  As Freeland exited the first meeting with Lighthizer the reasoning for their collective word choice is becoming apparent.  Canada is preparing to take a knee, and they are positioning for the least amount of political damage possible.  WATCH the exit of first meeting:

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Team Trump has positioned this perfectly. By using NAFTA section 2202, to construct a modification of the original 1993 agreement, Lighthizer is intending to send a 90-day notification letter to congress informing them the U.S. and Mexico have agreed to modifications of their bilateral trade agreement.
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