The Beginning Of Progress In The Trade War With China

It is no surprise that trade negotiations with China have moved slowly. President Trump is attempting to level a playing field that has been tilted for a long time. China has manipulated its currency to gain trade advantage, China has stolen intellectual property, and China has used slave labor to manufacture products at ridiculously cheap prices. We have looked the other way, ignoring human rights abuses. We have also looked the other way in terms of the censorship of speech in China. Google has helped develop a search engine that will meet the requirements of the Chinese censors. We have complied with things that are against our principles for the sake of money. The trade deal being negotiated is not going to change that, but at least it will be a beginning attempt to level the playing field.

Fox Business is reporting today that the U.S. and China agreed to a “phase one deal” in the trade war.

The article reports:

The deal, which has been agreed to in principle and will take three to five weeks to write, includes China agreeing to raise its agricultural purchases to between $40 billion and $50 billion from $8 billion to $16 billion, in addition to making reforms on intellectual property and financial services. The U.S. will not be raising tariffs from 25 percent to 30 percent on Oct. 15. A decision has not yet been made on the tariff increase scheduled for Dec. 15.

A comprehensive trade deal will have two or three phases, according to Trump. China’s trade team is calling the agreement a “pause” in the trade war, and not a deal.

China is not a free country, and the Chinese negotiators who are working out this trade deal will pay a high price if the deal is not totally acceptable to the leadership in China. The fact that a phase one deal has been reached is good news, but China does not have a great track record on keeping promises or abiding by trade agreements.

Elected Officials Are Supposed To Represent The People Who Voted For Them

The Democrats have always been able to count of the labor unions to support their candidates. However, in recent years, Democrat policies have worked against people who belong to labor unions. Illegal immigration depresses the wages of American workers. Bad trade agreements send jobs overseas. Both of these problems are things that President Trump is trying to fix, but the Democrats in the House of Representatives are generally a road block to dealing with either problem.

Breitbart posted an article on Friday about some recent comments by AFL-CIO President Richard Trumka.

The article reports:

AFL-CIO President Richard Trumka blasted Democrats during a private meeting this week for their globalist free trade agenda where 2020 Democrat presidential primary candidates have continued to embrace the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP).

During a private meeting with Democrat National Committee (DNC) members, including Chairman Tom Perez who pushed TPP while working for President Obama, Trumka blamed a coalition of elected Republicans and Democrats for the country’s entering into a multitude of free trade agreements that have gutted America’s working and middle class while outsourcing those jobs to China, the Phillippines, Vietnam, and India.

“It’s time to do better,’ Trumka said, scolding Democrat Party leaders, according to the Huffington Post. “I believe you can. I believe you will. And working people are hungry for it. But you can’t offer campaign rhetoric or count on workers’ votes simply because you have a ‘D’ next to your name.”

The article continues:

“You need to prove that this party is the one and only party for working people,” Trumka said, according to the Huffington Post. “And recognize that unions and collective bargaining are the single best way to make this economy work for everyone.”

Trump has sought to protect and create American working and middle-class jobs by imposing tariffs on China and other foreign imports. Likewise, during his first year in office, he ended the Obama effort to enter TPP — which would have eliminated millions more U.S. jobs by allowing multinational corporations to outsource them directly to Vietnam and Malaysia.

Meanwhile, Biden has continued to defend NAFTA, which he claimed in 1993 would add American jobs to the American economy but actually helped eliminate nearly five million U.S. manufacturing jobs and resulted in the closure of nearly 50,000 U.S. manufacturing facilities. A number of American towns and small cities were left economically destroyed and have yet to recover.

I would call this a shot across the bow. Unions provide major money to Democrat political campaigns, even when their members don’t vote for Democrats. If the Democrat party continues in its current direction, the labor union leaders may be less enthusiastic about promoting and funding Democrat candidates.

Economic Policies Matter

As the Democrat presidential candidates continue their debates, all of us need to step back and consider the consequences of economic (and other) policies. For instance, Medicare for all sounds like a really good idea–until you consider that the one place the government has been running healthcare for a while is the Veteran’s Administration. That hasn’t worked too well. Guaranteed income for all also sounds like a great idea–until you begin to calculate how much it will cost. Income inequality is a problem–it is most prevalent in our largest cities that have been under Democrat control for decades. So what has been the result of President Trump’s economic policies?

The Conservative Treehouse posted an article about the current state of the economy.

The article reports:

The Bureau of Economic Analysis (BEA) released significant wage and salary data yesterday which held stunning upward revisions for 2018 and 2019.   Wage growth of 5.5% combined with low inflation remaining at 1.4 percent; the disposable income of U.S. workers jumped to a stunning 4.1%.

Within the revised BEA data, we find employee compensation rose 4.5% in 2017 and 5% in 2018.  Importantly the growth trend continued into 2019, with compensation increasing 3.4 percent in the first six months alone.  Year-over-year wages and salaries were revised upward to 5.3% for May, and 5.5% in June.  These are stunning increases in worker pay.

There are various economic indicators we have shared through the years, but wage growth is one of the more critical.  First, wage growth lags behind business activity – workers don’t get pay raises until after business volume demands/provides it.  Second, wage growth is generally uni-directional – once businesses hike pay, the increases cement.

The wage growth is across the board–it has not impacted only the wealthy.

The article concludes with a summary of President Trump’s overall economic strategy:

The U.S. consumer is driving the economy.  The jobs and labor market remains strong.  Wage growth is rising in proportion to the diminished availability of the labor pool. Price inflation is low because manufacturing economies (EU and China) are devaluing their currency, and subsidizing their industries (China), in an effort to avoid Trump’s trade policies (tariffs).  Their efforts increase the value of the dollar and we are importing deflation.

Simultaneously, global manufacturers -multinationals- need access to the U.S. consumer market.   As President Trump applies a series of strategic global trade moves, intended to draw manufacturing back to the U.S., those multinationals are in somewhat of a holding pattern for further investment.  Simply, the multinationals are trying to figure out where to put their investment capital for the highest return.

Example: The U.S. economy is strong, unemployment is low and wage rates up; so if China is a non-option, the profit determination shifts.  Where to manufacture? It might be more profitable for a multinational in either Southeast Asia or North America. The key is which country has a long-term agreement with the U.S.  That’s why the USMCA is critical.

CTH still predicts POTUS Trump will eliminate the uncertainty as soon as the USMCA is ratified.  I suspect President Trump will drop massive tariffs on all Chinese goods.

Think of China like a big lake filled with U.S. economic value. Through his Asian discussions with Vietnam, S Korea, Malaysia, Singapore, Australia, Japan, et al, President Trump has stealthily built a thin levy, an ASEAN dam of sorts, that will direct the China lake of economic value into Southeast Asia.

Once the USMCA is signed, Trump will blow the dam by triggering the tariffs.  This will move all of the multinationals who are in a ‘holding pattern’, and capital investment will flow fast.   The China exodus will benefit North America (USMCA) and those ASEAN nations who have partnered with Trump and made proactive trade agreements.

This is the reason it is good to periodically get politicians out of the White House and elect a successful businessman.

The Ghost Of The Obama Administration

Breitbart posted an article today about trade agreements between the United States and Qatar. It seems that there are air trade agreements that Qatar is violating. Those violations were allowed under the Obama administration. Qatar would like to see those violations continue under the Trump administration.

The article reports:

Open Skies agreements are executive agreements, similar to treaties, between the United States and other nations regarding international air travel, designed to foster free-market competition and a level playing field for international flights. From trade, to commerce, to tourism, Open Skies requires each participating country to provide non-preferential access to their airspace, and requires airline companies to compete against each other to in terms of offerings, quality of service, and low prices, without government subsidies.

Breitbart News has previously reported on several Arab nations that were violating their Open Skies agreements with the United States, illegally subsidizing three Persian Gulf carriers. The Obama administration did nothing, and a group of NeverTrumpers tried to convince President Trump to do nothing as well.

President Trump’s team had other ideas. In January 2018, the Department of State announced a deal with Qatar to end violations involving Qatar Airways, and in May 2018, Secretary Mike Pompeo announced a deal with the United Arab Emirates (UAE) addressing the remaining airlines, Etihad Airways, and Emirates Airline. These were hailed as significant victories for American workers and the president’s America First agenda.

But it appears there may still be trouble with Qatar. And someone from the Obama administration has been implicated, apparently operating behind the scenes.

In late April of this year, the CEOs of all three of the top U.S. airline companies – American, Delta, and United – published an open letter to President Trump as an ad in the New York Times and New York Post, entitled, “President Trump: Please enforce our trade agreements to support U.S. airline workers.”

The article then goes on to explain the involvement of someone from the Obama administration in this matter:

Then three other airline companies – FedEx, Jetblue, and Atlas Air – sent a letter defending Qatar to Pompeo and also Transportation Secretary Elaine Chao. The April 16 letter pushes back against “false claims” and touts the need “to set the record straight.”

However, according to materials Breitbart News reviewed, it looks like someone forgot to remove the metadata from the document, showing who wrote the document. Because the metadata shows the letter sent by FedEx, JetBlue, and Atlas Air was actually written by Jenny Rosenberg.

Rosenberg is a lobbyist. But she formerly served as assistant administrator of the Federal Aviation Administration (FAA) and at another time served as acting assistant secretary for aviation and international affairs at the U.S. Department of Transportation – both stints during the Obama administration.

In other words, unless this document is a complete forgery or one of the CEOs’ personal secretaries happens to be named Jenny Rosenberg, an Obama White House political appointee is ghostwriting letters trying to persuade President Trump to ignore purported trade violations.

When the CEOs of American companies are asking the president to stand up for American companies against foreign interests who are undercutting American workers, someone who formerly held “senior executive positions” – that is how her company webpage biography puts it – to advance Barack Obama’s policy priorities is seeking to influence the President Trump’s White House, trying to persuade the current president that what is happening is consistent with his America First agenda, and that his Cabinet should ignore claims to the contrary.

If you are going to do something dishonest, it is wise not to leave your electronic fingerprints on it.

Laws Have Consequences

Yesterday The Conservative Treehouse reported that Toyota has announced the following:

  • By 2021, Toyota will now invest nearly $13 Billion in its U.S. operations with plans to add nearly 600 new jobs at American manufacturing plants
  • Hybrid versions of the popular RAV4 and Lexus ES to be produced in Kentucky for the first time
  • Production capacity increases and building expansions at Toyota’s unit plants in Huntsville, Alabama, Buffalo, West Virginia, Troy, Missouri and Jackson, Tennessee

The article states that this is a direct outcome of the NAFTA replacement USMCA trade deal; and the new 75% rule of origin within the Auto sector.

The article explains:

The guiding decision here relates specifically to the construct of the USMCA (NAFTA replacement).   Toyota was previously focused on multi-billion-dollar investments in Canada as they exploited the NAFTA loophole and procured component parts from Asia for North American assembly and shipment into the U.S. Market.  However, when they renegotiated NAFTA and created the USMCA President Trump and USTR Lighthizer closed closed the loophole.

The new USMCA agreement requires that 75% of automobile parts must be made in North America; and 45% must come from plants with minimum labor costs ($16/hr); or face tariffs to access the U.S. market with the finished good.  As a result Toyota has to either pay a tariff to continue importing Asian component parts, or move the higher-wage component manufacturing directly into the U.S.

Obviously, Toyota chose the latter.

The article explains that Toyota is not the first automobile company to respond to USMCA:

Keep in mind Toyota is not the first Auto manufacturer to respond with increased U.S. investment. Prior to the USMCA German auto-maker BMW began building a $2 billion assembly plant in Mexico. Under the old NAFTA plan most of BMW’s core parts were coming from the EU (steel/aluminum casting components, engines, transmissions etc.) and/or Asia (electronics, upholstery etc).

However, under the USMCA the Mexico BMW assembly plant has to source 75% of the total component parts from the U.S, Canada and Mexico; with 45% of those parts from facilities paying $16/hr.

The result was BMW needing to quickly modify their supply chain, build auto parts in the U.S. and Mexico, or they would end up paying a tariff on the assembled final product.

Like Toyota, BMW made the financial decision to open a new engine and transmission manufacturing plant in South Carolina…. exactly as Trump and Lighthizer planned.

And don’t forget Fiat Chrysler made a similar announcement in February: “The automaker says it will hire 6,500 workers and invest $4.5 billion by adding a new assembly plant in Detroit and boosting production at five existing factories.”

Like him or not, President Trump is a businessman who is doing things that are helping the American economy and the average worker.

President Trump Has Reached A Trade Deal With Canada And Mexico

America has not done well in trade deals in the recent past. Our manufacturing sector has suffered for a variety of reasons–high taxes, bad trade agreements, energy costs, etc. The Trump administration has begun to address these issues, sometimes more successfully than others.

This past weekend, Fox Business announced that the United States and Canada confirmed that they had reached a deal on a “new, modernized trade agreement,” which is designed to replace the 1994 NAFTA pact.

The article reports:

In a joint statement the two nations said the new deal would be called the United States-Mexico-Canada Agreement (USMCA).

Canadian Prime Minister Justin Trudeau said following a cabinet meeting, “It’s a good day for Canada.”

…The agreements reportedly boost U.S. access to Canada’s dairy market and protect Canada from possible U.S. autos tariffs.

Trump’s administration has said Canada must sign on to the text of the updated NAFTA by a midnight Sunday deadline or face exclusion from the pact. Washington has already reached a bilateral deal with Mexico, the third NAFTA member.

If Canada did not sign a new deal, Trump had threatened to impose steep tariffs on all automotive imports.

…Trump blames NAFTA for the loss of American manufacturing jobs and wants major changes to the pact, which underpins $1.2 trillion in annual trade. Markets fear its demise would cause major economic disruption.

Negotiators from both sides spent two days talking by phone as they tried to settle a range of difficult issues such as access to Canada’s dairy market and U.S. tariffs.

As part of any agreement, Canada looks set to offer increased access to its highly protected dairy market, as it did in separate pacts with the European Union and Pacific nations.

Access to Canada’s dairy market was one of the sticking points of the negotiations. Canada places high tariffs on imported dairy products in order to protect its dairy farmers.

This agreement is another indication of the Trump administration’s desire to protect the interests of America. America is simply looking for a level playing field in trade agreements. This treaty is one more step in that direction.

Good News For Indiana

Yesterday Breitbart reported the following:

U.S. Steel has announced that they will invest $750 million at their 110-year-old steel manufacturing plant known as Gary Works in Gary, Indiana, crediting President Trump’s protective tariffs on steel imports.

…“We are pleased to be making this significant investment at Gary Works, which will improve the facility’s environmental performance, bolster our competitiveness and benefit the local community for years to come,” Burritt said in a statement.

“We are experiencing a renaissance at U.S. Steel,” Burritt said.

That manufacturing renaissance for U.S. Steel comes after decades of free trade policies which incentivized American companies to readily outsource their labor force to foreign countries.

…Already, though, Trump’s tariffs have created 11,100 American jobs in six months. There have been 20 times as many U.S. jobs created because of the tariffs than those jobs that have been lost.

This illustrates why it is good to have a political outsider who is a businessman in the White House. The political establishment and the State Department would never have had the courage to reverse bad trade agreements. America cannot afford to support the world by making bad trade deals–we have serious deficits that we still have to deal with. We need to remember that when more Americans that are working, fewer Americans are depending on the government to support them. That alone cuts government spending.

The economic growth we are experiencing under President Trump is a vivid example of the fact that economic (and trade) policies matter. The elimination of unnecessary regulations combined with a tax code that is friendly to business have resulted in a degree of economic growth that Democrats told us was impossible. We need to remember who said that this couldn’t be done and vote them out of office. We then need to vote people into office who will support economic policies that result in economic growth.

Good News For America

American trade agreements have not worked in our favor. Many of our current agreements put American manufacturers at a disadvantage and cost American consumers money. One of the goals of the Trump administration is to level the playing field so that American goods compete on an equal level with foreign goods. President Trump has taken a lot of criticism for moving in this direction, but it seems as if he has made some very good moves.

The Conservative Treehouse posted an article today about some recent changes in some of our trading practices with our allies.

The article reports:

…Germany, without consulting with Emmanuel from France, just unilaterally announce the EU is willing to drop all trade tariffs against U.S. auto manufacturers as part of their strategy to fend-off steel, aluminum and crushing auto tariffs.

BERLIN—Germany’s leading auto makers have thrown their support behind the abolition of all import tariffs for cars between the European Union and the U.S. in an effort to find a peaceful solution to the brewing trade war.

The U.S. ambassador to Germany, Richard Grenell, brought the proposal for a broader industry trade pact to the Trump administration on Wednesday, according to people familiar with the situation.

That would mean scrapping the EU’s 10% tax on auto imports from the U.S. and other countries and the 2.5% duty on auto imports in the U.S. As a prerequisite, the Europeans want President Donald Trump’s threat of imposing a 25% border tax on European auto imports off the table.

[…] A French official said Paris was unaware of the proposal, and it wasn’t discussed during a recent summit between French President Emmanuel Macron and German Chancellor Angela Merkel in Meseberg, Germany. 

The article further explains:

All foreign automakers with limited U.S. operations are seriously concerned that Trump’s auto tariff threats will hurt their sales and profits, and the only way to avoid losing market share is to shift production investment into the U.S; or back into the U.S.

Strategery.

Back to Canada, and the ill-fated, now back-fired, scheme of Justin and Chrystia; standing naked and alone, as the reality of national economic interests has their former anti-Trump trade allies headed for the exits to save their industries.

Yikes, amid all of Canada’s uppity antagonism and demands for gender equity in NAFTA trade negotiations now they’re seriously exposed and more vulnerable than ever to Godzilla Trump and his “killers’.

This is definitely a ‘get out the popcorn’ moment.

Quote Of The Week

The Conservative Treehouse posted an article yesterday about the G7 meeting. I seriously doubt the American mainstream media will report this story correctly, but The Conservative Treehouse summed it up beautifully:

The underlying Trudeau trade premise is that the U.S. should be thankful for the products brought into the U.S. market by Canadians and Europeans. And Americans should express their appreciation through unilateral indulgence-fees for friendship. If President Trump does not agree to continue the cycle of abusive trade policies, the Europeans and Canadians might stop saying they are our closest and most valuable ally.

I think that about covers it!