Month: May 2019

Vice President Mike Pence may have assured Canadian Prime Minister Justin Trudeau that the Trump administration was “absolutely committed” to passing USMCA this summer, but that was before Robert Lighthizer infuriated Democrats by starting the clock on bringing legislation to ratify the treaty before Congress – and also before President Trump revealed his plans to impose tariffs on Mexican imports.

Millennials better stock up on their avocados before June 10.

The chances of USMCA passing were already looking tenuous, as Democrats have appeared reluctant to work with President Trump to facilitate what would be his biggest trade triumph to date. But now that Trump has angered Mexico and Democrats with the new tariffs, chances of USMCA passing have fallen from ‘low’ to ‘nearly zero’, according to a team of analysts at Goldman Sachs.

In a note to clients published on Friday, Goldman explained that it believes Trump will move ahead with 5% tariffs on Mexican imports on June 10 – at least that’s the bank’s base case, even as its analysts concede that Trump never followed through on threats to close the southern border.

And, assuming the tariffs do take effect, Democrats in the House will likely slow consideration of USMCA – likely missing the 90-day window for consideration triggered by Lighthizer on Thursday – and greatly increasing the chances that the deal won’t be ratified until after the 2020 election (thought Goldman still believes ratification is likely in the long run, given the support from the business community).

Read Goldman’s full note below:

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BOTTOM LINE: President Trump has announced the intent to levy a 5% tariff on all imports from Mexico effective June 10, rising by 5pp July 1 and every month thereafter until it reaches 25%. The President states he will remove the tariffs when Mexico “substantially stops the illegal inflow of aliens coming through its territory.” The White House yesterday (May 30) also submitted draft USMCA text to Congress; Canada and Mexico also just took steps to begin legislative consideration of their implementing legislation. We view this as an attempt to show action on the immigration issue while also pressuring congressional Democrats to pass USMCA. While still possible, enactment of USMCA prior to the 2020 election would no longer be our base case if these tariffs are implemented as proposed.

MAIN POINTS:

1. President Trump has announced the intent to levy a 5% tariff on all goods entering the US from Mexico effective June 10. The tariff would increase by 5pp on July 1 and every month thereafter until the President determines that Mexico “substantially stops the illegal inflow of aliens coming through its territory.” Given the specific and near-term implementation date the President cites, we believe at least the first tariff at 5% is likely to be implemented as stated. That said, we note that another of the President’s proposed immigration actions – closing the US-Mexico border – was also threatened but never implemented. The odds of this tariff are at least somewhat higher, we believe; while the tariff would be highly disruptive, it would be less so than full closing of the border would have been, and also has been proposed in a more specific way.

2. This action is also linked to congressional consideration of USMCA, in our view. While there had long been a possibility that the President would announce the intent to withdraw from NAFTA as a means of pressuring Congress to pass USMCA—and it is still possible he could do this—the proposed tariffs might also be intended to put pressure on Congress to pass USMCA. The White House sent draft text to Congress yesterday (May 30) to trigger the first procedural step for consideration. However, it is extremely unlikely that Congress would take any action on USMCA prior to June 10. Congress must wait 30 days to introduce the formal legislation, and would likely need at least a few more weeks to pass it (the Trade Promotion Authority (TPA) process limits consideration to 90 legislative days).

3. If the tariffs take effect, we believe this would make USMCA ratification less likely to occur prior to the 2020 election. We have believed that House Democratic leaders would be inclined to eventually allow USMCA passage – primarily with Republican votes but a substantial number of Democrats – because of substantial support from the business community and because the TPA process requires the House to vote on the measure, so simply declining to address the matter is not an option. However, if these tariffs take effect, we expect Democratic leaders to slow USMCA consideration, which would lower the odds of enactment this year and, we believe, prior to the 2020 election since enactment in an election year is likely to be difficult. Moreover, we expect that Mexico will slow its ratification process if tariffs are in place.

4. The US imported $352bn in goods from Mexico in 2018, and exported $265bn. At a 5% tariff rate, this would generate roughly $18bn in tariff revenue annually, well under the $62bn that the 25% tariffs already in place on $250bn in imports from China will raise at an annual rate. The largest categories of imports from Mexico are autos and auto parts ($93bn), computers ($27bn), routers ($10bn), and other electronics ($17bn), and other categories shown below in Exhibit 1. Some products from Mexico account for a substantial share of imports in that category, such as air conditioners (44%) and TVs (35%). If tariffs on imports from Mexico as well as tariffs on List 4 imports from China are imposed, then a significant majority of US imports of some products would be subject to additional tariffs, such as computers and equipment (79%), TVs (84%), personal electronics (79%), and others.

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And for reference, here’s a breakdown of what the US imports from Mexico (it’s unclear which line encompasses the avocado trade, but in 2017, the US imported $2.6 billion of avocados from Mexico).

 

via ZeroHedge News http://bit.ly/2Z0nlok Tyler Durden

Authored by James Howard Kunstler via Kunstler.com,

You’d think that Robert Mueller might know what any licensed attorney-at-law in the land tells a client in a tight spot with a lame alibi: better keep you mouth shut. Instead, Mr. Mueller crept Sphinx-like out of the Deep State woodwork on little cat’s paws and in a brief nine minutes blabbed out a set of whopperish riddles much more likely to get himself in trouble than the target of his hinky inquisition.

The key whopper was that he could not make “a determination” on an obstruction-of-justice charge against Mr. Trump because guidance policy from the DOJ’s Office of Legal Counsel had said some years ago that a sitting president can’t be indicted. That is not what he told his boss, Mr. Barr, the Attorney General (and a roomful of the AG’s staffers who heard it), in person when he delivered his final report a few weeks ago.

Upon receipt of that report, Mr. Barr asked the Special Counsel three times whether his inability to conclude anything on an obstruction charge was due to the OLC guidance, and three times Mr. Mueller answered “no.” Mr. Barr relayed this on-the-record in testimony before the House Judiciary Committee and, as averred above, he has plenty of witnesses. It should not be hard to reach a determination on who is telling truth here.

In fact, Mr. Mueller could have declared that he found chargeable obstruction crimes were committed based on the evidence, and also demurred to press them at this time — leaving them available to federal prosecutors until after the president was out of office, one way or another. The reason he didn’t is that Mr. Mueller does not want the case to come to trial, ever, because he would lose badly and his reputation would be destroyed. Consider that in any trial, the defendant gets to call witnesses and make his own case. The evidence for gross prosecutorial misconduct on the part of Mr. Mueller and his associates is mountainous compared to the molehill of Mr. Trump’s temper tantrums over the seditious hoax he was subject to. And that matter is now moving in the direction of adjudication.

So instead, Mr. Mueller has set in motion a potential political crisis as momentous as the Civil War, but completely unlike it. Knowing that congress can impeach the president on just about anything — especially this president, publicly reviled like no other before him — he served congress the platter of material to use in the form of his final report, and pretty much dared them to not go forward with it. Get this: it is a ruse. The object is solely to divert the nation’s attention with an impeachment circus, allowing Mr. Mueller to slip away harmlessly into history without sacrificing his own reputation in a courtroom.

Do you have any idea what a fiasco this set-up is? I will tell you.

The US government itself will be discredited and crippled. At one end of Pennsylvania Avenue, you’ll have the impeachment circus in which the misdeeds of the RussiaGate perpetrators will be revealed in all their naked political indecency; and at the other end of Pennsylvania Avenue you’ll have many of the same government officials involved in all that indecency marched into courtrooms to be tried by Mr. Barr’s prosecutors on charges possibly as grave as treason. On the sidelines, you will see something like a fight to the death between the White House and the rogue leviathan that the nation’s “intel community” has grown into — like the ghastly, slime-dripping creature that stowed away on the spaceship Nostromo in the horror movie Alien.

In his farewell performance, Mr. Mueller declared that he considers himself unavailable to testify before congress in whatever proceedings they convene going forward. That’s rich. If you take him at his word, he said that if called, he would simply refer to his 448 report, where all the mysteries of existence may be found — like the Old Testament Yahweh laying his Good Book on the table before the cringing multitudes. It will surely come as a surprise to Mr. Mueller that he is actually not Yahweh with such supreme powers, but a mere mortal who has fucked up mightily in the service of an earthly political conspiracy. In the event, he may find himself citing not his fabulous RussiaGate report, but the Fifth Amendment to the constitution.

That’s what we have to look forward to in the months leading up to the 2020 election, if it can even take place during what may be an epic paralysis of government verging on sickening collapse.

via ZeroHedge News http://bit.ly/2QH2W4I Tyler Durden

Pro-Tesla blog electrek is starting to allude to another “red pill” reality that many skeptics have long thought the company may soon face: Elon Musk’s top lieutenant and Tesla CTO J.B. Straubel doesn’t appear to be coming around his Palo Alto office too much anymore.

In addition, he is not waiting for Tesla stock to appreciate further to hit the bid, having sold about ~$3 million worth in TSLA shares after exercising a slug of options recently. As the blog post notes, the options recently sold were not set to expire until 2022. Straubel’s sales now hardly do anything to inspire confidence – perhaps this could be because Straubel may be on his way out?

According to the report, two sources who have worked with Straubel  said that his presence at Tesla’s headquarters in Palo Alto has been “scarce” over the last 6-8 months. 

Despite his absence at headquarters, he did appear on the company’s most recent conference call. Straubel has led numerous battery and power electronics initiatives for Tesla during his time there and had been considered by many to be Musk’s second in command.

As the article notes, Straubel has been “credited with bringing Elon Musk on board and therefore, he technically predates Musk at the company.” Recall, it was about one year ago that safe harbour language that associated key person risk with Straubel by name was removed from Tesla’s SEC filings. 

From the company’s 10-K, filed in February 2018:

If we are unable to attract and/or retain key employees and hire qualified personnel, our ability to compete could be harmed.

The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our vehicles and services, and negatively impact our business, prospects and operating results. In particular, we are highly dependent on the services of Elon Musk, our Chief Executive Officer, and Jeffrey B. Straubel, our Chief Technical Officer.

None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business. Our future success depends upon our ability to attract and retain executive officers and other key technology, sales, marketing, engineering, manufacturing and support personnel and any failure to do so could adversely impact our business, prospects, financial condition and operating results.

And from subsequent filings:

If we are unable to attract and/or retain key employees and hire qualified personnel, our ability to compete could be harmed.

The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our vehicles and services, and negatively impact our business, prospects and operating results. None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business. Our future success depends upon our ability to attract and retain executive officers and other key technology, sales, marketing, engineering, manufacturing and support personnel and any failure to do so could adversely impact our business, prospects, financial condition and operating results.

The loss of Straubel could amount to the most meaningful executive departure at Tesla thus far, despite the litany of executives who have already left. We think electrek’s take on the situation says it all:

Of all the things that happened at Tesla over the last few months, learning from two reliable sources that JB was making himself scarce lately was definitely one of the most worrying to me.

He always seemed to be an important reason behind Tesla’s long-standing technology lead in the EV space.

Tesla did not respond to electrek for a comment. 

via ZeroHedge News http://bit.ly/2Xi1uIl Tyler Durden