“Blow For Blow” US-China Trade Spat Expected To Become “War Of Attrition”

Every investor and fund on Wall Street is trying to discern where the blossoming trade dispute between the US and China will go next now that the first punches have finally been thrown. The US has already threatened to issue another “tit” for China’s “tat”, which China announced on Friday by unveiling a slate of tariffs to be unveiled in two stages, not unlike the US tariff rollout. So, while we await the Trump administration’s next salvo, Bloomberg is reporting that most analysts are expecting the battle to be “a war of attrition” – meaning things will get much worse before they get better.

Analysts increasingly expect the confrontation to be a war of attrition. While China has shown a willingness to make a deal on shrinking its trade surplus with the U.S., it has made clear it won’t bow to demands to abandon its industrial policy aimed at dominating the technology of the future.

“The Chinese view this as an exercise in self-flagellation, meaning that the country that wins a trade war is the country that can endure most pain,” said Andrew Polk, co-founder of research firm Trivium China in Beijing. China “thinks it can outlast the U.S. They don’t have to worry about an election in November, let alone two years from now.”

Contrary to what the “analysts” have decided, it’s equally likely that the Trump Administration knows Xi Jinping would never cave and scale back the state-mandated “Made in China 2025” initiative, and is hoping instead to use this demand as a tool to coax the Chinese into delivering a larger trade-deficit reduction…unless we misunderstand the precepts of Game Theory.

Trade

Whatever their expectations, it appears politicians, analysts and the media have united in their insistence that whatever is happening right now between the world’s two largest economies is “not a trade war”. We are only ever “approaching” a trade war…because admitting that one has already arrived would seriously spook the market.

The two nations moved to the brink of a trade war on Friday after the Trump administration announced new tariffs on imports would take effect from July 6. A 25 percent tariff will be imposed on $34 billion in goods imports, with further duties on another $16 billion in imports under consideration. In response, China said it would charge tariffs of the “same scale and intensity” on goods from the U.S., adding that all trade commitments made during the previous weeks of negotiations are now off the table.

“We could be dangerously approaching such a trade war,” Jack Reed, the ranking Democrat on the Senate Armed Services Committee, told Fox News Sunday.

Bloomberg also pointed out this morning that China’s “arsenal of potential retaliatory measures” to the US’s trade tactics is wider than the US’s. As stated above, Chinese politicians don’t need to worry about elections, and the Chinese people are largely united in their support of China beating back what they consider American aggression.

Aside from slapping tariffs on American products, China’s arsenal of potential retaliatory measures is formidable, and it could inflict heavy punishment on the more than $200 billion of investment by American companies in China. Increased safety inspections and delays in approving imports are possible tools, as is consumer boycotts of American goods sold in China’s rapidly growing retail market, or stemming a flow of free-spending tourists to the U.S.

China’s punishment of South Korea for allowing the U.S. to station a missile defense system on the peninsula cost that nation billions of dollars, and it has used similar tactics against the Philippines and Japan as well. China also has a pivotal role in Trump’s goal of disarming North Korea because without its participation, sanctions have little chance of success.

“We have very legitimate reasons to be concerned about China’s trade practices,” Susan Rice, former national security adviser to President Barack Obama, told CNN’s Fareed Zakaria GPS on Sunday. “But the way to resolve this is not at the expense of American workers and manufacturers and farmers, by getting into a trade war that has potential, real global ramifications.”

And, as we noted over the weekend, Chinese officials haven’t been shy about warning US corporations about the potential consequences of a trade war if the administration continues to ignore pleas from the business community. In addition to all of the tactics cited above, China could also follow Russia’s lead and sell a large chunk of its Treasury holdings.

In a longer-term, worst-case scenario, there also are actions such as selling down its massive stockpile of U.S. treasuries or devaluing the yuan, moves that would send shock waves through global markets.

But one factor that could complicate this trade “skirmish” (or whatever you want to call it) is the fact that, as one analyst who spoke with Bloomberg pointed out, the US’s aggressive trade policies are part of a larger “technology arms race” with China as the two countries compete on building better AI and more advanced communications technology (the race for 5G is probably the best example). 

Trade is just a way to contain China from moving up the technology ladder, according to Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis SA in Hong Kong. Trump’s ‘America First’ policy is against every nation, but it includes a tech arms race against China, and China will respond by trying to build ties with other nations, and buying technology from wherever it can, she said.

And when the issue is framed this way, it’s much easier to imagine it spiraling out of control into a second cold war…or possibly even a military conflict. Because while analysts have fixated on the trade dispute “tit for tat”, a much more alarming military “tit for tat” is unfolding over the South China Sea, as China and the US trade military exercises and provocative “freedom of navigation” operations. China recently carried out a live-fire anti-aircraft drill over the disputed area using dummy “target drones”.

via RSS https://ift.tt/2JWubHo Tyler Durden

“Can’t Work With That Woman Anymore”: On Her “D-Day” Merkel Is Given A Two-Week Ultimatum

Adding insult to injury, one day after Germany’s historic loss to Mexico, Europe’s most important country is facing the “Destiny Day” to a political crisis like no other in recent history.

For almost 13 years as chancellor, Handeslblatt writes this morning, Angela Merkel managed to outmaneuver all rivals, schemers and plotters. But her time could finally be up.  Two of her Christian-Democratic predecessors, Konrad Adenauer and Ludwig Erhard, fell from power not after losing the electorate, but after losing the support of their own parliamentary bloc. That may now be Merkel’s fate, too.

Today, the top brass of her party, the CDU, and its Bavarian frenemies, the CSU, are meeting separately in Berlin and Munich, to agree on a common course about the coming days and weeks, however chances of a deal appear increasingly remote: according to Handelsblatt, Horst Seehofer, the CSU’s boss, federal interior minister and perennial Merkel gadfly, told one newspaper that he “can’t work with that woman anymore.

Horst Seehofer and Angela Merkel. Photo: DPA

The issue is, as it has been since the crisis of 2015, refugees.

If Seehofer, acting as interior minister, really starts turning back asylum seekers at the border, this will count as open insubordination to Merkel. She would have to fire him. That would probably lead to a break between the CDU and CSU, which would cost their governing coalition with the Social Democrats its parliamentary majority.

Merkel would step down or be forced out.

Which is why, on Sunday Germany’s Bild said that Monday is “destiny day for Angela Merkel. For the government.

As we discussed previously, Seehofer has been one of the fiercest critics of Merkel’s liberal stance that allowed a million asylum seekers into Germany since 2015. Heading into Monday, the interior minister wanted to turn away at the border new arrivals who have previously been registered in another EU country, often their first port of call, Italy or Greece, a proposal which however is a non-starter with both Italy and Greece.

But Merkel is firmly opposed, warning that it would leave countries at the EU’s geographic southern periphery alone to deal with the migrant influx. Instead, she wants to find a common European solution at the June 28-29 EU summit.

It is hardly a secret that popular misgivings over the massive migrant influx have given populist and anti-immigration forces a boost across several European nations, including Italy and Austria where far-right parties are now sharing power. In Germany, voters handed Merkel her poorest score in September’s elections while giving seats for the first time to the far-right anti-Islam AfD. The latest poll released this morning did not help: a Forsa poll commissioned by RTL and ntv, showed that in the wake of the refugee debate, German CDU/CSU lost 4% points, as voter support for CDU/CSU slipped to 30%, the lowest since the federal elections.

  • CSU in Bavaria falls to 36%
  • Coalition partner SPD down 2 ppts to 16%
  • AfD at 15%
  • Greens at 14%; FDP at 10%; Left party at 9%; Other parties in total 6%

Several high profile crimes by migrants, including the 2016 Christmas market attack by a failed Tunisian asylum seeker as well as the recent rape-murder of a teenage girl allegedly by an Iraqi, have also helped to fuel anger. The case of a German teenager who was believed to have been stabbed to death in a supermarket by her Afghan asylum seeker boyfriend is due to be heard in court on Monday. With an eye on October’s Bavaria state election, the CSU is anxious to assure voters that it has a roadmap to curb the migrant influx.

As such, Seehofer’s “masterplan” on immigration was meant to be the showpiece of the CSU’s tough stance against new arrivals.

But the interior minister was forced to cancel a planned presentation of his vision after Merkel disagreed with his proposal to turn some asylum seekers away at the borders, sparking last week’s dramatic escalation of discord within the conservative bloc. For all the noise, the CSU knows that there is more at stake.

On Sunday, Seehofer struck a more conciliatory tone when he told Bild that “it is not in the CSU’s interest to topple the chancellor, to dissolve the CDU-CSU union or to break up the coalition” adding that “we just want to finally have a sustainable solution to send refugees back to the borders.”

Which brings us to Monday, when Seehofer’s CSU met on Monday to decide which course to take. As the Local de reported, he had the nuclear option of seeking approval to shut Germany’s borders immediately in defiance of Merkel, or the less aggressive choice of giving her an ultimatum of two weeks to sort out a deal with other EU nations.

Signalling that he is leaning towards the latter option, Seehofer wrote in a column in Frankfurter Allgemeine Zeitung that “it is essential that the EU summit takes a decision at the end of June. “The situation is serious but still solvable,” he wrote. Of course, whichever option he chooses, the ball will land in Merkel’s court.

* * *

Then, moments ago, DPA reported that Seehofer indeed gave Merkel a two week ultimatum until the end of June to agree Europe-wide migration rules. After the deadline, if Merkel is unable to get EU countries to approve a solution within the deadline, comprehensive refusals of migrants at borders will begin, which will ultimately begin a chain reaction which will likely end will the collapse of Merkel’s government, and the end of her political career.

To be sure, having been given a two-week ultimatum, Merkel now faces the Herculean challenge of persuading EU governments to sign up to a common plan on the migrants.

Good luck with that: central and eastern EU nations such as Hungary and Poland have either refused outright or resisted taking in refugees under an EU quota system that has essentially floundered. A populist-far right government in place in Italy, as well as the conservative-far right in power in neighbouring Austria, have also taken an uncompromising stance on immigration.

Meanwhile, despite howls of protests from aid groups and even the United Nations, Rome has banned rescue vessels carrying migrants from docking.

* * *

What are the next immediate catalysts? Merkel’s talks on Monday evening with Italian Prime Minister Giuseppe Conte could prove crucial, if she is to have any chance of finding concordance in Brussels. Then, on Tuesday, Merkel will meet with French President Emmanuel Macron.

Berlin is also reportedly preparing to call a meeting between Merkel and the leaders of several EU frontline nations in the migrant crisis ahead of the Brussels summit.

Underlining the unenviable task ahead for Merkel, Welt daily said “it would be almost a miracle if she emerges a winner from the next EU summit.”

Which is why, one month from today, Germany may be faced with a summer of discontent: not only does it now look increasingly unlikely that the German team will not play in the July 15 World Cup final (if its game against Mexico was any indication of what to expect), but it is increasingly likely that Angela Merkel will be absent at the final game as well.

In other news, we can’t wait until this latest European scandal resulting from Merkel’s own “progressive” politics and liberal vision is somehow blamed on Putin too.

via RSS https://ift.tt/2JL39U1 Tyler Durden

Mom Brings Coughing 10-Month-Old to the Hospital. Days Later, Cops Take the Baby.

BabyOutraged by cases of child protective services taking children from their competent, loving parents on flimsy medical grounds, a group in Minnesota has filed a motion in federal court to do what their organization’s name suggests: “Stop child protective services from legally kidnapping children.”

Fox 9 reports that Dwight Mitchell, the founder, had his child taken away from him “unfairly” for 22 months. His group now has over 1,000 members. One of them is Amanda Weber, whose son was taken from her for a week after she brought him to the hospital to be examined for a cough:

The doctor deemed him stable and notes show the diagnosis was, in fact, a cough. However, the recommendation was that the patient should have stayed. Weber took him home.

“After waiting, I had asked to leave because I wanted to put my kids to bed and I had my three-year-old with me and I asked if there was anything else that had to be done,” said Weber. “They said ‘No, there was no other testing or anything that needed to be done.'”

In a couple of days, police were at her door and took Zayvion to the doctor.

“She checked him out, all his vitals were stable,” she said. “They already had a foster parent in the room, in the room to remove my son before they ever proved … before they ever proved there was an emergency situation.”

This practice—overly suspicious government officials seizing children from their parents—isn’t confined to Minnesota. In Chicago, a mom named Stephanie took her toddler, “A,” to the doctor because the girl’s arm seemed tender. The doctor said it was probably just a case of “nursemaid’s elbow,” but suggested mom follow up at the hospital, where it was discovered that the girl had a fracture. Emergency room doctors assured Stephanie that fractures were very common in toddlers learning to walk. However, the one doctor on staff who specialized in “child abuse pediatrics,” thought otherwise.

The Family Defense Center in Chicago took the case. In its newsletter, the group writes that the Department of Child and Family Services allowed the child to go home:

….but only on the condition that Stephanie move out of her own home and have supervised contact with A. Because Stephanie has no relatives in Chicago, her parents flew to Chicago each week from the San Francisco Bay Area to care for A. This exhausting ordeal continued for nearly four months.

During the investigation, DCFS blatantly ignored the opinions of the leading orthopedists and relied exclusively on the child abuse doctor’s opinion. In March, the State’s Attorney’s office filed a petition to take custody of A., initiating a court proceeding that lasted for two and a half months.

Finally, in mid-May, the State’s Attorney’s office concluded that it did not have enough evidence to proceed further, and it asked the juvenile court judge to dismiss the petition. Eventually, the “child abuse” doctor rescinded his conclusion that abuse had caused the fracture.

While the Minnesota group would like CPS to shut down immediately on the grounds that its practices are unconstitutional, there are, of course, horrific tales of children truly abused by their caregivers. In those cases, CPS can save lives.

Emily Piper, commissioner of Minnesota’s Human Services, released a statement saying:

Every day, trained professionals in counties across Minnesota go to work to protect our children and families. To call their work ‘kidnapping’ is an affront to the extraordinary service they perform for all of us, particularly the most vulnerable children in our community. Our highest priority is keeping children safe and Minnesota’s child protection system is an integral part of that work.

Mitchell, the Minnesota dad who started the anti-CPS group, thinks financial concerns improperly influence the agency’s practices. He told Fox 9, “[CPS] can’t even start collecting the money until the child is taken out of the home, put into foster care, then they can start billing a minimum of one social worker a month and one supervisor a month per child.”

Diane Redleaf, legal director of the National Center for Housing and Child Welfare and author of the forthcoming book, They Took the Kids Last Night: How the Child Welfare System Puts Families At Risk, summed up the problem in an email to me:

Far too many children in far too many states are being taken from parents for reasons that defy logic and common sense, magnified by racial and class biases. Instead of supporting reasonable parent decisions, child protective services has become an integral part of the surveillance society. This has become especially insidious where health care providers work hand in hand with police and caseworkers when children show up for routine or not-so-routine care.

We need to get back to a system in which only cases in which there is clear and convincing evidence of serious imminent harm to the child at the hands of the parent [warrant intervention]. The Minnesota parents are simply demanding a child welfare system that protects children and families—something that is everyone’s right.

The answer is to stop incentivizing both worst-first thinking and the seizure of kids whose loving parents are just trying to do their best.

from Hit & Run https://ift.tt/2yieaak
via IFTTT

Preview Of Friday’s “All-Important” OPEC Meeting

Heading into Friday’s much anticipated OPEC meeting in Vienna, the focus has shifted from (declining) global demand-side concerns to specific supply-side actions, and while it is broadly expected to conclude with an oil production increase –  the first since the historic production cut agreement in late 2016, is set to be contentious with members Iran, Venezuela and Iraq arguing against a hike proposed by Saudi Arabia and non-member Russia.

Here is a brief summary of what to expect:

  • Weekend reports noted that Russian Energy Minister Novak stated OPEC and non-OPEC countries will discuss raising oil
  • output by 1.5MMb/d in Q3 only.
  • Russian Energy Minister Alexander Novak said June 14 that a collective increase of as much as 1.5m b/d is being considered in conjunction with Saudi Arabia.
  • Meanwhile, Iran said on Sunday that 3 OPEC members – Iran, Iraq and venezuela – would veto the proposed increase.
  • That counters Saudi Arabia’s oil minister who said on June 14 that it’s “inevitable” that OPEC and its allies will decide to boost output gradually.
  • Saudi officials have been discussing different scenarios that would raise production of OPEC and allied producers by between 500k b/d and 1m b/d, people familiar with the matter said last week.
  • However, countering this, a Monday morning report from Bloomberg noted that OPEC is said to discuss an output hike of only 300k-600k bpd, while Saudi and Russia are said to work on making the oil alliance permanent. Furthermore, OPEC members are said to be looking for a compromise to overcome the Iran dissent
  • According to a Bloomberg survey, OPEC and allies will probably boost output:
    • 18 out of 31 analysts predicted an increase in the June 12 poll
    • Most predicted +500k b/d; range was +180k to +1m
  • Bloomberg tanking-tracking analysis on June 15 showed Iranian oil exports dipped in the first half of June, a sign that President Trump’s re-imposition of sanctions may be deterring buyers

In terms of Vienna logistics:

  • OPEC’s International Seminar is Wednesday, Thursday, with participation of all OPEC ministers, CEOs of Sonangol, BP, Total, among others. Click here for program.
  • OPEC’s formal, policy-setting ministerial meeting is on Friday, including a session that involves certain non-OPEC nations.

Finally, with Trump making increasingly louder noises that he won’t accept higher oil prices (most recently last week), and warning OPEC not once but twice on Twitter to produce more, it is no surprise that WTI dropped to its lowest price in the past month in the overnight session, although it has since rebounded modestly on hopes the OPEC production cut could be smaller than expected.

via RSS https://ift.tt/2JNsRaD Tyler Durden

Stop Trying to Get Workers Out of Their Cars: New at Reason

If you hate urban sprawl, you’re probably familiar with the complaints of the “smart growth” movement: Roadways blight cities. Traffic congestion is the worst. Suburbanization harms the environment. Fortunately, say these smart growthers, there is an alternative: By piling on regulations and reallocating transportation-related tax money, we can “densify” our urban communities, allowing virtually everyone to live in a downtown area and forego driving in favor of walking or biking.

Smart growth proponents have been gaining influence for decades. They’ve implemented urban growth boundaries (which greatly restrict the development of land outside a defined area), up-zoning (which tries to increase densities in existing neighborhoods by replacing single-family homes with apartments), and “road diets” (which take away traffic lanes to make room for wider sidewalks and bike lanes).

Alas, there are inherent flaws in the “smart growth” approach—beginning with the idea that it makes sense for everyone to live and work in the same small area, writes Bob Poole in the latest issue of Reason.

View this article.

from Hit & Run https://ift.tt/2Mzt277
via IFTTT

Audi CEO Arrested As Diesel-Emissions Scandal Spreads

Munich prosecutors have arrested Audi CEO Rupert Stadler, also a member of parent company Volkswagen’s board, on concerns he might try to suppress evidence, in what is the highest-profile arrest of a Volkswagen executive since the diesel emissions scandal exploded into public view nearly three years ago.

The arrest comes a month after Audi admitted that another 60,000 A6 and A7 models with diesel engines could have “software emissions issues,” and more than two months after Volkswagen CEO Matthias Mueller stepped down and was replaced by Herbert Diess, formerly the CEO of the company’s core VW unit, according to the BBC.

While former VW Group CEO Martin Winterkorn has been charged by US authorities, Stadler is the first executive to be taken into custody, and perhaps it’s about time: the emissions scandal provided ample evidence that Volkswagen had probably the worst executive oversight in Europe, and that a real criminal conspiracy had unfolded in the highest ranks of the company. The only real surprise is that it’s taken this long: US authorities blew the lid off the company’s emissions test-defeating software in September 2015 – nearly three years ago. Since then, the scandal has spread from the VW unit to other Volkswagen subsidiaries, and beyond: BMW and Daimler have also faced allegations of emissions cheating, as has American car maker General Motors.

Stadler
Audi CEO Rupert Stadler

More surprising still has been Volkswagen’s steadfast support of Stadler, who retained the backing of his fellow board members, including the influential Porsche-Piech families that own majority voting rights in Volkswagen, according to the Financial Times. The arrest was first reported in Germany’s Der Spiegel

The company issued a statement on Stadler’s arrest to Reuters.

“We confirm that Mr Stadler was arrested this morning. The hearing to determine whether he will be remanded is ongoing,” the spokesman said, adding that the presumption of innocence applied to Stadler’s case.

The CEO has previously survived calls by minority shareholders to step down, and yet in the face of threats the company not only defended Stadler, it extended his contract and promoted him to the head of a new “premium” cars division. The new role gave him sales responsibilities group-wide. The company will likely continue to stand by him as lawyers haggle for his release.

The company maintains that there’s no evidence to suggest Stadler knew of the cheating, though after Munich prosecutors raided Stadler’s apartment (and one other Audi boardmember) they named Stadler as a suspect. They’ve also said they’re investigating 20 suspects whom prosecutors believe were aware of Audi’s diesel engine scheme.

In light of today’s development, expect more imminent arrests as it is unlikely, given the number of Audi employees currently under investigation, that this will be the last shoe to drop.

via RSS https://ift.tt/2M0BA5W Tyler Durden

How Trump’s Republican Party Went Soft on Communism: New at Reason

If you had told Ronald Reagan in 1988 that in 30 years, the president of the United States would be chummy with communist dictators in China and North Korea, eager to please a brutal Kremlin autocrat, and indifferent to the needs of our military allies, he might have said: That’s what you get for electing a Democrat.

Today’s Republicans, writes Steve Chapman, make up a party he wouldn’t recognize. For decades, the Russians and Chinese dispatched spies and enlisted American sympathizers to try to harm the United States and tilt its policies in their favor. Under Donald Trump, they don’t have to. They have a friend in the Oval Office.

View this article.

from Hit & Run https://ift.tt/2LZNTzf
via IFTTT

Global Stocks, Futures Tumble On Trade War, Merkel Shock; Oil Volatile Ahead Of Meeting

Global stocks and US index futures are a sea of red this morning amid growing concerns over the escalating trade war between China and the U.S., which on Friday launched tit-for-tat $50BN in tariffs, coupled with the growing risk that Merkel’s government is on the edge of collapse.

As Bloomberg notes, it’s pretty risk-off this morning no matter where you look: it’s blow for blow in the U.S.-China trade spat sending European and Asian stocks sharply lower, metals have been melting, EM currencies remain under pressure with Argentina’s peso sinking further.

Global trade is (once again) back at the top of the wall of worry, with investors afraid that the confrontation between the U.S. and China can escalate out of control, hitting both the global economy and corporate earnings. On Friday, China immediately responded after President Donald Trump slapped tariffs on $50 billion of imports, putting an additional 25 percent levy on $34 billion of U.S. agricultural and auto exports starting July 6.

“Up to now it’s been hypothetical; action has been taken, tariffs are coming and you need to pay very, very careful attention to the impact it’s going to have on your holdings,” Bank of Singapore Chief Investment Officer Johan Jooste told Bloomberg Television. “There are too many unknowns right now to be terribly specific. The thing you do know is risk is higher. The market will take something of a cautionary stance.”

Analysts expect the U.S.- China confrontation to be a war of attrition: while China has shown a willingness to make a deal on shrinking its trade surplus with the U.S., it has made clear it won’t bow to demands to abandon its industrial policy aimed at dominating the technology of the future.

Looking ahead, as a reminder on Friday Reuters reported the US may impose higher tariffs on an additional $100bn of Chinese imports. If this triggers another round of actions from China, then this second round of trade war will likely be much more damaging for both sides. According to DB, this could reduce China’s GDP growth by c0.3% of GDP, but importantly, the US tariff list will likely include big item consumer goods such as phones, computers, TVs etc, which could mean a lot more workers in China and US consumers would be negatively affected. If this second scenario eventuates, economists expect China to loosen policy such as tolerating the property and land market boom in tier 3 cities and cutting the RRR twice over the rest of this year to partly offset the potential drags

In Europe, Angela Merkel’s political future is on the line amid a crisis over Germany’s migration policy, while U.K. prime minister Theresa May seems cornered by Brexit foes. Meanwhile, there is some confusion over Europe’s grand MiFID II overhaul on market transparency: according to Robert Ophele, chairman of French market regulator Autorité des Marchés Financiers, the jury is still out, given the “surprise” surge in off-exchange trading.

As a result, the Stoxx 50 is down -0.9%, with the rebound in the Euro not helping export-heavy Germany. The DAX is the clear underperformer, down -1.3%, with Germany’s political drama the main source of angst this morning. The FTSE 100, with its heavier weighting of energy and metals vs other European indices, is falling in line with peers, which however according to Bloomberg implies that neither Brexit nor the possible clash at Friday’s OPEC meeting are rattling energy shareholders that much.

In Asia, markets were closed for the holidays in China and Hong Kong, but Japan’s Topix Index fell the most in almost three weeks as the yen edged higher and after a strong earthquake hit Japan’s industrial heartland of Osaka.

Oil tumbled below $64 initially, after Saudi and Russia signaled global output would continue to rise while the US-China suggested Chinese demand could decline.

However, oil then promptly rebounded ahead of this Friday’s key OPEC meeting, following a Bloomberg report that OPEC was discussing output hikes of only up to 600,000b/d, well below earlier rumors of as much as 1.5mmb/d.

In global FX it has been a quiet session, with Sweden’s ensuing World Cup football encounter probably more discussed at trading desks than major currencies (at least according to Bloomberg’s Love Liman). The dollar tried and failed to build on gains soon after the London open but made no progress even though the euro was held was down by concerns surrounding the fate of Merkel’s ruling coalition. The Bloomberg Dollar index slumped to session lows not long after it hit session highs around the time Europe opened. The EUR first slumped, erasing all of Friday’s gains, however, then rebounded back over 1.16 after Europe opened for trading.

Looking ahead, it could be the dollar that benefits from this week’s gathering of central bankers in Sintra, Portugal, given a renewed focus on the widening gap between monetary policy in the U.S. and the euro area, Credit Agricole says (and to think it was just a year ago that Draghi’s Sintra speech sent the Euro soaring higher). In other G-10 FX, the Yen strengthened as Osaka earthquake adds pressure from trade wars on Japanese stocks; Topix index declines 1%.

Meanwhile in EM, the Thai baht, the South Korean won and the Philippine peso led weakness in emerging Asian currencies as rising trade tensions between the U.S. and China escalated against a backdrop of a strengthening U.S. dollar.  Elsewhere, the South African rand’s implied volatility against the USD is rising at a faster rate than actual price swings, indicating that traders are anticipating a wild ride ahead for South Africa’s currency. After falling to a three-year low in April, the rand’s three-month implied volatility has climbed as crises in Turkey and Argentina soured sentiment toward emerging markets and rising U.S. rates attracted capital to the dollar, and is now at the highest since December.

Surprisingly, the Turkish lira was today’s outperformer, as it started the week with heavy swings and bond yields climbed to a record high ahead of the country’s presidential and general elections on Sunday. The strength may not last: “The external backdrop is not conducive for risky assets due to growing trade tension between the U.S. and China,” said Piotr Matys, an emerging-market currency strategist at Rabobank in London.

Sovereign bonds were mixed, while developing-nation Asian equities extended declines for a fourth day. Euro-area bonds and Treasuries found support from investors. While Italy’s bonds continue to recover, local investors are skeptical. They are avoiding the nation’s debt after political uncertainty fueled a market rout at the end of May, even as the securities may look more attractive after the slump according to Bloomberg.

Ahead of the Bloomberg report on smaller than expected OPEC production cuts, the market’s attention was focused on reports that Russian energy minister Novak stated OPEC and non-OPEC countries will discuss raising the oil output by 1.5mln bpd in Q3 only. However, Iran stated that 3 OPEC members (Iraq, Iran & Venezuela) will veto a proposed production increase. Ahead of this meeting banks are expecting production increases of 700k BPD (SocGen & Barclays) to 1mln BPD (Goldman Sachs). Sources in EU trade suggested that this would be a smaller hike than expected, however, with 300-600k BPD the stated figures.

In the metals scope gold is in the green (+0.15%) as market sentiment sours on Chinese trade concerns and investors are flocking to safe haven assets. Copper has slipped for the second straight session and is at USD 6,997/tonne hovering just above 2 week lows as supply concerns continue to ease. Aluminium is also falling and has hit 2 month lows at USD 2,193/tonne, with support seen at the 200dma of USD 2,175/tonne.

It’s a quiet calendar, with the only expected data on Monday the NAHB Housing Market Index.

Market Snapshot

  • S&P 500 futures down 0.6% to 2,767.75
  • STOXX Europe 50 down 1.1% to 3466.45
  • MXAP down 0.7% to 171.55
  • MXAPJ down 0.4% to 559.81
  • Nikkei down 0.8% to 22,680.33
  • Topix down 1% to 1,771.43
  • Hang Seng Index down 0.4% to 30,309.49
  • Shanghai Composite down 0.7% to 3,021.90
  • Sensex down 0.04% to 35,607.98
  • Australia S&P/ASX 200 up 0.2% to 6,104.13
  • Kospi down 1.2% to 2,376.24
  • German 10Y yield fell 1.6 bps to 0.387%
  • Euro down 0.3% to $1.1581
  • Italian 10Y yield fell 12.7 bps to 2.343%
  • Spanish 10Y yield unchanged at 1.297%
  • Brent futures up 0.8% to $74.04/bbl
  • Gold spot up 0.2% to $1,281.51
  • U.S. Dollar Index up 0.1% to 94.85
  •  

Top Overnight News

  • U.S. and China trade war escalates. In his announcement of tariffs on Chinese goods on Friday, Trump vowed additional duties if China retaliated — which Beijing immediately did. An announcement on U.S. restrictions on investments from China will follow
  • Germany’s crisis over migration policy is entering a critical phase with Chancellor Angela Merkel’s political future on the line and the ripples already being felt across Europe
  • Merkel’s CDU allies stand behind chancellor in migration crisis; German Interior Minister Horst Seehofer said to target immediate refusals at border, RND reports
  • OPEC is said to debate output hike of 300k to 600k b/d versus Russia’s proposal of 1.5m b/d; Bloomberg survey showed majority forecast of 500k b/d
  • Iran says Venezuela and Iraq will join it in blocking a proposal to increase oil production that’s backed by Saudi Arabia and Russia when OPEC and its allies meet in Vienna this week
  • Pound faces another week of political turmoil as the Conservative Party’s internal battle over Brexit rages ons
  • U.K. Prime Minister Theresa May has been warned that rebels inside her own party could bring down her government if they don’t like the final Brexit deal she negotiates with the European Union
  • Oil fell near $64 a barrel as Saudi Arabia and Russia prepared for a clash with allied crude producers over whether to lift output and as China and the U.S. exchanged threats over trade
  • Three people were confirmed dead and almost 100 injured after a strong earthquake hit Osaka on Monday morning, rattling one of Japan’s industrial heartlands and halting trains and factories across the region
  • Steady growth in Japanese exports for a second straight month offered more reassurance that Japan’s economy is rebounding in the current quarter, despite rising trade tensions. A surge in imports pushed the trade balance to a bigger-than-expected deficit
  • A falling tide lowers all boats, it seems. Amid an exodus from emerging markets, investors are pulling out of even Asian economies with solid prospects for growth and debt financing
  • After two months of cutting bets on rising prices, hedge funds are feeling optimistic again as OPEC prepares to meet
  • China, Hong Kong, Taiwan and Indonesia closed for holidays

Asia stocks mostly backpedalled at the start of the week as the region digested the tit-for-tat trade spat between US and China, in which the US confirmed tariffs on USD 50bln of Chinese goods and China responded with reciprocal tariffs of the same value against the US. ASX 200 (+0.3%) and Nikkei 225 (-0.8%) both opened negative with Australia initially led lower by commodity-related sectors although strength in financials and healthcare later reversed the downside in the index, while sentiment in Japan was dampened by a firmer JPY and amid a fatal earthquake in Osaka. KOSPI (-1.3%) underperformed as a fallout from the US-China tariff dispute due to fears South Korea could feel the brunt of the trade war between its 2 largest trading partners, and with index-heavyweight Samsung Electronics pressured after it was ordered to pay USD 400mln for patent infringement related to semiconductor technology. Finally, markets in mainland China, Hong Kong, Taiwan and Indonesia were all closed for holiday, while 10yr JGBs were uneventful despite the risk averse tone as prices took a breather from last week’s upside and following a lack of a Rinban announcement by the BoJ.

Top Asian News

  • HDFC Bank Is Said to Mull Relying on India in $2.3 Billion Offer
  • Noble Group Halts Shares as Restructuring Hangs in Balance
  • India Is Said to Plan to Sell a Stake in State-Run Coal Miner
  • Deutsche Bank Head of Asia Equity Sales Tan Is Said to Leave
  • Emerging Asia Hit by Biggest Foreign Investor Exodus Since 2008

European equities took impetus from Asia as the fallout from the US-China tariff dispute continue to subdue the market. FTSE 100 (-0.2%) outperforms its major peers as the index is kept afloat by currency effects. In terms of sectors, energy names are extending losses following the slump in oil prices (ahead of the key OPEC+ meeting later this week) while material names are also hitting rock bottom amid trade woes effecting base metal prices. IT names are underperforming, albeit off worse levels, as risk averse investors flee to less risky sectors. Looking at stock specifics, Aviva (+2.4%) and RSA (+1.7%) are amongst UK’s top performers after reports that DAX 30 heavyweight Allianz (-0.3%) is considering the companies for a large UK deal. Elsewhere, Hermes (-0.7%) replaced Lafargeholcim (-0.1%) in the CAC 40 today.

Top European News

  • Equinor Awards Record $3.7 Billion in Drilling-Service Deals
  • Norwegian Air Gains as Lufthansa CEO Says He’s Mulling Bid
  • UBS Credit Rating Is Raised at Moody’s on Wealth Management
  • Credit Suisse Gears Up for Next Wave of Leveraged Loan Issuance

In FX, the Dollar is mixed overall, but netting more gains vs the Eur and Gbp in particular against losses elsewhere to nudge the index back up to 95.000 and close to ytd peaks (around 95.150) forged in wake of last week’s divergent Fed and ECB policy actions/guidance. A clearer or convincing break above the big figure would bring strong resistance just ahead of 95.500, but this may also require other G10 pairs to breach levels that have held so far, like 111.00 in Usd/Jpy and 1.3200 in Usd/Cad. EUR/GBP: As noted, the major laggards as Eur/Usd remains capped ahead of 1.1600, while Cable is retreating towards 1.3200 amidst ongoing Brexit jitters and ahead of this week’s BoE policy meeting that is widely if not unanimously expected to see the MPC stand pat again and signal no urgency to normalise policy further. Nearest support is 1.3210 and for Eur/Usd the 2018 base at 1.1510. JPY/CAD: Marginal outperformers with Usd/Jpy pivoting around 110.50 and the Jpy benefiting from a degree of safe-haven demand amidst the latest import tariff trade-off between the US and China, while the Loonie has recovered some lost ground to trade back above 1.3200 vs its US peer after sliding in wake of the G7 fall-out. Note, latest OPEC spec suggesting 300-600k BPD output increase has boosted crude prices and the Cad to a degree. TRY: Attempting to pare some of its recent losses beyond 4.7000 vs the Usd, but still looking very vulnerable against the backdrop of widespread EM weakness relative to the Dollar as Turkey’s election looms and polls indicate a very unpredictable outcome. Indeed, even improvements in the jobless rate and a swing in the budget balance to a surplus from deficit is not offering the Lira any real comfort.

In commodities, oil rebounded from losses seen at the end of last week as concerns over Chinese crude tariffs were offset by a Bloomberg report OPEC may cut oil output by a far smaller 300-600kb/d. Still WTI was down modestly ahead of the upcoming OPEC meetings this week that are set to announce increased production for the cartel. Brent is outperforming WTI on Libyan internal conflicts affecting refinery production.

Reports have noted that Russian energy minister Novak stated OPEC and non-OPEC countries will discuss raising the oil output by 1.5mln bpd in Q3 only. However, Iran stated that 3 OPEC members (Iraq, Iran & Venezuela) will veto a proposed production increase. Ahead of this meeting banks are expecting production increases of 700k BPD (SocGen & Barclays) to 1mln BPD (Goldman Sachs). Sources in EU trade suggested that this would be a smaller hike than expected, however, with 300-600k BPD the stated figures.

In the metals scope gold is in the green (+0.15%) as market sentiment sours on Chinese trade concerns and investors are flocking to safe haven assets. Copper has slipped for the second straight session and is at USD 6,997/tonne hovering just above 2 week lows as supply concerns continue to ease. Aluminium is also falling and has hit 2 month lows at USD 2,193/tonne, with support seen at the 200dma of USD 2,175/tonne

Looking at the day ahead, the most significant event today is the start of the ECB’s Forum on Central Banking in Sintra (continuing until Wednesday), with President Draghi due to make opening remarks in the evening. Away from that, the Fed’s Dudley and Williams are all due to speak while datawise in the US the NAHB housing market index reading is due for June. Finally the Brexit withdrawal bill passes to the House of Lords on Monday and Germany Chancellor Merkel meets new Italy PM Conte.

US Event Calendar

  • 10am: NAHB Housing Market Index, est. 70, prior 70
  • 8:45am: Departing NY Fed Chief Dudley Speaks at Bank Culture Conference
  • 9am: Dudley, Duke and Gorman Speak on Culture in Finance Panel
  • 1pm: Fed’s Bostic Speaks on Economist and Monetary Policy Outlook
  • 4pm: Fed’s Williams Speaks at NY Fed Bank Culture Conference

DB’s Jim Reid concludes the overnight wrap

Happy Monday. Whether it’ll be a happy Tuesday for me might depend on whether Tunisia help England to end a stretch of only one win in their last eight World Cup games tonight. Having said that, half of Deutsche Bank is going to be in mourning today after Germany’s opening match defeat yesterday. Outside of football I hope you all had a good weekend. I spent yesterday afternoon watching Paddington 2 for the fifth time as Maisie loves it. In fact it might be Hugh Grant’s best film since “Mickey Blue Eyes”! Talking of Mr Grant, once we get past the BoE meeting on Thursday, it will be a case of “Four Central Bank meetings and a nuclear summit” over the last week.

Of those central bank meetings so far, the main outcomes were that the Fed was more hawkish than expected and with the ECB pulling off a remarkably dovish QE exit routine. As such our rates strategists have now upped their 10 year US Treasury forecast for YE 2018 to 3.50% (from 3.25%) and lowered their 10 year Bund forecast to 0.90% from 1.25%. We can’t stray too far away from central bankers this week as between today and Wednesday we have the ECB’s Forum on Central Banking due to take place in Sintra.

Chances are that coming so close after the big ECB meeting, it’s unlikely to have the same impact on markets as it did this time last year when Draghi announced that the ECB was ready to start phasing out extreme monetary stimulus. However it’s a true A-list gathering of Central Bankers that makes the casting agents of Ocean’s Eleven look like they ran out of money. As such headlines will be aplenty. Kicking things off tonight, President Draghi will deliver opening remarks followed by a speech from former US Secretary of State Lawrence Summers. Tomorrow morning Draghi will then make the introductory speech, before board member Peter Praet speaks in two separate panels, the second including the Fed’s Bullard and ECB’s Lane. Finally on Wednesday we’ll hear from ECB board member Sabine Lautenschlager in the morning and then Benoit Coeure. The main event might well come on Wednesday afternoon though when we get to watch a policy panel featuring Draghi, the Fed’s Powell, BoJ’s Kuroda and RBA’s Lowe.

Elsewhere we have a BoE meeting (Thursday) and a likely contentious OPEC meeting in Vienna (Friday) where ministers are due to discuss a possible lift back up in output after the freeze last year. Headlines will start from Wednesday as officials and companies start to gather before the meetings. Global flash PMIs at the end of the week are likely to be the big data highlight. With regards to other potentially important things to look out for, early this week the Brexit withdrawal bill passes to the House of Lords and back to the Commons with plenty of opportunity for rebellion and headlines about the future of Brexit and PM May. Mrs Merkel will be busy keeping her party’s coalition together while also meeting Italian PM Conte in Berlin today and Macron tomorrow re-strengthening the Euro Area. Finally the Fed’s results from its 2018 bank stress tests will be out on Thursday. The rest of the week ahead is included at the end.

Back to Ms Merkel, last week speculation swirled about the health of her party’s (CDU) 69-year old coalition with the CSU due to policy differences on immigration, as Sonntag reported Germany’s Interior Minister Mr Seehofer (a member of CSU) will defy Chancellor Merkel and unilaterally implement a plan to turn away refugees from Germany as early as today. Over the weekend, the tone was a bit more conciliatory as the Bild newspaper reported the CSU Party will meet today and may give Ms Merkel another two weeks to get an EU deal facilitating the return of immigrants to countries where they were first registered.

Notably, Mr Seehofer noted “the situation is serious but manageable” and that “no one in the CSU has an interest in toppling the Chancellor, in dissolving the union of the CSU-CSU”. Elsewhere, the WSJ reported Ms Merkel has reached out to some of her southern EU neighbours to sound out their willingness to readmit migrants. Looking ahead, as highlighted above Ms Merkel will meet with her Italian and French counterparts this week and then also have the June 28-29 summit of EU leaders to seek some sort of agreement.

Turning to trade tensions and its potential impacts on China. DB’s Zhiwei Zhang and team estimates the impact of the announced US tariff on China’s economy is quite small for now. They note that if the US imposes 25% tariff on $50bn of Chinese goods ($34bn in July, $16bn in Sep.), the total impact would be less than 0.1% of China’s GDP in 2018.

Looking ahead, Reuters reported the US may impose higher tariffs on an additional $100bn of Chinese imports. If this triggers another round of actions from China, then this second round of trade war will likely be much more damaging for both sides. The team estimate this could reduce China’s GDP growth by c0.3% of GDP, but importantly, the US tariff list will likely include big item consumer goods such as phones, computers, TVs etc, which could mean a lot more workers in China and US consumers would be negatively affected. If this second scenario eventuates, our economists  expect China to loosen policy such as tolerating the property and land market boom in tier 3 cities and cutting the RRR twice over the rest of this year to partly offset the potential drags.

This morning in Asia, markets are trading modestly lower with the Nikkei (-0.93%) and Kospi (-1.22%) both down, while markets in HK and China are closed for holidays. Meanwhile, futures on the S&P are down c0.5% and UST 10y yields are down c1bp. Datawise, Japan’s May adjusted trade balance was lower than expected (-JPY297bn vs. +JPY144bn expected) as growth in imports was stronger than expected.

As for markets back on Friday, equities broadly weakened as trade tensions escalated. The Stoxx 600 (-0.99%), DAX (-0.74%) and FTSE (-1.70%) all declined, dragged down by materials and energy stocks (-2.43%). The S&P traded -0.7% lower initially, but recovered later in the day to close -0.10%, in part due to higher volumes on the close for index rebalancing. Government bonds were broadly firmer (UST 10y -1.5bp; Bunds -2.3bp) while 10y Italian BTPs rallied for the third consecutive day (-12.9bp), in part reflecting the ongoing reactions to a more a dovish ECB.

In commodities, WTI oil dropped -2.74% as the Russian energy minister Mr Novak signalled that Russia and Saudi Arabia both “in principle” support a gradual rise in output. Meanwhile, other LME base metals also dropped 2-3% following increased trade tensions (copper -2.19%; zinc -3.36%; aluminium -2.30%) while the price of soybeans fell to a fresh one year low (-2.05%). On Sunday, Iran’s representative to the OPEC meeting noted that Iran, Venezuela and Iraq “are going to stop” Russia & Saudi Arabia’s proposal for higher oil production. He added that if the two countries want to “act alone, that’s a breach of the cooperation agreement”. This morning, WTI oil is down another c2%. So lots to look forward to ahead of this week’s OPEC meeting.

Before we take a look at today’s calendar, we wrap up with other data releases from Friday. In the US, the May IP was weaker than expected at -0.1% mom (vs. 0.2%), weighed down by a -0.7% mom decline in manufacturing production, which was mainly due to a decline in production in the auto sector as a result of a fire at a major truck assembler. Elsewhere, the June Empire manufacturing index was above market at 25 (vs. 18.8 expected) and the highest since October 2017, with the new orders and employment indices both firmer. Meanwhile the June University of Michigan sentiment index was 99.3 (vs. 98.5 expected), with both the 1yr and 5-10 inflation expectation up 0.1ppt mom to 2.9% yoy and 2.6% yoy respectively. Notably, the 1yr ahead index is now at its highest level since March 2015. Following the above, the NY Fed’s estimate of Q2 GDP growth has edged 0.1ppt lower to 3.0% saar.

In Europe, the final reading of the Euro area’s May core CPI was confirmed at 1.1% yoy, while Italy print was revised 0.1ppt lower to 1% yoy. The Euro area April trade surplus was smaller than expected at €18.1bln (vs. €20bln) while the 1Q Euro area labour costs have increased 2.0% yoy, up from 1.4% yoy in Q4, which is the fastest pace recorded for five years.

Looking at the day ahead, the most significant event today is the start of the ECB’s Forum on Central Banking in Sintra (continuing until Wednesday), with President Draghi due to make opening remarks in the evening. Away from that, the Fed’s Dudley and Williams are all due to speak while datawise in the US the NAHB housing market index reading is due for June. Finally the Brexit withdrawal bill passes to the House of Lords on Monday and Germany Chancellor Merkel meets new Italy PM Conte.

via RSS https://ift.tt/2thdD2E Tyler Durden

Blain: “Back In The Markets, There Is So Much To Worry About”

Submitted by Bill Blain of Mint Partners

Iceland, Rising worries about immigration, trade and oil prices… whatever next.

“A free man can live on fish. Independence is better than meat.”

Today, its’ all about Iceland! The giant-killing demi-gods of football slaughtered Argentina in a 1-all draw! [Think Led Zep riff : Da da da dada!] What other mere team can possibly match them? The population of Edinburgh is 100k people bigger than the whole of Iceland! And, since the Icelanders are pretty much Scots according to their DNA, I’m now a fanatical fan! I’ve ordered my Iceland shirt, the Black-Death Brennavin, fermented shark and sheep’s wobbly bits for the next game on Friday when they will take down Nigeria in Stalingrad! (I shall be supporting England this afternoon – I guess I’ve gone soft after so many years amongst them… Who are they playing btw?)

Meanwhile…. Back in the markets, so much to worry about.

I suppose the challenge is to figure out what the looming German political implosion over immigration policy, the likely splatter effects across Europe, trade war worries and US high-tech sanctions on China, turmoil in OPEC, and the light comic relief provided by the UK Brexit shenanigans, are collectively going to do to sentiment. Germany without Merkel? A full scale trade war? They are not unimaginable!

Or, I could worry about what I’m going to say at tomorrow’s Euromoney Global Borrowers and Investors Conference…

Or, I could worry about this week’s big Central Bank gab-fest. I would love to be a fly on the wall in Portugal… I can picture Jay Powell sitting there with a smug smile talking about the normalised US economy at full employment while Draghi tries to put some kind of gloss on Europe’s stunning 1% growth quantum and his difficulties balancing his “independent” central bank with national vs EU political imperatives – you have to admire the man for trying. The US is pretty much the only normalised economy on the planet – average interest rates are still below 1%, inflation is where?, and central bank balance sheets remain at record levels. What is “synchronous” about that?

There seem to be two economic outlooks in fashion at the moment. I) that normalisation and synchronous growth will drive the global economy much higher therefore buy buy and buy some more, versus the alternative II) that years of intervention, distortion and regulatory bluster leave markets weaker and more vulnerable than ever before. I suppose that’s going to be the gist of my debate at the Euromoney conference tomorrow… I guess I’ll be talking about “irrational complacency” and “delusional exuberance”…

The big issue is likely to be the OPEC meeting where the Iran axis will try to block the Russia/Saudi pact from increasing production. My stock picking chart-analyst Steve Previs cast his technical eye over the recent charts of oil price action. He concludes we’re looking at a likely slide back towards $60 BBl in the near term despite bullish oil speculators. The US ramping up production and the Russia/Saudi pact looking to sell more – the prospects for an oil glut look high. So much for oil prices driving inflation?

Let’s wait and see what direction sentiment takes…

via RSS https://ift.tt/2JVFkFa Tyler Durden

Trump Wants To Free America From “Fool Trade” And Flip The Tables On The EU

Authored by Andrew Korybko via Oriental Review,

Trump promised to replace what he termed as “fool trade” with fair trade when it comes to America’s economic partnerships, especially those with NAFTA and the EU.

Tweeting from Singapore after the failed G7 Summit in Canada, the President wrote that “Fair Trade is now to be called Fool Trade if it is not Reciprocal”, before explaining how Canada and Germany “rip off” the US through their own protectionist tariffs and insufficient contributions to NATO, respectively. Trump’s sour that their leaders attacked him for his “Make America Great Again” steel and aluminum tariffs while hypocritically ignoring their own lopsided economic relations with the US, and he believes that now is the time to make right for what he truly believes are the historic wrongs that his predecessors committed in voluntarily handicapping American power.

Proverbially speaking, the President conceptualizes America as Gulliver the “giant” tied down by a bunch of Lilliputian dwarves, albeit having previously put itself in this submissive position out of some sort of ideological masochistic-sadism that Trump wants to free it from.

Canada’s Prime Minister Justin Trudeau (R) meets with U.S. President Donald Trump during the G7 Summit in the Charlevoix town of La Malbaie, Quebec, Canada, June 8, 2018

The Cold War-era quid pro quo of the US providing costly security assistance to its NATO allies in order to enable them to concentrate more fully on building their utopian welfare states is no longer relevant because of the changing nature of geopolitics and the rise of asymmetrical threats, though Clinton, Bush, and Obama perpetuated this state of affairs because it advanced the Liberal-Globalist model that all three of them were pursuing at the expense of average Americans.

Having entered into office because of the desperation that millions of regular folks in Middle America are experiencing as a result of the domestically catastrophic consequences of globalization on the American Heartland and especially the Midwest, Trump feels obligated to do something about this massive self-inflicted economic wound that’s bleeding hundreds of billions of dollars from the country each year for voluntary reasons that are impossible for this businessman to fathom.

Transforming “fool trade” back into fair trade will harmonize this imbalance, at least from the US’ perspective, though it’ll be detrimental to its semi-socialist partners who have grown accustomed to having the “big brother” that they love to complain about so much subsidizing their militaries and de-facto doing the same for their economies through this decades-long legacy of uneven trading arrangements that Trump now wants to change.

The far-reaching consequences of the Europeans losing out on this multibillion-dollar bonanza are that their domestic growth and social stability will undoubtedly suffer while the elite scramble to appease the masses as they frantically try to negotiate more favorable trading terms with the US.

America can deal with an indefinite disruption of transatlantic trade much better than the Europeans can, and Trump’s betting that he can exploit the resultant geopolitical tumult in order to strengthen the US’ unipolar control over the EU.

via RSS https://ift.tt/2LYr1jW Tyler Durden