President Trump’s MAGAnomic team have announced a 30-day extension for the Steel (25%) and Aluminum (10%) tariffs for the European Union, Canada and Mexico.
Also, after a prior agreement with South-Korea, the “KORUS” deal, team U.S.A. has also reached an agreement in principle with Australia, Argentina and Brazil which will be finalized in next 30 days.
Via Wall Street Journal – President Donald Trump has decided to postpone decisions about imposing steel and aluminum tariffs on the European Union and other U.S. allies until June 1, a senior administration official said.
In addition to announcing the delay, the White House is expected to say Monday evening that it has finalized a deal to exempt South Korea from the tariffs, mirroring details that have been previously released by the U.S. Trade Representative’s office.
The remaining decisions on tariffs will be decided later, the official said. A White House spokeswoman declined to comment.
The U.S. initially imposed world-wide tariffs of 25% on U.S. steel imports and 10% on aluminum in March, but it temporarily exempted several U.S. allies from the tariffs. Monday’s decisions extend that delay. (read more)
Additionally, to showcase the importance previously outlined, the team has added ‘big timber’, Commerce Secretary Wilbur Ross, to the trade delegation heading to China.
So the entire MAGAnomic “killers” team appears to be heading to Beijing. Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, Chairman of National Economic Council Larry Kudlow, WH Trade Adviser Peter Navarro and U.S. Ambassador to China, Terry Branstad.
[Side-Note: hopefully they take AF2]
NAFTA and the trade tariffs on steel and aluminum (major components of cars) are about credibility against China, Japan and the EU. The bulk of the US trade deficit comes from China, Japan, and the EU. China, Japan and the EU all exploit NAFTA to get around US trade barriers that should have balanced trade among these countries.
Trump has signaled that he wants trade renegotiated but the major trade entities- China, Japan and the EU- didn’t take him seriously until he slapped tariffs globally on steel and aluminum. That was a direct strike at their automobile industries that make up the bulk of the US trade deficit between the EU and Japan. The intellectual property tariffs got the attention of China because not only did Trump place them on China but he mobilized support in the EU and Japan for action on intellectual property theft.
So where does the North Korean (NK) negotiations come into play in all of this?
Aside from the possibility that the US sabotaged the last Korean nuclear tests, I believe this Korean peace initiative is more about Japan and South Korea than China. I believe Japan and South Korea will agree to more favorable terms with the US on trade pending the denuclearization and potential reunification of Korea. I believe Japan and Korea will be very grateful to the US when the prisoners are released and will find ways to buy more product (agricultural, energy, military and aerospace) from the US.
China is simply trying to stay on the good side of the US because the intellectual property tariffs are a significant threat to its future. Xi has imagined China dominating industries that primarily rely on intellectual property.
In addition, Xi is trying to build a major trade corridor to the EU to diversity his exports away from the US so that he’s not so dependent on the US but Trump is threatening to bite into the funds he will have to complete OBOR. So China is cooperating on Korea but Korea is not a chip it can bargain with anymore because Trump has already taken that away with the sabotage of the last Korean nuclear test.
Trump is a genius. He knows his leverage very well. He knows that any reduction in the trade deficit is a major win for the US. He is not looking for the immediate balance of the trade deficits with the EU, China and Japan (and Korea). He’s looking for key concessions that will enhance his legacy such as increasing NATO contributions by EU countries in exchange for smaller reduction of the trade deficit. Chinese ending their assault on US technology industries in exchange for a smaller reduction of trade deficit. Japan buying more US autos or opening more car plants in US for a smaller reduction of trade deficit and so on.
NAFTA is all about credibility. Canada and Mexico will agree to terms. Mexico will pay for the Wall and Trump will win his noble prize!
BTW, don’t think Russia escapes this equation or Iran. Trump has all of them wrapped up in this. For Russia, Trump will make EU buy even more American energy and will get EU to fully fund NATO. As we speak, Pompeo is in the Middle East to rally up an Arab force to replace US troops in Syria and Iraq (and pay!). This is not good for Russia. It guarantees Syria will be split unless Russia agrees to a political settlement that has Assad gone from Syria. A stronger NATO and a EU now buying even more US gas and oil means less money for Putin’s military in Ukraine and Syria. And there’s no outlet to China because Trump is putting the squeeze on Xi. Multidimensional chess?
Iran is now in trouble too. That Arab force plus Israel is ready to strike. Trump has put the squeeze on EU (steel/aluminum), China (intellectual prop), and Russia (energy). The Iran deal will be redone and tougher sanctions will be enacted by US and EU for any violations of new terms. And military actions looms over their heads just as it did over North Korea. And BTW, the end of the NK nuclear program is a major blow for Iran since it essentially was continuing work on nukes through NK (Pakistan needs to be watched but it seems Trump is on top of them too).
That Trump has been able to wield this much power in so short of a time is mind blowing. If he’s able to pull all of this off in two years, he’ll already be a top 5 POTUS! MAGA!!