It is worth noting the date, time and general information released within an innocuous tweet today from President Donald Trump:
The geopolitical confrontation between the U.S. and China is the big picture. There is a tremendous amount of noise surrounding other media-advanced current events; but the real issue of generational consequence is between President Trump and Chairman Xi.
In advance of the midterm election Beijing pulled-back as part of their strategy to wait out the results from the U.S. midterm election. The ‘Red Dragon‘ play was to reengage after Trump after the election hoping for a weakened enemy.
The red dragon has a tendency to say one necessary thing publicly, while manipulating another necessary thing privately. The Art of War.
President Trump is the first U.S. President to understand how the red dragon hides behind the panda mask.
It is specifically because he understands that Panda is a mask that President Trump messages warmth toward the Chinese people, and pours vociferous praise upon Chairman Xi Jinping, while simultaneously confronting the geopolitical doctrine of the Xi regime.
In essence Trump is mirroring the behavior of China while confronting their economic duplicity.
President Trump is putting on a MASSIVE economic squeeze.
♦Squeeze #1. President Trump and Treasury Secretary Mnuchin sanctioned Venezuela and cut off their access to expanded state owned oil revenue. Venezuela needs more money. China and Russia are already leveraged to the gills in Venezuela and hold 49% of Citgo as collateral for loans outstanding. China and Russia now need to loan more, directly.
However, China cannot engage in economic commerce with Venezuela or they risk losing access to the U.S. banking system. Therefore all current Chinese aid to Maduro comes in the form of IOUs. These ongoing loans are likely impossible to be repaid.
♦Squeeze #2. China’s geopolitical ally, Russia, is already squeezed with losses in energy revenue because of President Trump’s approach toward oil, LNG and coal. Trump, through allies including Saudi Arabia, EU, France (North Africa energy), and domestic production has influenced global energy prices. Additionally, President Trump is demanding NATO countries, specifically Germany, stop supporting financial dependence on Russia.
Meanwhile, and directly connected, Russia is bleeding out financially in Syria. Iran is the financial reserve, but they too are energy price dependent and President Trump is now putting pressure on Iran vis-a-vis new sanctions and new demands on allies.
♦Squeeze #3. In 2017 Trump and Secretary Tillerson, now Secretary Pompeo, put Pakistan on notice they need to get involved in bringing their enabled tribal “extremists” (Taliban) to the table in Afghanistan. Pakistan’s primary investor and economic partner is China. The U.S. removed $900 million in financial support to pressure Pakistan toward a political solution in Afghanistan, China has to fill void. [NOTE: Last month the World Bank began discussions about a financial bailout for Pakistan.] Again, more one-way bleed for China.
♦Squeeze #4. China’s primary economic threat (competition) is next door in India. President Trump has embraced India as leverage over China in trade and pledged ongoing favorable trade deals. The key play is MFN (Most Favored Nation) trade status might flip from China to India. That’s a big play. It would have massive ramifications.
♦Squeeze #5. President Trump launched a USTR Section 301 Trade Investigation into China’s theft of intellectual property. This encompasses every U.S. entity that does manufacturing business with China, particularly aeronautics and technology, and also reaches into the financial services sector.
In March of 2018 U.S. Trade Representative Robert Lighthizer completed a section 301 review of China’s trade practices. [SEE HERE] Section 301 of the U.S. Trade Act of 1974 authorizes the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. However, as talks with China progressed, President Trump shelved the 301 action to see where negotiations would end-up. The May and June, 2018, negotiations between the U.S. and China provided no progress. The 301 review of China was pulled back off the shelf, and President Trump assembles his trade-war strategy. The 301 tariffs/sanctions are currently being worked out with U.S.T.R Robert Lighthizer.
♦Squeeze #6. President Trump, Secretary Ross, Secretary Mnuchin and USTR Robert Lighthizer dissolved NAFTA. One of the primary objectives of team U.S.A. was to close the 3rd party loopholes, including dumping and origination, that China uses to gain backdoor access to the U.S. market and avoid trade/tariff restrictions. [China sends parts to Mexico and Canada for assembly and then back-door entry into the U.S. via NAFTA.]
♦Squeeze #7. President Trump has been open, visible and vocal about his intention to shift to bilateral trade renegotiation with China and Southeast Asia immediately after Team U.S.A. concludes with NAFTA. [Current discussions with Japan are ongoing]
♦Squeeze #8. President Trump positioned the U.S. relationship with the E.U. as a massive potential loss for Europe (via Steel, Aluminum, and Auto tariffs) if they did not: (A) shift their trade relationship toward greater reciprocity; and (B) reconsider the size of their trade relationship with China. After initially trying to push-back, Europe acquiesced.
♦Squeeze #9. President Trump has positioned ASEAN (Association of Southeast Asian Nations) as trade benefactors for assistance with North Korea. Last year the KORUS (South Korea and U.S.) trade deal was renegotiated, and announced in March. The relationship between ASEAN nations and the Trump administration is very strong, and getting stronger. Which leads to…
♦Squeeze #10. President Trump has formed an economic and national security alliance with Shinzo Abe of Japan. It is not accidental that North Korea’s Kim Jong-un fired his last missile over the Northern part of Japan. Quite simply, Beijing told him to. However…
♦Squeeze #11. President Trump cut-off the duplicitous Beijing influence over North Korea by engaging directly with Kim Jong-un. The open exchange and ongoing dialogue has removed much of the ability of Beijing to leverage the DPRK nuclear threat for their own economic benefit. This dialogue was as much, if not more, about dismantling the Beijing geopolitical influence as it was about denuclearizing the Korean peninsula. However, no-one caught on to that part of the strategy.