Last night President Trump congratulated Prime Minister Boris Johnson on his great win in the U.K. election, noting the possibilities for a big trade boost are “massive”:
Not accidentally, the geopolitical economic and trade planets have aligned splendidly. The cornerstone USMCA agreement has bipartisan support and will ratify quickly in congress. A “phase one” trade agreement with China is likely, and prior plans for a strategic trade deal with the U.K. have increased as a result of the U.K. election.
First rule in geopolitics, it’s always about the economics. Second rule in geopolitics: refer to rule #1. Understanding this basic truism is the key to understand how President Trump is able to be so effective. There are trillions at stake, and many interests.
“Economic security is national security.” ~President Trump
All politics circles back to the underlying economics; whether it is an individual financial self-interest for a specific politician, or whether it is a larger financial interest for a group or even a nation. Everything is always about the money; and that essential truth is why Donald Trump is so uniquely qualified, influential and stunningly effective.
Donald J Trump isn’t a politician at heart, he’s a businessman. From that outlook he appears to be working through a plan for what he views (we agree) is bigger than politics.
The economics of all things is the priority for President Trump…. step into that lane, or bring forth a policy directive that crosses into that economic lane, and you step into an administration agenda item completely controlled and directed by Donald Trump.
Every policy engagement from the big to the small goes through the prism of economics first and last. Essentially this is the foundation of the Trump doctrine. Brexit, Huawei, Iran, China, North Korea the larger EU etc. all geopolitical issues cross paths with President Trump’s primary focus, U.S. economic wealth, influence and security.
President Trump doesn’t leave economic policy to chance. He’s full bore economic obsessive compulsive! …And unapologetic about it. President Trump has single-handily begun resetting the global economy and is bringing massive amounts of wealth back into the United States.
In essence Titan Trump is engaged in a process of: (a) repatriating wealth (trade policy); (b) blocking exfiltration (main street policy); (c) creating new and modern economic alliances based on reciprocity (tariffs); and (d) dismantling the post WWII Marshal plan of industrial trade and one-way tariffs.
Every element within this process, no matter how small, has President Trump’s full attention. He has assignments to many, but he relies upon none. In prior review of President Trump’s discussions with Boris Johnson there was a clear outline of a possibility.
In the details of a Brexit trade agreement with the EU it appears the EU can, likely would, punish the UK for having more favorable trade agreements with other nations. Meaning if the UK gives better deals to others than it does the EU, the EU will increase tariffs against the UK and use non-trade barriers to restrict access to the EU market for UK products.
But that’s the limit of what the EU will be able to do….
Meaning, the EU cannot stop the UK from entering a trade deal with North America (think USMCA); and there’s a very visible likelihood President Trump is constructing a U.S-U.K trade agreement with that in mind.
Meaning the U.K. could have preferential access to North America; and USMCA countries (Mexico, U.S. and Canada) will in turn have preferential trade treatment with the U.K.
This is important. The EU will not be able to influence the U.S-U.K. trade agreement beyond imposing tariffs and restrictions on Britain as punishment. This is where the importance of Donald Trump comes in.
Trump can, I would say: likely will, give preferential treatment to exports from the U.K., so long as PM Boris Johnson is reciprocal toward the U.S.
Simultaneously, President Trump can hit the EU much harder than the EU can hit Great Britain. If, say, the EU hits the UK with a 25% tariff as punishment for a better trade deal with the U.S. on any individual segment, Trump can hit the EU with a 25% tariff back on the EU.
The EU needs access to the $20 Trillion U.S. market much more than the EU needs access to the newly freed U.K. market. It takes building a level of trust, but President Trump and PM Johnson can work together to leverage this trade situation to both of their benefits.
The EU will want to keep selling their stuff into the U.K. (less important); but the EU *has to* keep selling their stuff into the U.S. (very important) in order to survive.
Trump and Johnson can work on a U.S-U.K. trade superhighway. Our research already sees this construct in the discussions. Simultaneously, Trump can pummel the EU with tariffs.
[Keep in mind the U.S. won a WTO ruling for $7.5 billion a year in countervailing duties the EU cannot legally try and counteract (Boeing case); and USTR Lighthizer has calculated a $2.4 billion countervailing duty against France for their internet tax scheme]
Combine the $7.5 billion WTO ruling against the EU (writ large), with the $2.4 billion duty against France, and overlay the potential for President Trump to hammer additional duties against the EU for adverse trade action within the Brexit customs authority, and what we see is an EU that can threaten action, but has limited recourse (just like China).
As inferred recently by Commerce Secretary Wilbur Ross, President Trump is not adverse to triggering more tariffs against the EU. Arguably he is looking for any economic excuse to do so. Brexit provides just that excuse.
Once the U.K exits the European Union, President Trump can provide trade incentives for EU products that come from the U.K. – that do not come from the EU itself. No U.S. tariffs on Great Britain, while Trump, Ross and Lighthizer put heavy tariffs on the EU.
The result of this process would push EU manufacturers and suppliers into the U.K. as a trade hub for access to North America, specifically the United States. EU companies wanting to avoid the U.S. tariffs against the EU could distribute their products through operations within the U.K.
As described this trade network provides PM Boris Johnson with the ability to pick and choose the EU entities that he would permit to operate in the U.K. In essence, this provides Prime Minister Boris Johnson with leverage against the EU for “other issues” of importance.
It’s all about the economics.
Without money to finance a big government ideology, everything stops.
All of the above stated, this is another reason why Nancy Pelosi and the ideological leftists were trying to stall the USMCA. The North American Trade agreement is the trade fulcrum for a massive global economic reset that impacts Asia and Europe.
The corporate multinational profit schemes that exploit China/Asia, and the political ideology behind the socialists/leftists that align with the EU (ie. “share the wealth”), are both weakened by a North American trade alliance, USMCA, that establishes the best return on international investment in North America.
At the center of this realignment is “America First“. A reestablished economic leverage that can reward allies and punish adversaries. Globalism becomes a thing of the past and is replaced by economic nationalism; an international tide to lift all boats – peacefully.
“Economic security is national security”…