President Trump tweeted about a phone call this morning with Chinese Chairman Xi Jinping. There will be a G20 meeting between Trump and Xi. So, extending our conversation from yesterday…. the “magnanimous panda” approach appears confirmed.

[White House] President Donald J. Trump spoke with President Xi Jinping of China this morning. The two leaders discussed the importance of leveling the playing field for U.S. farmers, workers, and businesses through a fair and reciprocal economic relationship. This includes addressing structural barriers to trade with China and achieving meaningful reforms that are enforceable and verifiable. The leaders also discussed regional security issues. The two Presidents look forward to meeting again in Osaka, Japan at the G20 Summit. (read more)

With Chairman Xi Jinping traveling to North Korea for talks with his captive Kim Jong Un prior to the G20; and with the meeting between Xi and Trump confirmed; it certainly looks like Beijing is deflecting the weakness of their economic/trade position by shifting the optic toward a geopolitical magnanimous panda.  The scale of the uprising in Hong Kong was also a likely influence on the margins.
(more…)

Author of ‘The Coming Collapse of China’, Gordon Chang, appears on Fox Business to discuss the mounting U.S. trade tensions with China, the fallout from the protests against Carrie Lam in Hong Kong, and the announced visit by Xi to North Korea.
Chang also sees the visit by China’s Chairman Xi Jinping to North Korea as a strategic and purposeful moment for Beijing; an attempt to find footing against the overwhelming economic punishment being delivered by U.S. President Donald Trump.

Well, well, well….  Against the backdrop of everything we have been discussing about the nature of the U.S. – China – North Korea geopolitics; and considering the current position of all the players; THIS is a very interesting development:

BEIJING (Reuters) – Chinese President Xi Jinping will visit North Korea for two days from Thursday, state media in both countries reported on Monday, making him the first Chinese leader to visit in 14 years.
Neighboring China is reclusive North Korea’s only major ally, and the visit comes amid renewed tensions between the United States and North Korea over efforts to persuade Pyongyang to give up its nuclear weapons.

(more…)

Charles Payne, filling in for Maria Bartiromo, interviews White House Manufacturing and Trade Policy advisor Peter Navarro.  Unfortunately the interview begins with a discussion of tariff polling….  The vast majority of Americans have no understanding of the impact of tariffs and/or MAGAnomic policy; they only know the economic outcomes they can feel.
Mr. Navarro walks through how tariffs interact with global supply chains and the financial manipulation by multinational corporate interests.

~ Dance With The Dragon ~

Amid the furor from hundreds-of-thousands -perhaps millions- of protestors, Hong Kong leader Carrie Lam announces a ‘suspension‘ of the proposed extradition law that would have permitted extradition of Hong Kong residents to Chinese law enforcement.

Lam apologized on Sunday, for the way the Hong Kong government handled the proposal but she did not fully take the controversial law off the table.  The ripple effect of the proposal itself now calls into question the autonomy of Hong Kong, and many observers foresee it is now only a matter of time before China takes a tighter grip.
Currently Hong Kong is not subject to the same economic consequences within the U.S-China confrontation.  As long as Hong Kong is considered ‘autonomous’ they remain detached from U.S. tariffs and other measures targeted to China.  However, if China breeches the increasingly unclear barriers, judicial and legal systems intended to provide that autonomy – well, then the situation could change.  Hong Kong is tenuous at best.
(more…)

President Trump has taken the leverage of economics to levels of geopolitical strategy never seen before.  Nowhere is the genius strategy more clear than in the way Trump has positioned the trade reset and confrontation with China.
In hindsight every move since early 2017 including:  (1) the warm welcome of Chairman Xi Jinping to Trump’s Mar-a-Lago estate; (2) the vociferous praise poured upon Xi; (3) the November 2017 tour of Asia; (4) the direct engagement with North Korean Chairman Kim Jong Un; the strategic relationship with Japanese Prime Minister Shinzo Abe; and a host of smaller nuanced moves have been quietly building toward a conclusion.
The upcoming G-20 summit is the last chance for Trump and Xi to reconcile considerable differences and President Trump has the strongest strategic position any Chinese official has ever faced.
After Beijing walked away from previous agreements between USTR Robert Lighthizer and Vice-Premier Liu He, Trump initiated a series of punishing economic consequences that had to have been well planned in advance.
The economy in China is reeling from the pressure applied; and stunningly it has only been a month since the consequence phase began.
In addition to tariff increases, the U.S. blacklisted Huawei Technologies Co., threatened other major Chinese tech companies and essentially cut-off China from the international supply chain it needs to sustain itself.  Beijing responded by drawing up a list of “unreliable entities” and making threats against any enterprise that would walk away from business engagement with China.  The totalitarian response has worsened the situation, and more companies have announced their intent to decouple from Beijing.
An important aspect, missed by most observers, is the ideology and outlook within any Chinese engagement. Quite simply, if it does not benefit China it is not done.  Therefore any negotiation with China is challenging because Beijing will cede no ground they view as already won.
(more…)

Against the intense leverage being applied by President Trump, last week Beijing doubled-down and threatened punishment against any company that would leave China and begin manufacturing elsewhere.
The totalitarian response was predictable and expected.  However, also predictable was the corporate response to the threats.
As we shared:  “China is counting on prior western investment being so significant that a corporation will be reluctant to withdraw. However, in this outlook Beijing seriously underestimates the free market because communist controlled China doesn’t understand the action of a inherently free market.
The first loss is the best loss. If walking away from an investment provides more financial security and stability than attempting to retain a grip on a tenuous position – corporations will walk away.” (more)
Now today – “Nintendo Moves Some Switch Production Out of China”:

TOKYO— Nintendo Co. is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, said people who work on Nintendo’s supply chain.
It is another example of manufacturers adapting to the tariff threat. Taiwan’s Foxconn Technology Group said Tuesday that it was ready to move assembly of Apple Inc.’s iPhones out of China if necessary, and Japan’s Sharp Corp. , which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam.

(more…)

There’s always a larger geopolitical dynamic when you assess the economic alliances that President Trump puts together…. Always and underlying plan…  Sometimes it just takes time to surface.
As we have noted, even going back to 2017, Japanese Prime Minister Shinzo Abe always appeared to be the fulcrum for President Trump’s Indo-Pacific strategy.  

Remember the trip to Japan as honored guests of Emperor Naruhito and Empress Masako at the Imperial Palace?  Remember last month’s (May 25th) unprecedented reception with the titans of Japanese business?  Remember the private reception set up by a very nervous U.S. Ambassador William F. Hagerty?  A reception with the most influential business CEO’s in Japan and Southeast Asia? 
Well…

TOKYO (Reuters) – Japan’s Tokyo Electron, the world’s No.3 supplier of semiconductor manufacturing equipment, will not supply to Chinese clients blacklisted by Washington, a senior company executive told Reuters.
The decision shows how Washington’s effort to bar sales of technology to Chinese firms, including Huawei Technologies, is ensnaring non-American firms that are not obliged to follow U.S. law.

(more…)

Tokyo Japan is 13 hours ahead of U.S. Eastern timezone. As a result, much of the diplomatic activity for the final day of the state visit happens in the late night hours.
Today is the final day of the official visit which included the first state visit hosted by the Emperor Naruhito and Empress Masako to celebrate the new imperial era of “Reiwa”.
The visit has been a resounding success for Japan and the United States of America.
Today, the President and First Lady will honor the military.  Specifically and purposefully the President will showcase the strategic U.S-Japan military alliance, and deliver remarks to commemorate Memorial Day.  At the conclusion of events the President and First Lady will bid farewell to our good friends in Japan.

9:15am (Tokyo) / 8:15pm (U.S. EDT) THE PRESIDENT and THE FIRST LADY participate in a Farewell Call with Their Majesties the Emperor and Empress, Tokyo, Japan
9:35am (Tokyo) / 8:35pm (U.S. EDT) THE PRESIDENT and THE FIRST LADY depart the Palace Hotel en route to the Hardy Barracks Landing Zone, Tokyo, Japan
9:45am (Tokyo) / 8:45pm (U.S. EDT) THE PRESIDENT and THE FIRST LADY arrive at the Hardy Barracks Landing Zone, Tokyo, Japan
9:55am (Tokyo) / 8:55pm (U.S. EDT) THE PRESIDENT and THE FIRST LADY depart Hardy Barracks Landing Zone en route to JS Kaga Landing Zone, Tokyo, Japan [JS Kaga (DDH-184) is a helicopter carrier (officially classified by Japan as a helicopter destroyer) and the second constructed ship in the Izumo class of the Japan Maritime Self-Defense Force (MSDF)]
(more…)

President Trump is holding a White House event to support Farmers and Ranchers and announce a transitionary aid package to help during the restructuring of the global supply chain and a reset in U.S-China engagement. Anticipated start time 3:15pm EDT.
Quite a remarkable presser.
UPDATE: Video Added