The 30-day extension on exemptions for Steel and Aluminum tariffs is scheduled to expire June 1st.  President Trump is positioning the U.S. Trade Team for a substantial reset. According to reports, U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystina Freeland held a terse meeting today over the tariffs and Canada’s unwillingness to close the NAFTA ‘fatal flaw‘ (loophole).

Both Canada and Mexico have structured key parts of their trade agreements to take advantage of their unique access to the U.S. market.  Mexico and Canada generate billions in economic activity through exploiting the NAFTA loophole.  China, Asia (writ large), and the EU enter into trade agreements with Mexico and Canada as back-doors into the U.S. market.  So long as corporations can avoid U.S. tariffs by going through Canada and Mexico they will continue to exploit this approach.

If the U.S. applies the same tariffs to Canada and Mexico we apply to all trade nations, then the benefit of using Canada and Mexico -by those trade nations- is lost. Corporations will no longer have any advantage, and many are likely to just deal directly with the U.S.  However, this would mean hundreds of billions in lost economic activity for Mexico and Canada.  It is the NAFTA fatal flaw.

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The NAFTA phone call between Justin from Canada and U.S. President Trump took place yesterday.

Due to the importance of the timing; and against the backdrop of Trump’s meeting with auto executives; and considering that Canadian Foreign Minister Chrystia Freeland spent five days in Washington DC last week without an agreement; and understanding no NAFTA talks are taking place this week; it was important to see who called whom in order to understand the import of the phone contact:

President Donald J. Trump spoke today with Prime Minister Justin Trudeau of Canada to address the renegotiation of the North American Free Trade Agreement. President Trump underscored the importance of quickly concluding an agreement.  (WH – link)

According to Canadian officials, Justin from Canada was the initiator of the call yesterday.

Speaker of the House Paul Ryan previously set a deadline date of May 17th, due to the statutory requirements for any agreement, based on this year’s legislative calendar.  That’s the day after tomorrow.  There is general consensus no agreement prior to that date is possible.   Additionally Mexico’s national election is July 1st, 2018.

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Critical Update – Critical Update – Critical Update

Those who are watching the NAFTA negotiations must pay close attention to the activity in the past 36 hours.  There is a key video at the bottom.  First the backdrop:

As most are aware the NAFTA fatal flaw, the “loophole”, surrounds Mexico and Canada structuring their economic manufacturing policy -and trade deals- through the exploitation of a back-door into the U.S. Market. Understanding this key issue is paramount to understanding President Trump’s approach therein.

Remove the NAFTA “loophole” and there is no longer an incentive for U.S. manufacturers to locate their operations in Mexico or Canada. However, the removal of this loophole also means China, ASEAN nations and the EU lose the same incentive.

There have been hundreds of billions of previous investment by multinational corporations in Mexico and Canada.  Every dollar spent was intended to continue this exploitation.

Then came Trump.

In terms of investment size and scale of manufacturing, the auto-sector is perhaps the primary industry attempting to position themselves to avoid any reversal of the NAFTA scheme; and it is a self-interested economic scheme. In the short term there are billions at stake; in the longer term there are trillions within the equation.

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Earlier today President Trump announced via Twitter the date and location for the upcoming denuclearization talks between the U.S. and North Korea.

As announced, the summit between President Trump and Chairman Kim Jong-un will take place in Singapore on June 12th, 2018.

In the days leading up to the Singapore summit, there is a G7 meeting in Quebec, Canada, on June 8th and 9th.  The timing affords France, Germany, Italy, Britain, Japan and Canada an opportunity to share their perspectives, and simultaneously provides an opportunity for President Trump to solidify international support in advance of the summit.  Importantly the G7 allows time with Shinzo Abe of Japan.

South Korean Prime Minister Moon Jae-in is scheduled to visit the White House May 22nd, to brief President Trump on his prior meeting with Chairman Kim and discuss regional strategy and key issues for the Korean peninsula.

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NAFTA is at a critical stage.  Mexico has committed themselves to a full-court press this week in an effort to retain the investment influx from multinational corporations.  To retain their advantage, Mexico needs to keep the NAFTA loophole allowing Asia and EU to use Mexico and Canada as back-doors to the U.S. market.

Additionally, AM-LO, a self-described soft-Marxist (similar to Hugo Chavez) is likely to win the July 1st Mexican election.   Yesterday, Mexican Foreign Secretary Luis Videgaray travels down the street to the State Department for a meeting with Secretary Pompeo. From the U.S. perspective, anything from Secretary Videgaray is essentially moot at this point; the Mexican government is moving toward a more socialistic economic model.

[Transcript] SECRETARY POMPEO: Good afternoon. Today it is my pleasure and a great honor to welcome the Mexican Foreign Secretary Luis Videgaray to the State Department. Welcome.

We had a great discussion and we had so because Mexico is one of the United States’ closest partners. Together we are working to build a more secure, prosperous, and democratic hemisphere. We are neighbors, allies, and friends.

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Generally speaking the corporate media have yet to have an honest outline about the fatal flaw within NAFTA that allows China, ASEAN nations and the EU to exploit previous investments in Canada and Mexico as a back-door to the U.S. market.

In a generalized aspect, the recent visit of top U.S. trade and economic policymakers to China was part of Trump’s exploration into the larger dynamic of bi-lateral trade between the U.S. and China knowing full well the NAFTA flaw remains unaddressed.  Without addressing the loop-hole (aka ‘fatal flaw’) any modernized NAFTA deal is moot; and by extension the foundation for any future trade deal between the U.S. and China is too byzantine to manage.

It is in China and the EU’s interests to continue exploiting the NAFTA access.  It is in Canada and Mexico’s interests to retain the subsequent investment influx.

It is in multinational corporate and Wall Street interests to continue the scheme. However, it is also entirely against U.S. Main Street interests.  Hence, NAFTA loggerheads reigns supreme; and in my opinion, we are soon to see President Trump cut the Gordian knot.

WASHINGTON (Reuters) – Senior Canadian, U.S. and Mexican officials trying to rescue slow-moving talks to update the NAFTA trade pact met on Monday in a new bid to resolve key issues before regional elections complicate the process.

With time fast running out to strike some kind of deal on the North American Free Trade Agreement, the three member nations are still far apart on major points.

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There is a geopolitical strategy happening this week that is essentially under the radar.

U.S. Treasury Secretary Steven Mnuchin, USTR Robert Lighthizer, Economic Council Chairman Larry Kudlow, and the U.S. trade team are heading to China.

The outcome of their discussions connects the initiatives behind North Korea, China and NAFTA.  The steel and aluminum tariffs are part of the toolbox.  Only one media personality, our favorite suspicious cat, appears to understand the larger economic play and how it is being deployed.

From the U.S. perspective, NAFTA has a fatal flaw. Mexico and Canada admitted the flaw for the first time a few weeks ago. The flaw is Mexico and Canada’s exploitation of NAFTA as a backdoor into the U.S. market for Asian, mostly Chinese, manufactured products. Multinational corporations who have invested in Canada and Mexico are determined to retain the flaw.

President Trump understands that as long as Canada and Mexico can unilaterally make trade agreements with the EU and ASEAN nations, any NAFTA agreement between the U.S., Canada and Mexico is moot. The NAFTA talks are paused.

The U.S. Team now heads to China. There’s no doubt part of the objective is to begin a structural discussion that must happen for the U.S. trade team to approach closing the fatal NAFTA flaw from the source of origin. [*note* on the EU side of this issue, Commerce Secretary Wilbur Ross is leading a similar discussion. Mnuchin and Lighthizer are focused on Asia, Ross has responsibility for Europe]

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The Senate voted Thursday to confirm CIA chief Mike Pompeo as President Trump’s next secretary of state.  Secretary Pompeo was confirmed on a 57-42 vote.  All Republicans present voted to confirm Pompeo. Seven Democrats voted yes.

After the vote, Pompeo was sworn in by Supreme Court Justice Samuel Alito in the West Conference Room of the Supreme Court:

I am pleased with the Senate’s confirmation of Mike Pompeo to serve as our country’s top diplomat. Having a patriot of Mike’s immense talent, energy, and intellect leading the Department of State will be an incredible asset for our country at this critical time in history. He will always put the interests of America first. He has my trust. He has my support. Today, he has my congratulations on becoming America’s 70th Secretary of State.

~ President Donald J Trump

Caution on this story. Toronto is the epicenter of political correctness. If the incident is terror related the suspect will not be named and the motive will be clouded in mystery. [Cultural Marxism is runs amok in Toronto]

  *UPDATE* 5:00pm EST: 9 dead, 16 injured

A white rental van mounted the sidewalk in downtown Toronto, Canada and appeared to be intentionally targeting pedestrians.  At least eight to ten pedestrians have been struck by a the van in north Toronto.  There are fatalities.

Police initially say the driver struck the crowd at Yonge Street and Finch Avenue East in downtown Toronto.  The driver fled the scene in the vehicle but has been captured by police.

BREAKING: Toronto police say 9 dead, 16 injured after van struck pedestrians in Toronto; driver in custody.

— The Associated Press (@AP) April 23, 2018

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U.S. Trade Representative Robert Lighthizer and the trade ministers from Canada and Mexico are not in Washington DC this weekend; however the trade staff from all three nations stayed in DC working to finalize agreement on NAFTA with increased urgency.

The nation pushing hardest to complete an agreement quickly is Mexico.  The Mexican national election is July 1st and the soft-Marxist Andres Manuel Lopez Obrador (AM LO) has increased his lead.  AM LO is now 22 points ahead of his next closest competitor. Lopez Obrador, a self-described Hugo Chavez ideologue, is guaranteed to win – and Mexico will become Venezuela 2.0 within five years.

The looming Mexican election, and the radical political departure therein, means if a deal is not made soon, there will be no deal.

Andres Manuel Lopez Obrador will likely nationalize large segments of the Mexican economy for more progressive wealth distribution…. Enter, quickly, and with a transparency in their desperation, the multinational corporations who have already invested hundreds of billions into Mexican ports, transportation infrastructure, raw material procurement contracts, manufacturing/processing and assembly facilities, and all around exploitation of NAFTA as a tariff-free, profit-driven, back-door to the U.S market…

Yes, as oft repeated, there are trillions at stake.

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