We previously outlined Mr. Zhongtian Liu [HERE] as part of the early 2018 explanation for how China was exploiting the NAFTA loophole as an end-run around tariffs.  Today the Central District of California U.S. Attorney announces his indictment.

LOS ANGELES– A federal grand jury indictment unsealed late Tuesday alleges a complex financial fraud scheme in which a Chinese company exported to the United States huge amounts of aluminum – disguised as “pallets” to avoid customs duties of up to 400 percent – and “sold” the purported pallets to related entities to fraudulently inflate the company’s revenues and deceive investors around the world.
The 53-page indictment alleges that China Zhongwang Holdings Limited, Asia’s largest aluminum extrusion company; Zhongtian Liu, the company’s former president and chairman; and several individual and corporate co-defendants lied to U.S. Customs and Border Protection to avoid paying the United States $1.8 billion in anti-dumping and countervailing duties (AD/CVD) that were imposed in 2011 on certain types of extruded aluminum imported into the United States from China.

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The Bureau of Economic Analysis (BEA) released significant wage and salary data yesterday which held stunning upward revisions for 2018 and 2019.   Wage growth of 5.5% combined with low inflation remaining at 1.4 percent; the disposable income of U.S. workers jumped to a stunning 4.1%.  [Data Tables]

Within the revised BEA data, we find employee compensation rose 4.5% in 2017 and 5% in 2018.  Importantly the growth trend continued into 2019, with compensation increasing 3.4 percent in the first six months alone.  Year-over-year wages and salaries were revised upward to 5.3% for May, and 5.5% in June.  These are stunning increases in worker pay.
There are various economic indicators we have shared through the years, but wage growth is one of the more critical.  First, wage growth lags behind business activity – workers don’t get pay raises until after business volume demands/provides it.  Second, wage growth is generally uni-directional – once businesses hike pay, the increases cement.
As the Wall Street Journal put it:
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It was only a matter of time before someone explained how the Chinese advisors to Chairman Xi Jinping are using President Trump’s inability to hold the coup plotters accountable as evidence they can wait out the President.
This is the crossover, where a lack of accountability for “Spygate” now begins to negatively influence the geopolitical, economic and strategic position of President Trump.  However, there’s an upside to this dynamic….
In several interviews the president has noted his preference to keep the DOJ and FBI issues at a distance and deferred action to others. The economic reset is President Trump’s #1 priority.  If Trump identifies the lack of DOJ and FBI accountability as an impediment to the economic program, he may become much more engaged.

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SHANGHAI—Plodding progress in trade negotiations between the U.S. and China this week is partly the result of a new tactic from Beijing, which increasingly thinks waiting may produce a more-favorable agreement.

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Good interview between Fox Business’ Maria Bartiromo and former White House trade official Clete Willems.  Essentially Willems confirms the current outlook of the Trump administration that a deal with China is not likely in the short-term; however, Willems is optimistic of the probability in the longer term (as China realizes consequences).

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The financial media still doesn’t get it… Obviously! Transfixed and jaw-agape at seemingly at-odds aspects to a new engagement with Beijing, the MSM financial media are clueless. They are genuinely disconnected, and have no idea what is going on.
The majority of financial pundits are perplexed at what they can see on the surface. USTR Robert Ligthizer and Treasury Secretary Steven Mnuchin are beginning discussions with Beijing. Meanwhile President Trump’s tweets seem to dismiss the potential of the deal-making. The media call this mixed-messaging; however, that’s not what this is.

Secretary Wilbur Ross was very insightful last week when he also spoke of the current U.S. perspective toward the U.S-China trade negotiation.  If you have followed the basic road-map of America-First trade policy, there’s was a very clear picture. However, as we expected, most pundits and trade analysts ignored the administration message.
Commerce Secretary Ross warned the professional investment class when he said the current objective for Mnuchin and Lighthizer was to find out if Beijing is willing to re-engage from the starting point where they left-off when talks collapsed.
That was a big tell.
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CNBC pundits use the drop in exports to attack the GDP result as Larry Kudlow appears to discuss the overall picture. The knuckleheaded pundits point to tariffs as the reason for the drop in exports without even contemplating (Mamet Principle) the devaluation and subsidies from foreign countries that have driven up the value of the dollar.
While currency manipulation/devaluing (EU and China) drops the prices of their export goods, their devaluation drives up the value of the dollar.  The first impact from a high valued dollar is that it causes our export products to increase in price.  This drops our exports, and can be a drag on the GDP growth rate.  Pundits are intentionally obtuse.

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My advice to President Trump: “Tariff the bastards; all of them” !!
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Commerce Secretary Wilbur Ross appears with Charles Payne to discuss the latest economic data and the Q2 GDP release.  Within the interview Secretary Ross explains the information behind the data; the status of the USMCA and Pelosi’s motives to delay ratification; the baseline for the U.S-China trade discussions, and the position of the administration to advance the economic interests of the U.S. above all others.

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The Bureau of Economic Analysis (BEA) has released the data for the second quarter of 2019.  The Q2 GDP growth rate of 2.1 percent beat all economic expectations, and highlights strong consumer spending throughout the U.S. economy.

The two primary drags on the Q2 release are also the most volatile: Export/Import contributions (-.65%), and Inventory contributions (-.86%) [table 2]. However, consumer spending was much stronger than anticipated (+4.3%) showing the internal strength of the U.S. labor market and the impact of wage growth which still exceeds 3.6 percent.
The inflation index is still low at 1.5 percent year-over-year, and highlights a point all economic pundits overlook.  With countries attempting to stop the impact of tariffs on their exports they are devaluing their currency (EU and China) and subsidizing their export industries (China).  This has the cumulative effect of lowering their price. As a consequence, and with a strong dollar, the U.S. is importing deflation.
The Fed can do nothing of substance to impact low price inflation because the causes are external to the U.S. economy.  CTH predicted this in 2016, and we stand by that assertion today because we now have almost three years of empirical data to prove it.
Wall Street wants bad news because Wall Street wants a lower fed rate.  As a direct consequence Wall Street’s multinational corporate media bias over the GDP data release is hilarious. The headline from NBC is typical: “Economic Growth Slows Less Than Expected in Second Quarter”….    Sometimes you just have to laugh.
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This is funny.  No, really, it is actually funny.  Yesterday the International Monetary Fund (IMF) revised its outlook of the global economy.  If you read the IMF prior “dire forecast” from July 17th –yes, only a week ago– you’ll discover the humor aspect.
The IMF is now upgrading their forecast of U.S. economic growth; and admitting -in essence- that President Trump’s America-First agenda is relocating global wealth back to the primary host nation known as the U.S.A.   The increase in their forecast isn’t a small increase, it is essentially adding .3 percent (from 2.3% to 2.6%) or $60 billion more.

However, you’d have to go through two-thirds of the Reuters press coverage of the IMF release; and plow through a littany of doom and gloom; before you found this obscure reference: “The IMF raised its forecast for U.S. economic growth to 2.6% in 2019, but left its 2020 forecast for 1.9% growth unchanged.”   Apparently the economic team at Reuters has a sad… harrumph!
Even the Washington Post, despite their earnest efforts, couldn’t actually put a negative spin on the new IMF projection:
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Excellent interview by Charles Payne as White House Manufacturing Policy Advisor Peter Navarro outlines how the strategic road map of MAGAnomics is converging.  If you want to see the future, listen to how Navarro outlines what’s coming.
The six MAGAnomic components to pay attention to include: ♦changes to the Universal Postal Union (UPU); ♦HUD Opportunity Zones; ♦America First raw material policy for infrastructure; ♦retail sales strength; ♦the current status of the U.S-China negotiations; and ♦the USMCA ratification.

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♦The UPU was one of those archaic policy issues set-up with good intentions, and then maintained by ‘stupid’ politicians well after it should have been renegotiated.  It’s good to hear that mess is coming to an end in October.
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