The New York Federal Reserve made a quiet admission two days ago that was missed by almost all financial media.  In the NY Fed economic blog they admitted everyone was wrong, President Trump’s 2017 tariffs against China did not lead to increased U.S. consumer prices [Read Here].  The Fed also said imports of the Chinese products affected by U.S. tariffs have fallen by an annualized $75 billion. That’s a huge chunk of business U.S. purchasers have shifted to Japan and other Southeast Asian countries.

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Within this dynamic lays the real reason why Beijing cannot wait for a 2020 election hoping that Biden or Bloomberg can stop their bleeding.  Before going into more depth, this brief explainer from Charles Payne will help establish a framework.  WATCH:
What Payne outlines is correct; however, the internal Chinese ‘tariff-offset’ dynamic is actually even a little deeper.  Overlaying the NY Fed research we can see that Beijing has attempted to offset the Trump tariffs in four majority ways:
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I can’t stop laughing…. just too darned funny.  CTH has long outlined how President Trump has taken the decades-long panda-mask game/approach of Beijing and mirrored it right back upon them.  Today Chinese Coucillor Wang Yi, while delivering a strongly worded statement to G20 ministers, is positively verklempt in his open admission therein.
Our President Trump is the only person who could have delivered this wonderful outcome… well done.  Beijing is very angry about how a U.S. President is disrupting a new world economic order that China has so artfully manipulated for the past two decades.

It is simply beyond delicious.

(Reuters) – The United States is the world’s biggest source of instability and its politicians are going around the world baselessly smearing China, the Chinese government’s top diplomat said on Saturday in a stinging attack at a G20 meeting in Japan.
Relations between the world’s two largest economies have nose-dived amid a bitter trade war – which they are trying to resolve – and arguments over human rights, Hong Kong and U.S. support for Chinese-claimed Taiwan.

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President Trump held an impromptu presser prior to departing JBA for Alabama.  This is one of those mini-pressers that reveals important aspects to the *direction* of the U.S-China trade discussion from the POTUS perspective.  The financial pundits always miss these little tell-tale remarks.  President Trump is managing the trade and economic program at a granular level; this is his priority… every little part of it, he is directing.
President Trump notes the value of the tariff strategy, and infers (not so subtle) that no deal is preferred within his ongoing plan: “you’ll see what I’m going to be doing.”  This is what the financial pundits ignore. President Trump has gamed this out, he’s stringing the process slowly to keep boosting the stock market…. but his goal does not include a deal.
[Video and Transcript below]

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[Transcript] – THE PRESIDENT: I look forward to seeing a lot of things. But on Monday, in particular, our stock market has just broken another record, as you see. Our economy is doing phenomenally well. Our jobs numbers just broke yet another record. They’re higher than ever before. Our country is doing better than it’s ever done. Our military is rebuilt. It was a mess when I took over.

And a lot of good things are happening, and now I’m going to watch Alabama-LSU, and that’ll be a lot of fun. So, we look forward to it.

Do you have a question? Go ahead.

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The International Monetary Fund (IMF) has a statement out today that underlines why so many global forces are against President Trump: “there are trillions at stake”.

(Reuters) – An interim U.S.-China trade deal that rolls back some tariffs has the potential to improve the International Monetary Fund’s baseline economic forecasts, which show the two countries’ trade war slowing global growth significantly this year, an IMF spokesman said on Thursday. (read more)

The baseline for the position of the IMF is the open secret amid global economic that few will ever discuss openly.  The U.S. economy generates approximately $21 trillion in total activity; roughly 20 percent of total global economic activity.
When the U.S. maintains a $500 billion per year trade deficit with China, essentially we are sending China trade dollars Beijing then uses to purchase industrial products from the EU an other nations.  Any reduction in the U.S-China deficit means China has less dollars to distribute; as an outcome the global economies have access to less U.S. wealth.
The process to retain U.S. dollars inside our own economy, President Trump’s “America First” economic agenda, is the heart of what most call the global economic slowdown.  As a result the position of the IMF is better when the U.S. maintains a deficit, and the position of the IMF is weakened by any process that stops that exfiltration of wealth.
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There is a lot of banter amid the punditry class of trade and finance watchers surrounding a statement from Chinese Commerce spokesman Gao Feng claiming that U.S. and China negotiators were discussing a ‘phased’ roll-back of U.S. tariffs as part of a trade deal. However, a note of very strong caution should be applied.

On its face the Beijing-central claim is essentially an accurate portrayal of a dynamic long discussed.  The tariffs were initially imposed to reset the outlook of China.  In any negotiation with China a concession of current status is a non-starter.  By natural disposition Beijing refuses to cede already won ground. This is their historic approach.
Therefore when engaging in any negotiations with China it is necessary to reset the baseline.  China has to naturally feel losses; the economic landscape must be changed around them without their participation; in order for for them to consider negotiation.
The punishing U.S. tariffs accomplished this objective; the Beijing baseline status has been changed.  The bamboo forest is significantly less than it was two years ago, and now China wants to recapture lost position. Their current status indicates exactly that dynamic.
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Hat Tip OverTheMoonbat for making sure we didn’t miss this segment from last week.  This video also explains why Larry Kudlow, Secretary Mnuchin, Secretary Ross and Peter Navarro have tended to spend more time discussing economic policy with CNBC analysts than Fox Business.   However, before watching, it is worth revisiting the background.

For three years CTH has explained the challenge in dealing with, or renegotiating with, the Beijing, China ideology.  Encapsulated thus in 2018:

[…] China has no cultural or political space between peace and war; they are a historic nation based on two points of polarity. They see peace and war as coexisting with each other.
China accepts and believes opposite or contrary forces may actually be complementary, interconnected, and interdependent in the natural world, and they may give rise to each other as they interrelate to one another. Flowing between these polar states is a natural dynamic to be used -with serious contemplation- in advancing objectives as needed.
Peace or war. Win or lose. Yin and Yang. Culturally there is no middle position in dealings with China; they are not constitutionally capable of understanding or valuing the western philosophy of mutual benefit where concession of terms gains a larger outcome. If it does not benefit China, it is not done. The outlook is simply, a polarity of peace or war. In politics or economics the same perspective is true. It is a zero-sum outlook.
If it does not benefit China, it is not done !

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Steve Bannon is at his best when he explains how the Chinese Communist Party (CCP) use their power in economics -against the capitalist view of profit- to erode the values of western companies and corporations.   Good points made in this interview.

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Lots of dragon-dancing with a very hungry panda.

President Trump, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Mnuchin gathered with their Chinese counterparts in the Oval Office for a lengthy  announcement of “phase-one” of a U.S-China trade agreement.  Vice-Premier Liu He leads the Chinese delegation.  [No point sheet on USTR website yet]  According to the presser:

Phase One has reached ‘agreement in principle‘, and includes: Intellectual Property issues; Banking and Financial Services to include currency devaluation; and major agricultural purchases ($50 billion +).  There will be several phases, and each phase will have an individually tailored enforcement mechanism. [Note: this approach sounds similar to the ‘six sectors and stages’ USTR Lighthizer discussed in March 2019.]
The Phase One agreement details still have to be put on paper over the next five to six weeks.  The U.S. and China are hopeful to have ‘phase one‘ complete by December. In exchange for current AG purchase commitments, and as an act of good faith while phase-one is finalized, the U.S. will suspend the tariff rate increases scheduled to take effect on October 15th. The tariff increase from 25% to 30% has been ‘suspended‘.
The scheduled U.S. tariff increases for December are still planned; however, they will be assessed as part of the ongoing negotiations.  Meanwhile, touchy issues like tech company Hauwei, 5G, telecom and the Chinese firms on the U.S. blocked “entity list” (ie. trade ‘blacklist’) are not part of the discussions.  Those issues fall under U.S. National Security and will not be part of any ongoing trade negotiations.
[Video Below]
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Earlier today Treasury Secretary Steven Mnuchin held a press conference at the White House to announce a new executive order constructed by the Trump administration that would deliver economic sanctions due to Turkish activity in Northern Syria.
“These are very powerful sanctions. We hope we don’t have to use them. But we can shut down the Turkish economy if we need to,” Treasury Secretary Mnuchin tells reporters.

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Additionally, Secretary Mnuchin notes there has been “significant progress” in the U.S-China trade discussions over the past two days. Vice-Premier Liu He is schedule to meet President Trump in the oval office at 2:45pm.
[Transcript] SECRETARY MNUCHIN: Hello everybody. So, I just met with President Trump, and he has authorized and will be signing a new executive order giving the Treasury Department, in consultation with himself and Secretary Pompeo, very significant new sanctions authorities that can be targeted at any person associated with the government of Turkey, any portion of the government. This will be both primary sanctions and secondary sanctions that will be applicable.
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Earlier today President Trump held a White House event to sign an executive order on Transparency in Federal Guidance and Enforcement. [Details Here and Here]
In addition, President Trump took numerous questions from the media during a lengthy press conference [Video and Transcript below].

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[Transcript] – THE PRESIDENT: Well, thank you very much. I’ll start by saying I just spoke with Boris Johnson, and we had a good talk about a number of subjects, and we’ll maybe talk about it a little bit later. But we had an extended conversation and some pretty good ideas, I think. They want to see if we can do a couple of things, and they’ll be doing certain things for us.
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