Earlier today U.S. Trade Representative Robert Lighthizer messaged a warm birthday greeting to Mexican Foreign Secretary Louis Videgaray during ongoing negotiations between the U.S. and Mexican trade teams (video below).

Canada is FUBAR. No-one quite knows how FUBAR Canada is, because no-one has  followed the brilliant Wolverine crew closely enough to spot the strategy.
At the strategic direction of President Trump; and it is a really brilliant workaround strategy; the U.S. and Mexican teams are approaching the current NAFTA negotiations from a position of bilateral trade.   Trade watchers, Wall Street experts, financial pundits and the entire media apparatus are missing what Team USA are doing right in front of their faces…. they’ve obviously never followed or studied Trump’s out of the box problem solving when it comes to complex deals.
I won’t rehash the NAFTA flaws; familiar CTH readers know them well.  However, the bottom line is NAFTA is NOT, repeat N.O.T being renegotiated. I was going to remain silent, but I think it’s safe, Lighthizer is close enough to a deal to explain what’s happening.
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If there was a five-click dial available as a severity meter between the U.S. and China, something happened internally in Beijing, over the last 72 hours, because that dial just triggered movement from 3 to 4… Keep watching everything in the world of geopolitics with a mental 360° radar sweep looking for Chinese influence/interests.

Nuance and subtlety is everything in China. Culturally harsh tones are seen as a sign of weakness and considered intensely impolite in public displays between officials; especially within approved and released statements by officials representing the government.
Therefore, when we see China publicly use strong language – it indicates a level of internal disposition beyond the defined western angst. Big Panda becomes Red Dragon; there is no mid-status or evolutionary phase.

SHANGHAI (Reuters) – China’s state media on Monday lashed out at the policies of U.S. President Donald Trump in an usually direct attack, accusing him of “starring in his own carefully orchestrated street fighter-style deceitful drama”.
Trump’s wish for others to play along with his drama is “wishful thinking,” the ruling Communist Party’s People’s Daily newspaper said in an editorial.

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U.S. Trade Representative Robert Lighthizer and a delegation of out-going and in-coming Mexican trade officials have been conducting intensive NAFTA negotiation talks for the past several weeks.  The out-going Mexican officials, led by Ildefonso Guajardo, are optimistic terms of agreement can be reached with the U.S; the incoming Mexican officials led by AMLO’s Jesus Seade, not so much.
The key issue is still the NAFTA fatal flaw that allows both Canada and Mexico to exploit their access to the U.S. market as brokers for imported Asian parts, assembled in Mexico/Canada, and the finished goods shipped into the U.S.  That structural issue remains unresolved; hence the impasse.
Meanwhile, Canadian Foreign Minister Chrystia Freeland wants to reenter the trade discussion after being shut out since the beginning of May.

(Reuters) – Canada is “very keen” on concluding negotiations to renew the North American Free Trade Agreement as soon as possible, Foreign Minister Chrystia Freeland said on Saturday, amid signs of progress after months of delays.

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Larry Kudlow has fully immersed himself in MAGA.  The evolution from supporter to believer likely comes from the increase in proximity to President Trump and the resolve therein.   Good stuff.
In this segment the Chairman of the National Economic Council discusses the background of the U.S. -v- China trade reset and the long-term goal of open global markets with Zero tariffs, Zero non-trade barriers and Zero subsidies.

President Trump has moved into Phase II of the U.S./China confrontation.  Part of that confrontation is to use the inherent weakness of the Chinese economy against them.  To understand the weakness is to understand the China ‘One-Belt / ‘One-World‘ economic trade strategy.  Here’s an outline of the economic battle-space we are witnessing.
People often talk about the ‘strength’ of China’s economic model; and indeed within a specific part of their economy –manufacturing– they do have economic strength.
However, the underlying critical architecture of the Chinese economic model is structurally flawed and President Trump with his current economic team understand the weakness better than all international adversaries.
Lets take a stroll and discuss.
China is a central planning economy. Meaning it never was an outcropping of natural economic conditions. China was/is controlled as a communist style central-planning government; As such, it is important to reference the basic structural reality that China’s economy was created from the top down.
This construct of government creation is a key big picture distinction that sets the backdrop to understand how weak the economy really is.
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President Trump sets the 2018 Mid-Term priority. Excellent. “I don’t care what the political ramifications are.” … “Border Security is National Security, and National Security is the long-term viability of our Country.” Yes, indeed, yes it is.

(Tweet LINK)

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Apparently our CTH suspicions were correct; this is interesting.  Canadian Foreign Minister Chrystia Freeland is scheduled to leave Canada on Tuesday for a meeting of ASEAN foreign ministers in Singapore…. Meanwhile U.S. Trade Representative Robert Lighthizer and a high-level Mexican team -consisting of both incoming AMLO and exiting Nieto delegations- will be meeting again to determine the details of a bilateral trade deal.

Mexican Economy Minister Ildefonso Guajardo is from the outgoing Pena Nieto administration and was part of the crew supporting the Canadian position; ie. the plan to continue exploiting the NAFTA loophole.  However, Mexican president-elect Andres Manuel Lopez Obrador (AMLO) has selected Jesus Seade as his lead person for trade negotiations and appears more willing to engage in a bilateral trade deal with the U.S.
AMLO’s Jesus Seade, Minister Ildefonso Guajardo and Ambassador Robert Lighthizer are meeting again this Thursday to put the outline of a deal together; while Canada is sidelined from the discussion.
Flavio Volpe, president of the Automotive Parts Manufacturers’ Association in Canada, said: “I wouldn’t be surprised if the Americans and the Mexicans came to some resolution on that piece (autos) and then the Americans flip it back to Canada and say ‘Take it or leave it’.”  That is exactly what CTH anticipated was going to happen.
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Interestingly Reuters uses the narrative from an anonymous Canadian “official” to frame an article about how global car manufacturers are coming together next week in Geneva to coordinate their strategy against the United States and President Trump.
Just let that part sink in for a moment…

Behind that context we can clearly see: 1) the economic importance of the Auto industry to the countries that are assembling; 2) their multinational corporate interest in retaining unlimited access to the U.S. market; and 3) the absolute need of all assembling corporations to find a way to keep their investments in NAFTA’s fatal flaw viable.
Who is gathering?  Canada, Mexico, the EU (ie. Germany), Japan and South Korea.
Where are they going?  To visit Geneva, Switzerland.  Why Geneva? Because that way China can attend (see Volvo/Sweden) without being on the official roster.  ::nudge, nudge:: ::wink, wink::  ::say-no-more Panda boy, say-no-more::  Additionally, Cecelia Malmström (EU Trade Minister), is the person Canada is relying upon to cover their anti-Trump position:

MEXICO CITY/OTTAWA (Reuters) – Canada, the European Union, Japan, Mexico and South Korea will meet in Geneva next week to discuss how to respond to threats by U.S. President Donald Trump to impose tariffs on U.S. imports of autos and car parts, officials familiar with the talks said.

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The head of the White House Council of Economic Advisers, Kevin Hassett shares his perspective on the 4.1 percent GDP growth, and the ongoing MAGAnomic America-First initiatives.   Hassett rightly points out that finished good domestic inventories dropped as an outcome of consumer purchasing outpacing manufacturing.  As more manufacturing comes on-line, the production capacity expansion leads to more GDP growth.
Remember, one of the unique attributes of the U.S. economy, thanks to the foresight of industrial titans who built it, is our internal consumption.  We are not only the worlds’ largest economy, we are the biggest self-sustaining economy in the history of the world; a massively consequential strategic advantage. Our leverage comes from nations needing access to our market; the U.S. does not necessarily need access to theirs. Therefore POTUS Trump can dictate the terms.

President Trump delivers a weekly address for W/E July 27th, 2018. The primary topic of immigration enforcement and support for Immigration and Customs Enforcement (ICE) is the message: