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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For more than three decades all U.S. economic policy was elevating Wall Street and diminishing Main Street. As a result the middle America blue-collar workers have not had wage gains keeping up with inflation for over 30 years…. Then came the era of Trump.

– “Walking in a Winner Wonderland” –

More than two years ago CTH began discussing the ramifications to a new emphasis on the economy outlined as a possibility of candidate Donald Trump’s economic policy outlook. Within the overall discussion we walked through the anticipated changes possible if A.) Trump won the election, and B.) Trump began instituting Main Street economic policy ahead of Wall Street policy (the past 30+ years).
We discussed the new dimension that would occur between two economic engines (Main Street -vs- Wall Street) as three decades of policy shifted. CTH outlined statistical and measurable KPIs that would become visible in the space between the policy shifts.
Part of those discussions focused on energy costs, product costs (we explained how inflation would be weird), and importantly, wage rates. It takes several months of policy emphasis (actual outcomes), before the labor market wage rates would grow. We anticipated seeing that impact in Q2 of 2018, which is April-June 2018.  Well:
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Several days ago I noticed a well-connected Canadian business analyst, Manny Montenegrino, had a considerable assembly of facts, examples, data-points and details to support his proposition that Canadian Prime Minister Justin Trudeau was intentionally collapsing his own economy.
After going through the evidence, weighing it against our own research, and looking closely at the political network of like-minded followers associating with PM Trudeau (mostly avowed Marxists), Montenegrino’s theory appears very solid:

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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Maria Bartiromo has an exclusive interview with Vice President Mike Pence to discuss the state of the economy and the ongoing administration policies therein.  VP Pence discusses the ongoing trade negotiations and the possibility of an agreement in principle between the U.S. and Mexico; a specific assignment for U.S.T.R. Robert Lighthizer.

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.