To understand the China ‘One-Belt / ‘One-World‘ economic trade strategy it becomes necessary to understand how structurally weak the Chinese economy was when created.
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 lightly 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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Despite the good news, the insufferable MSM are still trying to bury the cause and effect. In an effort to give a more precise picture I’m going to use a Reuters summary, and shift their text location to highlight what they bury and emphasize what they avoid:
WASHINGTON (Reuters) – The U.S. economy grew faster than initially thought in the second quarter, notching its quickest pace in more than two years, and there are signs that the momentum was sustained at the start of the third quarter.
Gross domestic product increased at a 3.0 percent annual rate in the April-June period, the Commerce Department said in its second estimate on Wednesday. The upward revision from the 2.6 percent pace reported last month reflected robust consumer spending as well as strong business investment.
Growth last quarter was the strongest since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that second-quarter GDP growth would be raised to a 2.7 percent rate.
♦[…] Businesses helped to carry the economy in the second quarter, with spending on equipment jumping at a rate of 8.8 percent. ♦[…] Trade added two-tenths of a percentage point to growth. ♦[…] Government spending contracted for a second straight quarter. ♦[…] Housing was a drag on growth in the last quarter, with investment on home building contracting at a 6.5 percent rate.
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Things are going swimmingly, strategically, seemingly according to plan.  When the full measure of history allows time to review, observers will note the strategic victory was achieved on August 5th, 2017; that’s the original date when Russia and China agreed to the U.N. Security Council sanctions against North Korea.  That first, historic, Russia and China U.N. Security Council vote against North Korea came as a result of eight months of assembled economic leverage created by President Donald Trump.
As a result of this ongoing strategy, every time North Korea’s Kim Jong-un takes an action, President Trump hits China’s Xi Jinping with an additional economic squeeze.  As Beijing feels the squeeze, they tell Kim Jong-un to act. Every time Kim Jong-un acts, President Trump squeezes Beijing with more economic pressure.  Wash-Rinse-Repeat.
Communist Beijing has boxed themselves into this inescapable cycle. The only way out of the box is to concede and lay the DPRK defeat at the feet of Kim Jong-un.  The conceding will evidence itself when Beijing inevitably calls for ‘Six Party Talks‘.  Today:

(Via Associated Press) Chinese Foreign Minister Wang Yi says his country will “fully and completely” abide by U.N. Security Council sanctions resolutions on North Korea.
Wang told reporters Wednesday China would work with other members of the council on how best to react to North Korea’s launch of a ballistic missile over Japan on Tuesday.
He says, “We will make a necessary response.”

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Mexico’s Economy Minister Ildefonso Guajardo has a different perspective today than prior to the beginning of NAFTA renegotiation.
Before NAFTA round #1 began Minister Guajardo stated angrily if the U.S. did not concede to the demands of Mexico his government would flood the U.S. with drugs and illegal aliens.
However, in the face of actually seeing NAFTA discussions possibly leading to collapse, Mr. Guajardo has a change in tone.  The minister is looking at alternatives, bi-lateral trade deal options are analyzed, and the reality of the Mexican economic position is settling in.
What happens next? Mexican officials are dispatched to Washington DC to enlist the lobbying efforts of K-Street and their allies in the U.S. CoC.  “Halp“:

MEXICO CITY (Reuters) – Mexico sees a serious risk the United States will withdraw from NAFTA and is preparing a plan for that eventuality, Economy Minister Ildefonso Guajardo said on Tuesday, calling talks to renegotiate the deal a “roller coaster.”
[…]  “This is not going to be easy,” Guajardo said at a meeting with senators in Mexico City. “The start of the talks is like a roller coaster.”

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China, via Beijing’s communist old guard, has played right into the hands of the Trump administration by overreacting to the economic pressure of President Trump.  Beijing authorized an atomic elbow via another provocative North Korean missile test. However, their response now empowers the Trump administration to point out the terrible DPRK behavior and simultaneously take a higher diplomatic road.
President Trump, Secretary Tillerson and Secretary Mattis’s “Fire and Fury” approach was essentially a dynamic Win/Win.  By utilizing diplomacy (Tillerson/Haley) while constructing the appearance of military possibility (Mattis/McMaster), while simultaneously President Trump put the BIG geopolitical economic squeeze on China, team U.S.A. created a multidimensional box – and Beijing walked directly into the trap.

Unintentionally, China has now created a diplomatic ‘high-road’ path in response to the DPRK for the Trump administration.  China, seeking to retain position behind the curtain of the DPRK, will not be able to oppose, publicly or in the U.N., any U.S. and allied position now or they run the risk of the entire world seeing their controls over Kim Jong-un.  Notice the strategy in the well coordinated approach today:

President Trump Speaks To PM Shinzo Abe – President Donald J. Trump spoke yesterday with Prime Minister Shinzo Abe of Japan to address North Korea’s launch of a missile that overflew Japanese territory. The two leaders agreed that North Korea poses a grave and growing direct threat to the United States, Japan, and the Republic of Korea, as well as to countries around the world. President Trump and Prime Minister Abe committed to increasing pressure on North Korea, and doing their utmost to convince the international community to do the same. (LINK)

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There is an saying people use to criticize President Trump based on the people around him:

“People are policy, and policy is people”…

The basic argument is that Mr. Trump can be swayed or distracted from his mission by his staff and those he hires.
This is a common catch-phrase brought about by historic and conventional wisdom.  However, when applied to President Trump, it’s also just plain wrong.
No similar cliche is appropriate for Donald Trump, nothing deters or influences him from his larger decades-long ‘America-First’ economic strategy. Nothing.
Donald Trump is the policy. There’s no assembly of advisers on economic issues that can ever sway his instinct.
Example:

(Reuters) – U.S. President Donald Trump last month rejected a Chinese proposal to cut steel overcapacity, despite the endorsement of some of his top advisers, the Financial Times said, citing people familiar with the matter.
Beijing proposed cutting steel overcapacity by 150 million tonnes by 2022 in a deal twice rejected by Trump, who instead urged advisers to find ways to impose tariffs on imports from China, the paper said, citing the sources.

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Beijing (China) is attempting to “trigger” President Trump’s internal neo-con and militaristic opposition. Stay frosty, avoid emotional reports demanding military engagement, and remain steady with a high altitude perspective.
Multiple reports now confirming that North Korea has conducted a missile test. The flight path escalates the issues by crossing over part of Northern Japan. In essence, Beijing China just threw an elbow at President Trump. [The likely “Why” follows breaking report]

TOKYO (Reuters) – North Korea fired a missile that passed over northern Japan early on Tuesday, the Japanese government said. The government’s J-Alert warning system advised people in the area to take precautions, but public broadcaster NHK said there was no sign of damage.
The Japanese military did not attempt to shoot down the missile, which passed over Japanese territory around 6:06 a.m. local time (2106 GMT). (Reuters)

Japanese Prime Minister Shinzo Abe, speaking to reporters in Tokyo after the launch, said the missile appeared to have passed over airspace and that the government was urgently collecting intelligence on the incident and doing everything to ensure the safety of its citizens, according to remarks broadcast on NHK, Bloomberg News reports.
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President Trump met with Finland’s President Niinistö in the Oval Office prior to the East Room press conference. During their remarks President Trump discusses his upcoming trip to Texas and the ongoing coordinated efforts between federal, state and local officials in the massive impact zone.

In 2015 we discussed candidate Trump’s economic positions and how they would impact the economy.  CTH anticipated that MAGAnomics would be reversing three decades of federal reserve fiscal policy. After about a year of analysis and discussion, in 2016 CTH presented a theory: “A new Dimension in Modern Economics“.
CTH shared a possibility of what could happen if Trump Economic Policy was shifted to favor Main Street over Wall Street.  One aspect we presented was how Federal Reserve monetary policy would be oddly disconnected from its ability to influence inflation.
Washington Times today:

(Article Link)

While the issues inherent within economic influences can be riddled with complexity, we remain optimistic that MAGAnomics will be very very successful.
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An interesting press release from Ford Motor Co. operations in the U.K. as they announce financial incentives (additional $2,500) to trade in old vehicles for newer “cleaner” emission vehicles in the U.K.

(Via Fox Business) Ford (F) is offering car buyers in Britain a 2,000-pound ($2,570) incentive to trade in older vehicles for newer, less polluting models.
The offer announced Tuesday is available to new car buyers who trade in vehicles registered before Dec. 31, 2009. The cars will then be taken off the road and scrapped. (read more)

Pay attention to these types of stories within the auto sector.  Watch for these types of “incentives” to cross the Atlantic.  The incentives described here are wrapped around a point of cleaner emissions, ie. “climate friendly” etc.  However, as we have shared the financial branch of the auto sector is in trouble; these incentives appear to be a marketing ploy.
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