From a pure economic/financial perspective this Nike  branding campaign doesn’t make sense…. unless, you realize a much bigger picture. A hidden bigger picture.

On its face, it just seems absurd. Why would any major corporation intentionally stake out a branding position that is adverse to their financial interests?
I’ve spoken to some very excellent business actuaries on this late today; and one specific conversation finally helped to make it all make sense.  During that conversation a good ally shared: “a multinational corporation would never make a branding decision adverse to their financial interests. Unless there is a hidden risk unrelated to what is visible on the surface.” ….BINGO, there it is, the lightbulb went on.
A hidden risk that likely has nothing whatsoever to do with Colin Kaepernick.
The bigger risk to Nike has nothing to do with Black Lives Matter, U.S. Consumers, or Antifa-like political advocacy. The bigger financial risk to the Nike Corporation has everything to do with geopolitics and a reset of international trade agreements.
Here’s the hidden aspect with research to back it up.  Nike Inc. has hitched its massive corporate existence to a 10-year business plan that is dependent on the continuance of recently negotiated manufacturing contracts.
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When China announced the One-Road/One-Belt initiative (now banned from discussion in Beijing); in combination with a looming trade confrontation with President Trump; CTH pointed out that sketchy pandas’ bamboo economy was very vulnerable because it was deep, but narrow – simply too dependent on manufacturing and exports.
Slow down the manufacturing sector and, well, there is no fall-back position….. Cue:

BEIJING (Reuters) – China’s manufacturing activity grew at the slowest pace in more than a year in August, with export orders shrinking for a fifth month and employers cutting more staff, a private survey showed on Monday.
The gloomy findings reinforce views that China’s economy will cool further in coming months, even as the United States ramps up tariffs on Chinese goods. That is likely to prompt more spending and other growth boosting steps from Beijing.

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The Trump Doctrine is easiest to describe as: deploying economic leverage to achieve national security interests.  The Trump Doctrine is unique and stunningly effective.

Many of the geopolitical decisions have multiple facets which connect like small gears on a much larger machine.  One of those small dual-purpose gears is the Doctrine as it is applied to Pakistan.  The downstream moves impact China, our #1 geopolitical and economic adversary, then Russia, and also support new alliances with India and the broader Middle-east.

Toward China = ♦Squeeze #3. In 2017 Trump and Secretary Tillerson, now Secretary Pompeo, put Pakistan on notice they need to get involved in bringing their enabled tribal “extremists” (Taliban) to the table in Afghanistan. Pakistan’s primary investor and economic partner is China. The U.S. removed $900 million in financial support to pressure Pakistan toward a political solution in Afghanistan, China has to fill void.  [NOTE: Last month the World Bank began discussions about a financial bailout for Pakistan.]  Again, more one-way bleed for China. {Go Deep}

When President Trump removed the $900 million in aid to Pakistan, he empowered the Pentagon via Defense Secretary James Mattis, with an option to give $300 million to Pakistan if Mattis felt positive steps were being taken to change behavior.  Today the Pentagon announces no change in behavior is noted:
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U.S. Trade Represenative Robert Lighthizer releases a statement announcing the administration is filing a NAFTA Section 2202 trade modification “notification of intent” letter to congress:

Washington, DC – U.S. Trade Representative Robert Lighthizer today issued the following statement regarding the status of trade negotiations with Mexico and Canada:
“Today the President notified the Congress of his intent to sign a trade agreement with Mexico – and Canada, if it is willing – 90 days from now.  The agreement is the most advanced and high-standard trade agreement in the world.  Over the next few weeks, Congress and cleared advisors from civil society and the private sector will be able to examine the agreement.  They will find it has huge benefits for our workers, farmers, ranchers, and businesses.
“We have also been negotiating with Canada throughout this year-long process.  This week those meetings continued at all levels.  The talks were constructive, and we made progress.  Our officials are continuing to work toward agreement.  The USTR team will meet with Minister Freeland and her colleagues Wednesday of next week.”  (link)

Under the original 1993 terms and Chapter 22 of the Implementation Act, Lighthizer notifies congress that trade parties have modified the terms; this is the Section 2202 notification of modification. Ninety days after the date of the notification the U.S. and Mexico can sign the new terms of agreement; congressional approval is not required. [Canada can still join the U.S-Mexico agreement but they need to act fast.]
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Continual emphasis on the severity of Canadian politics is needed to understand the latest developments in the U.S-Canada trade negotiations.
The Trump administration set a deadline of today for Canada to join the U.S-Mexico trade agreement and make the NAFTA replacement agreement a three-way pact.  The concessions needed by Justin Trudeau and Chrystia Freeland to join the agreement were politically devastating.

In order for Canada to accept or join, via a NAFTA 2202 modification, they would need to agree to the U.S-Mexico modification terms. For Canada they would have to:

• open their telecommunications and banking sector (eliminate non tariff barriers).
• eliminate soft-wood (lumber) and aeronautics subsidies.
• begin a process of lowering their assembly use of Chinese/Asian goods.
• accept the rules of origin for North American manufacturing.
• eliminate protectionist tariffs on dairy and farm products.
• accept the U.S-Mexico terms for arbitration and dispute resolution.

President Trump and U.S. Lighthizer are holding all the cards.  As we previously highlighted they don’t care if Canada doesn’t join; the U.S. would likely prefer to send congress a NAFTA 2205 withdrawal notification removing the U.S. from the original 1993 NAFTA construct in combination with a simultaneous 2202 modification notification for the U.S-Mexico side of the agreement.
This would allow the U.S. to go into a one-on-one trade negotiation where six months and a day from the 2205 notice. The U.S. would then apply 25% auto tariffs on Canadian made vehicles while negotiating a bilateral deal. Canada is in a very weak negotiating position; politics are paramount for the Canadian team; their exit needs political cover.  Media need to help the optics for the Canadian team.
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Prime Minister Justin Trudeau speaks Friday, August 31, 2018 about the Canadian perspective on trade negotiations with the U.S. – Everything about the Canadian position is framed through the prism of politics not economics. Virtue signalling is the primary tactic.
Trudeau and Foreign Minister Chrystia Freeland are in a tenuous position, they cannot accept the terms of the U.S-Mexico deal because they cannot afford to drop the protections and carve-outs within their highly controlled and subsidized economy. Canada would have to: drop telecommunications and banking barriers; drop protectionist tariffs on Dairy and agricultural products; and drop subsidies for the lumber and aeronautics industry.

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The financial media is all a flutter based on a Bloomberg report that President Trump is likely to apply tariffs on $200 billion in Chinese goods.  DUH !  Why do they think U.S.T.R. Lighthizer has been conducting open section 301 tariff hearings for the past week?  Of course President Trump is considering tariffs on $200 billion in trade goods; this approach is not exactly a secret.
Then again, most of the financial media are clueless about the larger economic strategy and how China ties into the negotiations with North Korea.  I digress.

The proposed tariffs are a supplemental action in response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation, based on the findings in USTR’s investigation of China under Section 301 of the Trade Act of 1974. Tariffs on $34 billion in goods from China are currently in effect, and tariffs on an additional $16 billion took effect on August 23rd, 2018.
The issue is not *if* President Trump will apply the 301-tariffs, the question is *how* and *when*?
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Ezra Levant of The Rebel Media discusses the background of Justin from Canada politicizing trade negotiations with President Trump eventually leading to a complete collapse of trade diplomacy.

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The *tell* is within: “we have agreed not to conduct our negotiations publicly.”
Remember, U.S.T.R. Lighthizer, Jared Kushner, Secretary Ross and the U.S. team have never made a public comment about internal negotiations, ever.  The only trade team that has discussed the dialogue, and specifically their individual terms within the dialogue, is Justin from Canada’s team, specifically Chrystia Freeland.  This has been a weakness of team sparkle socks all along because it highlights their political prism.
So when princess rainbow sparkles and Justin back away from talking about their unicorn demands they are signaling a shift from a political prism toward a more economic-based set of determinations.  Essentially, their political approach has failed; they are weakened.

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“what both sides need” interpreted: Justin and Chrystia are trying to gauge the best retreat from the position of political damage. I’m going to hold-off on expanding consequences to Canada joining until I see if they *actually* do join. However, the biggest part of the U.S./Mexico agreement would eliminate Canada’s ability to use the NAFTA loophole.
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What happens when the silent majority stand up in full force and elect a president entirely focused on advancing the interests of Main Street over Wall Street?  What happens when that President takes office and begins systematically instituting a comprehensive series of economic policies that are targeted to Make America Great Again?
The middle-class of America benefits.  That’s what happens.  And when economic, trade, and U.S. financial policy are focused to improve the outcomes for the middle-class, the entire landscape of beneficial outcomes within the U.S. economy shifts…. Bigly.

Express Pro Survey – America’s blue collar workers may be one of the most optimistic groups in the country today. According to a new study conducted by The Harris Poll and commissioned by Express Employment Professionals, 85 percent of America’s blue collar workers see their lives heading “in the right direction.”
Sixty-nine (69) percent also say their local communities are heading in the right direction, and 51 percent say the same about the country as whole.

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