There is a geopolitical strategy happening this week that is essentially under the radar.
U.S. Treasury Secretary Steven Mnuchin, USTR Robert Lighthizer, Economic Council Chairman Larry Kudlow, and the U.S. trade team are heading to China.
The outcome of their discussions connects the initiatives behind North Korea, China and NAFTA. The steel and aluminum tariffs are part of the toolbox. Only one media personality, our favorite suspicious cat, appears to understand the larger economic play and how it is being deployed.
From the U.S. perspective, NAFTA has a fatal flaw. Mexico and Canada admitted the flaw for the first time a few weeks ago. The flaw is Mexico and Canada’s exploitation of NAFTA as a backdoor into the U.S. market for Asian, mostly Chinese, manufactured products. Multinational corporations who have invested in Canada and Mexico are determined to retain the flaw.
President Trump understands that as long as Canada and Mexico can unilaterally make trade agreements with the EU and ASEAN nations, any NAFTA agreement between the U.S., Canada and Mexico is moot. The NAFTA talks are paused.
The U.S. Team now heads to China. There’s no doubt part of the objective is to begin a structural discussion that must happen for the U.S. trade team to approach closing the fatal NAFTA flaw from the source of origin. [*note* on the EU side of this issue, Commerce Secretary Wilbur Ross is leading a similar discussion. Mnuchin and Lighthizer are focused on Asia, Ross has responsibility for Europe]
