Bill Owens: Confounding And Confusing Events 5/20/19

It appears that much of the Canadian internet data is transmitted and stored in the United States.  This data is not accorded the same level of security as data which is generated and stored in Canada and it is not protected by the same privacy rights as those accorded to US domestic data and its owners.

As we noted in our commentary last week on Friday May 10^th was the start of the collapse of the US Chinese Trade Negotiations.  Mr. Trump initially increased tariffs to 25% on about 200 Billion Dollars worth of goods, the Chinese withdrew from negotiations, Mr. trump then threatened to increase tariffs on virtually all remaining Chinese imports to the 25% level and China responded by placing tariffs on about 60 Billion Dollars of US imports into China. It’s obvious the US will pay a small fraction of what China pays to the US- just seeing if you’re awake.  What will the Chinese do, let their currency weaken and sell US Treasuries? These two steps could profoundly weaken the US economy.  Did the administration think of this or is it a surprise?

Connected to the tariff issue, of course, is the cost to the US economy and in particular the growing vocal rejection of Mr. Trump’s policies by farmers and the agriculture community in general.  It is quite clear in comments made by many agricultural groups during the week of May 13^th that they see this issue as having gotten out of control and are wondering exactly what Mr. Trump’s game plan is. The economic hardship even with “subsidies” used to reimburse farmers for losses is not likely to sustain those agriculture economies for very long.  Mr. Trump needs those votes, so what will he do?  

In the past week, Larry Kudlow who is the President’s economic advisor indicated that in fact American consumers are paying the price for the tariffs imposed by Mr. Trump.  Mr. Trump continues to say that the Chinese are paying the tariffs, when in fact that is simply not true; it is importers who are paying the tariffs to the US Treasury and presumably passing most of that on to American consumers.  Mr. Kudlow did indicate in a surprise expression of logic that “we have had unfair trading practices all these years and so in my judgment, the economic consequences are so small that the possible improvement in trade and exports and open markets for the United States, this is worthwhile doing.”  This acknowledgement is important and makes at least two important statements, the first, that the economic consequences are small which I would agree with in the short term unless you are the one bearing them, and secondarily the “possible improvement” makes this worthwhile doing. So maybe there is a plan here.  I can’t see it, can you?

On Wednesday, May 15^th, the US Trade Representative, Mr. Lighthizer, met with senior Democratic leaders in the House about the status of the USMCA.  The indications from the meeting are that there was some hope infused into the process. Of course there remains the question of whether Speak Pelosi will allow the vote to come to the floor, even if there are votes for passage, in order to avoid giving Mr. Trump a significant domestic victory.  The question is, what will Speaker Pelosi demand in return, as I have previously commented, it would have to be something big, otherwise, giving up this prize is not necessarily going to help the Democratic cause.  Amongst those things that were discussed on Wednesday were making sure that there are adequate enforcement tools, that there are significant labor protections and environmental protections.  Most interesting was Mr. Lighthizer’s interest in opening up the conversation with Canada and Mexico which he had previously refused to do.  This tells us two things, first, he saw the handwriting on the wall that the agreement was not going to be approved in the House, and secondarily, that he finally made the correct stop, and that was at the Speaker’s office.  Canada and Mexico may not be willing to meet the Speaker’s demands, however, with the tariffs removed, maybe they will.  

This week saw the announcement of Bill de Blasio which was proceed by the announcement of Steve Bullock, the Governor of Montana.  Mr. de Blasio’s entry into the race is really somewhat unremarkable in that there are many Progressives who are pushing the same message as he is.  Mr. Bullock, on the other hand, represents a unique entry in that he was elected from a deeply red state as a Democratic Governor, clearly had people voting for him who voted for Mr. Trump, and he is known as a moderate and someone who is capable of getting along in a partisan environment.  He may be the surprise the Democrats should be waiting for.

Mr. Trump announced emergency action against foreign entities with regard to Telecom products.  Clearly, this is another strike at Huawei and will further deepen the rift between China and the United States.    Mr. Trump is used to playing all of his cards, and playing them hard, which he’s done here, but this is a different environment and one which may in effect, place this entire process in jeopardy.  Simultaneously, there was an announcement that there would be further talks with the Chinese, although, there was no time set nor was there any indication of what’s on the agenda.

Mr. Trump also announced this week that he was looking at alternatives in terms of the conditions for immigration.  He wants to do away with the family- ties concept, and move towards a more needs based approach.  A needs based approach, in my view, makes some sense as we should be assessing what are the skills that we need in the Country and obviously that means we have to look for a range of skills, from people with high tech backgrounds, to people who will be able to pick crops, to people who will be able to care for Baby Boomers (I’m really concerned about that as I am one of them).  This is a situation in which some real thought and compromise is necessary to develop a policy that would be beneficial to both Immigrants and to the United States economy, and the people of the United States. Mr. Trump apparently told the Secretary of Defense that he was no longer interested in going to war with Iran.  I recall very clearly when President Obama was talking about reducing troops in Iraq and Afghanistan, that Mr. Trump was one of his vocal critics along with many other Republicans, stating that we were giving away our strategy.  I wonder if POTUS understands that he’s given away his strongest card in this diplomatic kerfuffle. Probably not.

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