On the topic of Canadian trade there is mixed news. The USMCA went into effect on July 1, the White House threatens tariffs on Canadian steel and aluminum, while at the same time, being more welcoming to certain business visa holders (L-1s, etc.) coming in from Canada; the border remains closed, and in my view, given the uptick in cases in the United States and the irrational activity of the administration, it is unlikely that Canada will agree to an opening at the end of July. The fact that Canadian business people will be able to travel to the United States lessens the pressure for the border to fully reopen since they are asking and others are not. Damage, however, is being done to our tourist economy, both along the Canadian border, and if this persists for many months, it could well impact Florida and Arizona in the Fall and next Winter. Mr. Lighthizer in his recent testimony talked tough about how the US would enforce the USMCA.
On other trade fronts, the US is threatening troop withdrawals in Europe, demanding more defense spending by the EU and simultaneously entering into a trade war with the EU. The Chinese are reacting adversely to our positions on Hong Kong, expressing an unwillingness to meet the requirements of the first phase of the new trade deal. We are applying pressure to Chinese companies and attempting to have our EU allies ride along with us in prohibiting various tech companies from selling products in the EU and the United States. The US is also looking to impose tariffs on coffee, olives, chocolate and vodka in response to the long running dispute over airbus subsidies, further exacerbating the trade tensions with the EU. A confusing morass of contradictory approaches which POTUS has gotten away with for three (3) years, but I think is now coming back to roost as his threats have proven ineffective, and in many instances, just plain silly.
POTUS and Russia, there is news that our spies and commandos warned months ago of Russian bounties on US troops, and that in fact, Mr. Trump was briefed on these issues. He seems to be walking down the same path that he always does, first, denying that he was ever briefed, then saying that the intelligence was not adequately verifiable, then he will drift into – “Well, I was briefed but . . .” that explanation will be very interesting. It continues to amaze me that the military and veterans stand with him given all of the absurd actions he has taken to their detriment. Of equal concern, of course, is Congresswoman Stefanik’s position that she stands with the President on this issue, and does not challenge, in the least, his assertions but makes broad statements about standing with the military. If you stand with Trump, you can’t stand with the military.
The fed put restrictions on bank dividends and buybacks after stress testing was done to evaluate the impact of the pandemic. Also, reported this past week, were increasing levels of defaults and delayed payments making it very difficult for banks to judge the credit worthiness of their borrowers. The task of evaluating how a borrower is impacted by delayed payments to the borrower is both time consuming and complex. Careful scrutiny of accounts receivable aging will be a big test.
The Canadian dollar is lagging against its G-10 peers, which can have a significant impact on trade,including the opening months of the USMCA. If the Canadian dollar weakens, that makes its exports cheaper, which has a number of negative economic impacts. This is likely to excite Mr. Trump and his economic advisors, but in reality, there is very little that can be done in the short-term since Canada, like the United States, does not have an exchange rate set by the government, but rather by the market. It’s very difficult to argue that Canada is manipulating its currency when they use exactly the same system that we do. We will see how POTUS responds.
Siberia apparently had temperatures in the 100° range which are the highest ever recorded north of the Arctic Circle. It is unclear to me exactly what this indicates from a scientific perspective, but a commonsense perspective would tell you that something is happening to the earth and needs to be analyzed and responded to. It is certainly possible that this is a cyclic process that is simply going to have to play itself out, but I think there is ample evidence and the majority of reputable scientist will tell you that what man has done has at least exacerbated the process, potentially sped it up and there are some things we can do to reduce the increasing warmth of the earth. Note improved air quality during the quarantine.
I mentioned several weeks’ back that there was evidence of a giant squid attack on a shark, and that evidence of giant squids was very limited. It appears in the last week a giant squid thirteen feet long washed up on a south African beach weighing nearly 700 pounds and fully intact. Scientists indicate this is a relatively speaking medium sized squid with some squid growing can be 60 feet across and weighing up to 2000 pounds. Considering that these creatures usually live at a depth of 2000 feet, this is an unusual and extraordinary find.
In a not so surprising move, the Supreme Court failed to uphold the Trump administration’s attempt to shut down DACA. The reasoning of the court expressed by Justice Roberts which consistent with his view of the law and, in fact, should have been consistent with the view of the law of Justices Gorsuch and Kavanaugh since they both believe in literal statutory interpretation. The Administrative Procedures Act, a somewhat technical piece of legislation, clearly has been interpreted over time to require specific justification when rules are changed, the Trump administration has generally failed to provide that information believing that if they believe it, it is true.
It has been reported that our Congresswoman, Ms. Stefanik apparently opined that the Tulsa rally with 19,000 (turned out to be a lot less) which was mask optional, was, in fact, safe. If, in fact, she said this as reported, this is a serious issue in terms of her understanding of what is happening in the country. Many states that made public mask wearing optional are now making it mandatory because they are seeing the results of opening without the right actions being followed. Clearly, we want to open, the economy needs it, but we need to do it with some scientifically based activity, and those activities are relatively simple; wear a mask, put some distance between you and others, and wash your hands. Really, not so difficult, and it is no threat to your constitutional rights, but what you are doing is a threat to the constitutional rights of others as it impacts their health and safety.
A brief comment on COIVD as we are inundated with information that is voluminous, complex and confusing. COVID-19 is surging in much of the south and west in terms of the number of cases and hospitalizations but as of yet not deaths. This is a trend that needs careful watching and evaluating. We’d like to know the why and hope that the mortality doesn’t accelerate.
Unemployment had good news this past week, but with the opening, closing process ongoing so rapidly, it will take awhile to get an accurate analysis.
Bill Owens is a former member of Congress representing the New York 21st, a partner in Stafford, Owens, Piller, Murnane, Kelleher and Trombley in Plattsburgh, NY and a Strategic Advisor at Dentons to Washington, DC.
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