National Economic Council Director Larry Kudlow discusses some of the key specifics within the dinner table conversation between President Trump and Chairman Xi. [*note* at the very end of this briefing, Kudlow is asked about the German auto visit tomorrow]

President Trump has been brutally consistent for more than three decades on his intent and purpose with the Chinese. President Trump is the first U.S. President to understand how the red dragon hides behind the panda mask. Additionally, while carrying out the objectives of the confrontation, Secretary Mnuchin, Secretary Ross, Ambassador Lighthizer and adviser Navarro are well aware of Beijing’s panda mask; POTUS Trump will never let them forget about it.

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With a full quarter of trade data to analyze the impacts, the Chinese tariff results are now measurable. A multinational group studying the outcome (full pdf), identified that approximately 4.5% of the current tariff impact is being carried by American consumers. The overwhelming cost of the tariff is being paid (20.5% absorbed) by Chinese producers.

There is no doubt in my mind that President Trump has a very well thought out long-term strategy regarding China. President Trump takes strategic messaging toward the people of China very importantly. President Trump has, very publicly, complimented the friendship he feels toward President Xi Jinping; and praises Chairman Xi for his character, strength and purposeful leadership. Trump knows how to play their panda/dragon games.

In June and July last year it became obvious President Trump was going to initiate a full-frontal geopolitical confrontation with China based on their ambitions for economic conquest. We labeled the confrontation: Eagle -vs- Red Dragon.

Specifically around: intellectual property theft; massive U.S. trade imbalances; imposed tariffs, and ridiculous non-tariff barriers put in place by China, we anticipated the conflict would eventually force Beijing to drop the Panda mask and expose their economic intentions. Additionally there was clarity within President Trump’s approach for any observer who was willing to accept the history of Mr. Trump’s views on the larger issues. In short, POTUS Trump will not back down.

In March of 2018 U.S. Trade Representative Robert Lighthizer completed a section 301 review of China’s trade practices. [SEE HERE] Section 301 of the U.S. Trade Act of 1974 authorizes the President to take all appropriate action, including retaliation, to obtain the removal of any act, policy, or practice of a foreign government that violates an international trade agreement or is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce. However, as talks with China progressed, President Trump shelved the 301 action to see where negotiations would end-up.

Due to the severity of communist ideology, and the intransigence of China to make any modification to their global economic plans, Chairman Xi Jinping made the strategic decision to elevate the confrontation in full Red Dragon mode. The May and June, 2018, negotiations between the U.S. and China provided no progress. The 301 review of China was pulled back off the shelf in August 2018, and President Trump began executing his trade-war strategy.

When President Trump and Commerce Secretary Wilbur Ross announced tariffs on Steel and Aluminum, in combination with Round #1 tariffs on imported Chinese products, the Wall Street financial media went bananas with dire predictions of inflation.

However, in September, October and November the Bureau of Labor and Statistics (BLS) released the August and Sept measures of inflation in consumer goods. Despite the doom-and-gloom predictions from the self-interested multinationals, the inflation rate is still below 0.2% the same result as July ’18. Core inflation, which excludes volatile energy and food components, is hovering between 0.1% and 0.2% overall.

Total nonfarm payroll employment increased by 250,000 in October, following an average monthly gain of 211,000 over the prior 12 months. In October, job growth occurred in health care, in manufacturing, in construction, and in transportation and warehousing. (See table B-1.)

Low inflation; expanding employment opportunity; low unemployment; and rising wages.

These measures all have a cumulative impact on paycheck-to-paycheck Americans. Prices for durable goods are stable and wage growth is exceeding inflation. That means more disposable income in the middle-class…. which, when combined with the increased pay from lower middle-class tax rates, is exactly the intended outcome of MAGAnomics.

This creates a situation where the U.S. consumer can fuel the the U.S. economy while President Trump, Secretary Ross, Secretary Mnuchin and Ambassador Robert Lighthizer utilize the leverage within tariffs, to negotiate better America-First trade deals.

President Trump’s economic policy cabinet is the most effective group of individuals every assembled in modern U.S. history; arguably in all of U.S. history. The economic policy plans are working exactly as projected; and, in combination with the domestic economic strength, this empowers President Trump’s international engagements with a stunning amount of influence and leverage.

Economic Security is National Security. We are seeing this multidimensional truth being carried out for the first time in our lifetimes, thanks to a blue-collar billionaire.

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