The financial media still doesn’t get it… Obviously! Transfixed and jaw-agape at seemingly at-odds aspects to a new engagement with Beijing, the MSM financial media are clueless. They are genuinely disconnected, and have no idea what is going on.

The majority of financial pundits are perplexed at what they can see on the surface. USTR Robert Ligthizer and Treasury Secretary Steven Mnuchin are beginning discussions with Beijing. Meanwhile President Trump’s tweets seem to dismiss the potential of the deal-making. The media call this mixed-messaging; however, that’s not what this is.

Secretary Wilbur Ross was very insightful last week when he also spoke of the current U.S. perspective toward the U.S-China trade negotiation. If you have followed the basic road-map of America-First trade policy, there’s was a very clear picture. However, as we expected, most pundits and trade analysts ignored the administration message.

Commerce Secretary Ross warned the professional investment class when he said the current objective for Mnuchin and Lighthizer was to find out if Beijing is willing to re-engage from the starting point where they left-off when talks collapsed.

That was a big tell.

After weeks of phone calls and staff contacts if the U.S. team didn’t know the answer to that question, well, there’s almost zero likelihood of any optimistic outlook.

In essence, the only value within the current engagement is financial ‘optics’ to stabilize stock markets.

It has been clear -validated by the G20 outcome- that President Trump is not going to accept anything less than a full and complete structural change in the U.S. trade position with China. Lighthizer’s severe compliance and enforcement clauses, specific to each unique trade sector, are non-negotiable.

There’s only a very small chance a trade deal with China will be reached. The reforms within the original Lighthizer and Vice-Premier Liu He agreement were antithetical to Beijing. Chairman Xi Jinping and the communist politburo rejected them. For Beijing the compliance and enforcement sections within the agreement were too severe and did not allow China to retain control over the trade terms. The agreement was rejected.

President Trump understands Chairman Xi is looking at this as a zero-sum position. As a consequence it’s not a matter of “if” Trump will apply more tariffs; it is a matter of “when” will Trump apply the tariffs.

That said, there’s no duplicity in the U.S. Position. Mnuchin and Lighthizer are earnestly working in good faith; but President Trump is expecting ‘no deal’.

When President Trump expresses that hardened position, just accept it – and then look around at what else he is positioning to counteract that expectation/result.

Tariffs on China are coming; the question is the scale and timing. It’s likely Trump won’t strike against Chairman Xi until the USMCA is ratified.

That’s why October 21st, 2019 is important. That’s the Canadian election. If Justin from Canada loses his re-election, Speaker Pelosi cannot hold out on the USMCA until after the 2020 election.

Mexico has already ratified the USMCA. If Justin loses the next Canadian election, his successor will assuredly ratify the USMCA quickly. Nancy Pelosi cannot hold out if Mexico and Canada have both ratified.

Once the USMCA is set, there’s no motive for a low China tariff targeted to gain leverage toward a deal that would avoid higher tariffs. In this landscape there is no deal possible; therefore the scale of the tariffs against China will be very significant. My best guess is 25 percent on everything, based on: (A) the continued devaluing of currency and subsidies that Beijing is pre-committed to; and (B) Trump’s message about that manipulation.

President Trump is positioning for an economic platform in 2020 with specific deliverables. Trade and tariffs with China + the USMCA + trade and tariffs on the EU + the possibility of an independent U.K trade deal…. all adds up to massive net American economic value that will extend for decades. It’s like a series of dominoes.

The USMCA changes the global dynamic of how multinationals will gain access to the U.S. market. That kicks off a series of geopolitical moves. I firmly believe the U.S-Japan deal is already worked out. Lighthizer, Ross, Mnuchin and Navarro didn’t spend all that time with Japan in the month ahead of the G20 meeting in Osaka for nothing.

Think of China like a big lake filled with U.S. economic value. Through his Asian discussions with Vietnam, S Korea, Malaysia, Singapore, Australia, Japan, et al, President Trump has stealthily built a thin levy, an ASEAN dam of sorts, that will direct the China lake of economic value into Southeast Asia.

Once the USMCA is signed, Trump will blow the dam by triggering the tariffs. The exodus will benefit those who partnered with Trump.

You think it’s an accident that Australian Prime Minister Scott Morrison is scheduled to come to the U.S. as an official state guest of President Trump on Sept. 20th?

Rucky day, Rucky day…

“Economic Security IS National Security”… ~ US President Donald Trump