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May 18, 2018 | Trumpian Hardball: Nowhere Close to NAFTA Deal but Progress in China

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
NAFTA negotiations are in jeopardy, but things are progressing better in China. The difference? China strikes back.

U.S. trade representative Robert Lighthizer says ‘Nowhere Near’ Close to Nafta Deal.

“The Nafta countries are nowhere near close to a deal,” U.S. trade representative Robert Lighthizer said in a statement, citing “gaping differences” on intellectual property, agricultural trade, duty-free levels for shipments, labor rules, and other areas.

All three Nafta countries — Mexico, Canada and the U.S. — had sought to wrap up a deal before the height of the U.S. midterm season and before Mexico’s presidential election on July 1. Ryan, who had originally set Thursday, May 17 as a deadline, sought to offer Lighthizer and his Canadian and Mexican counterparts more time to reach a deal this spring that could still get a vote before a new Congress takes office in January.

In China

In April, Beijing introduced a high tariff on the imports as part of a tit-for-tat trade spat between with the US. But China’s commerce ministry has now said the measures affect consumers and are not in the public interest.

The US is the world’s leading producer of sorghum, and is the largest supplier of the grain to China. Sorghum is a grain used primarily to feed livestock, but it is also used to create ethanol, or drinking alcohol.

China said a final ruling on whether to continue April’s 178.6% tariffs would be made after a further investigation

China Hardball

Chinese hardball with the US resulted in Rotting Cherries, Spoiled Pork, and Ford Car Inspections that required dismantling entire engine assemblies.

Trump pulled back, citing concern over jobs, not in the US, but amazingly in China. For details, please see Trump’s pledge to help China’s ZTE spurs backlash in Washington.

EU Hardball

China is willing to play hardball with Trump. The EU, Mexico, and Canada are not.

Conclusion

China knows how to play hardball, the EU doesn’t. That said, the EU will at some point be forced to respond and the results won’t be pretty.

Trump may appear to be winning, but trade wars are lose-lose policies. The longer they linger, the more each side loses.

The difference with China is the US has already backpedaled.

However, it may not last. Trump has been known to change his mind.

Mike “Mish” Shedlock

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May 18th, 2018

Posted In: Mish Talk

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