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Wed 26 April, 2017

00:07 Cuba weathers storm in Venezuela but future looks uncertain» AP Top Business News at 12:01 a.m. EDT
HAVANA (AP) -- Refineries have gone dark. Gas rations have been slashed for hundreds of thousands of state workers. Construction materials are nearly impossible to find....

Tue 25 April, 2017

23:49 Asian stocks climb on hopes for US tax cuts, budget deal» AP Top Business News at 12:01 a.m. EDT
SEOUL, South Korea (AP) -- Shares rose in Asia on Wednesday after hopes for tax cuts by U.S. President Donald Trump drove record-breaking gains overnight on Wall Street...
23:39 Trump Plans to Seek Tax Rate of 15% on Owner-Operated Firms» WSJ.com: US Business
President Donald Trump is planning to unveil a proposal to cut corporate taxes on U.S. companies’ foreign profits and to slash the top tax rate on so-called pass-through businesses, including many owner-operated companies, to 15% from 39.6%, said White House officials.
23:36 China launches 1st domestically-made aircraft carrier» AP Top Business News at 12:01 a.m. EDT
BEIJING (AP) -- China launched its first aircraft carrier built entirely on its own on Wednesday, in a demonstration of the growing technical sophistication of its defense industries and determination to safeguard its maritime territorial claims and crucial trade routes....
23:31 I'm Not Getting Interviews -- Is It Because I Got Fired?» Forbes Real Time
I'm Not Getting Interviews -- Is It Because I Got Fired? When you fill out a job application, you get in line with dozens or hundreds of other applicants. Go direct to your hiring manager with a stronger message, instead! When you send a paper
23:31 How Do I Tell The Recruiter She's Not Getting My W-2?» Forbes Real Time
How Do I Tell The Recruiter She's Not Getting My W-2? Many employers demand a job applicant's W-2 or a recent pay stub as verification of their salary. They want you to prove that you earned. Most of us have gotten used to the idea that employers
23:31 Don't Let Anybody Stomp Out Your Flame» Forbes Real Time
Don't Let Anybody Stomp Out Your Flame We can always tell when our flame is growing. Your competence may threaten others. There is no reason to engage in battle, but no reason to navigate these tricky waters by yourself. There is nothing wrong
23:31 The Five Worst Things You Can Say In A Job Interview» Forbes Real Time
The Five Worst Things You Can Say In A Job Interview 1. How many other candidates are you interviewing for this job? 2. If you hire me, I'll work really hard. I'll work nights and weekends whatever you want! 3. How did I do in the interview? (or
23:31 The Highest-Paying Jobs In Healthcare In The U.S.» Forbes Real Time
The Highest-Paying Jobs In Healthcare In The U.S. But within the healthcare realm, which are the positions that pay the most The top job in terms of compensation is Orthopedic Surgeon paying $475,000 a year. (Source: LinkedIn) In second place on is
23:31 Ten Interview Questions That Scream 'You Don't Want This Job'» Forbes Real Time
Ten Interview Questions That Scream 'You Don't Want This Job' Ten interview questions that tell you the job will not be a good fit for you. How many unplanned absences did you take last year? What would your last three bosses say about you?
23:31 The Fatal Interview Mistake 90% Of Job Seekers Make» Forbes Real Time
The Fatal Interview Mistake 90% Of Job Seekers Make Making it out of a job interview without flubbing a question is not your goal. Your goal is to stand out -- in a good way! Change the conversation to get your interviewer off the interview script
23:19 U.S. Tariffs Pose New Reckoning on Canada's Lumber Sector» WSJ.com: US Business
The Trump administration’s action on softwood lumber this week puts to the test Canadian lumber producers’ bid to inoculate themselves from U.S. trade risks by ramping up sales to China and buying sawmills in the southern U.S.
23:18 The Wall Street Journal: Fox News host Kelly Wright joins racial discrimination lawsuit» MarketWatch.com - Top Stories
An African-American on-air host for Fox News has joined a group of current and former employees suing the cable channel and some of its senior executives for alleged racial discrimination.
23:09 To Spur Innovation, U.S. Colleges and Companies Must Collaborate Better» Forbes Real Time
It is time that academia and companies to share critical research for the benefit of the nation.
22:57 Asia Markets: Asia-Pacific markets continue to ride wave of gains» MarketWatch.com - Top Stories
Equities in Asia extended gains for a third session early Wednesday as sustained political optimism, currency tailwinds and the growing prospect of a U.S. tax overhaul whetted appetite for risk.
22:47 President Trump eyes steep cuts to corporate tax rates, repatriated earnings» Top News & Analysis
Trump planned to propose on Wednesday steep cuts in corporate taxes and repatriated offshore profits.
22:37 WTO ruling favors Mexico in US 'dolphin-safe' tuna spat» AP Top Business News at 12:01 a.m. EDT
MEXICO CITY (AP) -- The World Trade Organization ruled Tuesday that Mexico's tuna industry has been harmed by U.S. "dolphin-safe" labeling rules and says the country can seek retaliatory measures worth hundreds of millions of dollars....
22:37 Fox News Host Joins Racial-Bias Suit» WSJ.com: US Business
An African-American on-air host for Fox News, Kelly Wright, has joined a group of current and former employees suing the cable channel and some of its senior executives for alleged racial discrimination.
22:35 Hillary Clinton Explains Our 'North Korea, South Korea, China' Policy»

Authored by Gaius Publius via Down With Tyranny blog,

"We don't want a unified Korean peninsula ... We [also] don't want the North Koreans to cause more trouble than the system can absorb."
—Hillary Clinton, 2013, speech to Goldman Sachs

Our policy toward North Korea is not what most people think it is. We don't want the North Koreans to go away. In fact, we like them doing what they're doing; we just want less of it than they've been doing lately. If this sounds confusing, it's because this policy is unlike what the public has been led to assume. Thanks to something uncovered by WikiLeaks, the American public has a chance to be unconfused about what's really going on with respect to our policies in Korea.

This piece isn't intended to criticize that policy; it may be an excellent one. I just want to help us understand it better.

Our source for the U.S. government's actual Korean policy — going back decades really — is former Secretary of State Hillary Clinton. She resigned that position in February 2013, and on June 4, 2013 she gave a speech at Goldman Sachs with Lloyd Blankfein present (perhaps on stage with her) in which she discussed in what sounds like a very frank manner, among many other things, the U.S. policy toward the two Korea and the relationship of that policy to China.

That speech and two others were sent by Tony Carrk of the Clinton campaign to a number of others in the campaign, including John Podesta. WikiLeaks subsequently released that email as part of its release of other Podesta emails (source email with attachments here). In that speech, Clinton spoke confidentially and, I believe, honestly. What she said in that speech, I take her as meaning truthfully. There's certainly no reason for her to lie to her peers, and in some cases her betters, at Goldman Sachs. The entire speech reads like elites talking with elites in a space reserved just for them.

I'm not trying to impugn Clinton or WikiLeaks by writing this — that's not my intention at all. I just want to learn from what she has to say — from a position of knowledge — about the real U.S. policy toward North Korea. After all, if Goldman Sachs executives can be told this, it can't be that big a secret. We should be able to know it as well.

What Clinton's Speech Tells Us about U.S. Korea Policy

The WikiLeaks tweet is above. The entire speech, contained in the attachment to the email, is here. I've reprinted some of the relevant portions below, first quoting Ms. Clinton with some interspersed comments from me. Then, adding some thoughts about what this seems to imply about our approach to and relations with South Korea.

The Korea section of the Goldman Sachs speech starts with a discussion of China, and then Blankfein pivots to Korea. Blankfein's whole question that leads to the Clinton quote tweeted by WikiLeaks above (my emphasis throughout):

MR. BLANKFEIN: The Japanese -- I was more surprised that it wasn't like that when you think of -- all these different things. It's such a part of who they are, their response to Japan. If you bump into the Filipino fishing boats, then I think you really -- while we're in the neighborhood [i.e., discussing Asia], the Chinese is going to help us or help themselves -- what is helping themselves? North Korea? On the one hand they [the Chinese] wouldn't want -- they don't want to unify Korea, but they can't really like a nutty nuclear power on their border. What is their interests and what are they going to help us do?

Clinton's whole answer is reprinted in the WikiLeaks tweet attachment (click through to the tweet and expand the embedded image to read it all). The relevant portions, for my purposes, are printed below. From the rest of her remarks, the context of Blankfein's question and Clinton's answer is the threat posed by a North Korean ICBM, not unlike the situation our government faces today.

MS. CLINTON: Well, I think [Chinese] traditional policy has been close to what you've described. We don't want a unified Korean peninsula, because if there were one South Korea would be dominant for the obvious economic and political reasons.

 

We [also] don't want the North Koreans to cause more trouble than the system can absorb. So we've got a pretty good thing going with the previous North Korean leaders [Kim Il-sung and Kim Jung-il]. And then along comes the new young leader [Kim Jung-un], and he proceeds to insult the Chinese. He refuses to accept delegations coming from them. He engages in all kinds of both public and private rhetoric, which seems to suggest that he is preparing himself to stand against not only the South Koreans and the Japanese and the Americans, but also the Chinese.

Translation — three points:

  • The U.S. prefers that Korea stay divided. If Korea were to unite, South Korea would be in charge, and we don't want South Korea to become any more powerful than it already is.
  • We also don't want the trouble North Korea causes South Korea to extend beyond the region. We want it to stay within previously defined bounds.
  • Our arrangement with the two previous North Korean leaders met both of those objectives. North Korea's new leader, Kim Jung-un, is threatening that arrangement.

It appears that China has the same interest in keeping this situation as-is that we do. That is, they want South Korea (and us) to have a Korean adversary, but they don't want the adversary acting out of acceptable bounds — coloring outside the lines laid down by the Chinese (and the U.S.), as it were. Clinton:

So the new [Chinese] leadership basically calls him [Kim Jung-un] on the carpet. And a high ranking North Korean military official has just finished a visit in Beijing and basically told [him, as a message from the Chinese]: Cut it out. Just stop it. Who do you think you are? And you are dependent on us [the Chinese], and you know it. And we expect you to demonstrate the respect that your father and your grandfather [Kim Jung-il, Kim Il-sung] showed toward us, and there will be a price to pay if you do not.

 

Now, that looks back to an important connection of what I said before. The biggest supporters of a provocative North Korea has been the PLA [the Chinese People's Liberation Army]. The deep connections between the military leadership in China and in North Korea has really been the mainstay of the relationship. So now all of a sudden new leadership with Xi and his team, and they're saying to the North Koreans -- and by extension to the PLA -- no. It is not acceptable. We don't need this [trouble] right now. We've got other things going on. So you're going to have to pull back from your provocative actions, start talking to South Koreans again about the free trade zones, the business zones on the border, and get back to regular order and do it quickly.

 

Now, we don't care if you occasionally shoot off a missile. That's good. That upsets the Americans and causes them heartburn, but you can't keep going down a path that is unpredictable. We don't like that. That is not acceptable to us.

 

So I think they're trying to reign Kim Jong in. I think they're trying to send a clear message to the North Korean military. They also have a very significant trade relationship with Seoul and they're trying to reassure Seoul that, you know, we're now on the case.

Clinton ends with a fourth point:

  • From the U.S. standpoint, the current problem is now on the Chinese to fix.

Clinton:

So they want to keep North Korea within their orbit. They want to keep it predictable in their view. They have made some rather significant statements recently that they would very much like to see the North Koreans pull back from their nuclear program. Because I and everybody else -- and I know you had Leon Panetta here this morning. You know, we all have told the Chinese if they continue to develop this missile program and they get an ICBM that has the capacity to carry a small nuclear weapon on it, which is what they're aiming to do, we cannot abide that. Because they could not only do damage to our treaty allies, namely Japan and South Korea, but they could actually reach Hawaii and the west coast theoretically, and we're going to ring China with missile defense. We're going to put more of our fleet in the area.

 

So China, come on. You either control them or we're going to have to defend against them.

The four bullets above (three, and then one) give a very clear definition of longstanding U.S. policy toward the two Koreas. I think the only surprise in this, for us civilians, is that the U.S. doesn't want the Korean peninsula unified. So two questions: Why not? And, do the South Koreans know this? I'll offer brief answers below.

The "Great Game" In East Asia — Keeping the Korean "Tiger" in Check

South Korea is one of the great emerging nations in East Asia, one of the "Asian tigers," a manufacturing and economic powerhouse that's lately been turning into a technological and innovative powerhouse as well.

For example, one of just many, from Forbes:

Why South Korea Will Be The Next Global Hub For Tech Startups

 

American business has long led the way in high tech density or the proportion of businesses that engage in activities such as Internet software and services, hardware and semiconductors. The US is fertile ground for tech start-ups with access to capital and a culture that celebrates risk taking. Other countries have made their mark on the world stage, competing to be prominent tech and innovation hubs. Israel has been lauded as a start-up nation with several hundred companies getting funded by venture capital each year. A number of these companies are now being acquired by the likes of Apple, Facebook and Google. Finland and Sweden have attracted notice by bringing us Angry Birds and Spotify among others. But a new start-up powerhouse is on the horizon – South Korea. [...]

In other words, South Korea has leaped beyond being a country that keeps U.S. tech CEOs wealthy — it's now taking steps that threaten that wealth itself. And not just in electronics; the biological research field — think cloning — is an area the South Koreans are trying to take a lead in as well.

It's easy to understand Ms. Clinton's — and the business-captured American government's — interest in making sure that the U.S. CEO class isn't further threatened by a potential doubling of the capacity of the South Korean government and economy. Let them (the Koreans) manufacture to their heart's content, our policy seems to say; but to threaten our lead in billionaire-producing entrepreneurship ... that's a bridge too far.

Again, this is Clinton speaking, I'm absolutely certain, on behalf of U.S. government policy makers and the elites they serve: We don't want a unified Korean peninsula, because if there were one, an already-strong South Korea would be dominant for obvious economic reasons.

As to whether the South Koreans know that this is our policy, I'd have to say, very likely yes. After all, if Clinton is saying this to meetings of Goldman Sachs executives, it can't be that big a secret. It's just that the South Korea leadership knows better than the North Korean leader how to handle it.

[Update: It's been suggested in comments (initially here) that Clinton's "we" in her answer to Blankfein's question was a reference to China's policy, not our own. I'm doubtful that's true, but it's an interpretation worth considering. Even so, the U.S. and Chinese policies toward the two Koreas are certainly aligned, and, as Clinton says, "for the obvious economic and political reasons." (That argument was also expressed in comments here.)  I therefore think the thrust of the piece below is valid under either interpretation of Clinton's use of "we." –GP]

22:28 Wilbur Ross lays out plan to toughen up U.S. trade policies» MarketWatch.com - Top Stories
A day after announcing plans for a retaliatory tariff against Canadian lumber, U.S. Commerce Secretary Wilbur Ross said Tuesday the Trump administration may also take action to protect America’s aluminum, semiconductor and shipbuilding industries as part of a newly aggressive trade policy.
22:26 Is The Trump Trend Back?» Forbes Real Time
This sets us up for tomorrow's expected announcement from the White House on the tax plan. If they come through in a convincing way that fiscal stimulus is coming, then we probably see yields back to the 2.50% area and the Trump rally for global markets resumes.
22:23 Canadian leader responds to lumber tariffs imposed by the US» AP Top Business News at 12:01 a.m. EDT
TORONTO (AP) -- Prime Minister Justin Trudeau warned Tuesday that Canada and the U.S. could suffer a "thickening" border as the Trump administration imposes new tariffs on softwood lumber and trade tensions between the two countries escalate....
22:22 Sheila Bair on America’s middle class: ‘It’s hard to find real opportunity’» MarketWatch.com - Top Stories
Bair says she and her husband are now upper-middle class.
22:21 Key Words: Newly redesigned HuffPost makes a pitch to Trump voters » MarketWatch.com - Top Stories
The site’s editor-in-chief Lydia Polgreen says journalism is concentrated in ‘affluent urban centers.’
22:21 Is the free food offer at Walt Disney World really worth it?» MarketWatch.com - Top Stories
Visitors to the Florida theme park should read the fine print.
22:21 Express Scripts Faces a Future Without Its Biggest Customer» WSJ.com: US Business
Express Scripts Holdings, the largest administrator of prescription-drug benefits in the U.S., is facing an identity crisis as it grapples with replacing $17.1 billion in annual revenue following the loss of its biggest customer, health-insurer Anthem.
22:20 Peter Schiff on America’s middle class: ‘We used to be the envy of the world’» MarketWatch.com - Top Stories
This high-profile market pundit says U.S. living standards have been eroded.
22:20 ‘Rich Dad, Poor Dad’ on America’s middle class: ‘It’s the white-collar workers who are in trouble’» MarketWatch.com - Top Stories
Automation and lack of financial education are problems today, Robert Kiyosaki says.
22:19 Ivanka Trump was booed for saying her father is a champion of women’s issues — was that justified or just plain rude?» MarketWatch.com - Top Stories
At a conference in Berlin, the First Daughter received an icy reception.
22:18 Brazil police arrest 12 men suspected of stealing millions» Yahoo News - Latest News & Headlines

Brazil police arrest 12 men suspected of stealing millionsSAO PAULO (AP) — Twelve men suspected of taking part in a dramatic, multimillion-dollar theft from an armored car company in a Paraguayan border city have been arrested in Brazil, officials in the Brazilian Federal Police said Tuesday.


22:18 America’s middle class shrinking, but the middle class in these European countries is growing» MarketWatch.com - Top Stories
Europe and the U.S. paint a complex picture of shifting fortunes for middle-income families.
22:15 Director Jeff Nichols Raises Cinema Society From Ashes In Native Arkansas» Forbes Real Time
The Arkansas film community was dealt a heavy blow when the Little Rock Film Festival shuttered in 2015. Less than two years later, celebrated writer-director and native son Jeff Nichols has drawn-up a big solution to fill the void.
22:14 As Venezuela's Crisis Deepens, Multinational Companies Need A New Strategy» Forbes Real Time
As the Maduro regime moves to an open dictatorship, companies need to play out worst case scenarios and have contingency plans in place for how to react if and when the government targets them.
22:10 China Launches First Domestically-Built Aircraft Carrier»

Exactly one day ago, we reported that "China's first domestically built aircraft carrier will soon launch in Dalian, Liaoning Province for drills and trial voyages, putting to the test proprietary technology meant to further Beijing's expansion in the South and East China seas."

A dock at the Dalian shipyard was being filled with water Sunday the local press reported, in preparation for the launch. The Chinese-made vessel is expected to enter service around 2020, joining China's first and only aircraft carrier, a refurbished Ukrainian vessel known as the Liaoning.

Fast forward just 24 hours, when moments ago the People's Daily reported that China has officially launched its second aircraft carrier -- and its first domestically built, in Dalian on Wednesday morning

The new carrier, the first domestically-built one, was transferred from dry dock into the water at a launch ceremony that started at about 9 a.m. in Dalian shipyard of the China Shipbuilding Industry, according to Xinhua.

It is China's second aircraft carrier, which comes after the Liaoning, a refitted former Soviet Union-made carrier that was put into commission in the Chinese People's Liberation Army Navy in 2012.

In a statement, China's Ministry of Defense's announced that China's second aircraft carrier launching ceremony was held at the China Shipbuilding Industry Corporation Dalian Shipyard this morning. Fan Changlong, member of the Political Bureau of the CPC Central Committee and vice chairman of the Central Military Commission, attended the ceremony and delivered a speech.

More, google translated:

The ceremony began at 9am with the majestic national anthem. In accordance with international practice, after cutting the ribbon, a "bottle throwing" ceremony took place. With a bottle of champagne broken ship bow, two sides of the jet ribbon, the surrounding ship with a whistle, the audience sounded warm applause. The aircraft carrier moved out of the dock and towed the dock under towing traction.

 

The second aircraft carrier by our own development, started in November 2013, in March 2015 to start the construction of the dock. At present, the aircraft carrier main hull to complete the construction, power, electricity and other major system equipment installed in place. Docking is one of the major nodes in the construction of aircraft carriers, marking China's independent design and construction of aircraft carriers to achieve significant results. The next step, the aircraft carrier will be planned for system equipment commissioning and outfitting construction, and a comprehensive mooring test.

 

Navy, China Shipbuilding Industry Group leadership Shen Jinlong, Miao Hua, Hu asked Ming, as well as military and other relevant departments of the leadership and scientific research personnel, cadres and workers, representatives of officers and soldiers to participate in the ceremony.

For those who may have missed our original post, here are the full details of China's first domestically-build aircraft carrier.

The new ship, like its predecessor, will be conventionally propelled, as opposed to nuclear-powered, and feature a sloped flight deck known as a ski jump for aircraft takeoff. It is somewhat smaller than the Liaoning, with a displacement of around 50,000 tons compared to around 67,000 tons. The SCMP notes that "from the successful refitting of the Liaoning in 2011 and its commission a year later, China spent just five years to produce the 001A."

China's first home-built aircraft carrier awaits launch at a Dalian shipyard

Around 200 visitors and reporters gathered in Dalian on Sunday, expecting a launch ceremony to coincide with the 68th anniversary of the Chinese navy's founding. The scaffolding around the ship, temporarily named the Type 001A, was removed and the deck was cleared, Shanghai-based news portal thepaper.cn reported, suggesting that the launch date was getting close. However, experts said tidal conditions yesterday were not conducive for a launch to mark the navy’s birthday, and expected a ceremony to take place in the next few days.

According to SCMP, the new vessel is designed to have more space for aircraft than the Liaoning, by some estimates letting the ship hold as many as 36 fighter jets, or 50% more than its predecessor. While the new carrier "differs little from the Liaoning as far as outward appearances go, its operational capabilities are vastly superior," Chinese military expert Liang Fang told state-run China Central Television.

 
 

Commentaries published by party mouthpiece People’s Daily on the PLA Navy anniversary yesterday said a strong maritime force was crucial.

 

“Facing the increasingly complicated maritime security and sovereignty struggle, a strong navy is necessary to protect ­national sovereignty and maritime rights, overseas interests and take part in international cooperation,” one of the opinion pieces said.

 

Another commentary said the nation’s aircraft carrier fleet had participated in training in the western Pacific last year, and that the launch of a new carrier was a sign that China was mastering ­naval technology.

Nonetheless, military observers said the launch of the new carrier represented only modest progress in China’s military modernisation, given the technological gap ­between the PLA Navy and its most powerful rival in the Asia-Pacific region, the US Navy, which currently has 10 operational, nuclear-powered Nimitz-class carriers, which carry around 90 aircraft and helicopters and have a crew of 5,000 each.

The new vessel is expected to operate mainly in the South China Sea alongside the Liaoning, which in December held its second set of exercises in the contested waters since entering service. Adding another ship would enable an aircraft carrier to remain present there while the other is in for maintenance. This arrangement, combined with ports and airstrips China has built on man-made islands in the sea, aims to give Beijing aerial supremacy over a region it considers central to its national interest and to curtail U.S. activity there.

According to Nikkei, future Chinese aircraft carriers are likely to be built faster now that the country has amassed the design experience and technology to bring the first vessel to launch.

Confirming this, work on a second Chinese-made carrier has already begun. The vessel probably will employ a steam catapult to launch aircraft, retired Maj. Gen. Xu Guangyu told Chinese media. A third vessel which has yet to begin production is expected to use nuclear propulsion, eliminating the need to resupply fuel. Work on escort vessels and submarines for a carrier strike group is also underway.

Quoted by SCMP, Hong Kong-based military analyst Liang Guoliang said that with the launch of the Type 001A, China would still only have two carriers, with the new ship requiring two or three years before it was put into full service. He noted that the US has 10 carrier strike groups, with at least four deployed in the Asia-Pacific region. 

“The US navy has 9.5 million tonnes of shipping, while China has just 400,000 tonnes, or 4 per cent of the US capability. The US also has different kinds of carrier-based fighters, including its advanced carrier variants of the F-35 fighter ... while China just has the J-15,” Liang said. “Meanwhile, the US has more than 200,000 marines, while China is just trying to expand its force to 100,000.

“I think the Chinese military should realise that there are still huge gaps in both hardware and software between the two countries’ maritime capabilities.”

They probably do, which is why corporate espionage in the US is likely to intensify in the coming years as China rushes to cover the technological gap. And as China scrambles to catch up to the US fleet of aircraft carrier, it has also shown an eagerness to cover shortfalls in its submarine fleet: as reported on Friday, China is currently building the world's largest submarine facility, which when operational later this year, will be able to build as many as 4 subs at the same time.

22:08 US Destroyer Has Close Encounter With Iranian Vessel in Straits of Hormuz»

The USS Mahan has to take evasive actions in the Straits of Hormuz today, in order to avoid an Iranian 'fast attack' vessel. The Mahan sounded the danger alarm, fired flares and manned their weapons, but the Iranian cowards tucked tail and scattered before reaching within 1,000 yards of the U.S. destroyer.

"Coming inbound at a high rate of speed like that and manning weapons, despite clear warnings from the ship, is obviously provocative behavior," said one American official in describing the Iranian actions.

This is the second time in recent months that the Mahan was put on high alert due to pesky Iranian vessels. Back in January, the Mahan fired three warning shots from a .50 caliber machine gun in order to stop small Iranian vessels from harassing them.

The U.S. military said Iranian vessels harassed US warships a total of 35 times in 2016 -- a 50% spike from the year prior.

During the Presidential campaign, Trump was livid over the treatment of US sailors, after a swarm of Iranian vessels seized an American riverine, blindfolded the crew, struck the US flag in exchange for an Iranian, and interrogated 10 crew members, while humiliating them on Iranian tv.

Trump said of the ordeal, “When I see pictures of them with arms up in the air and guns pointed at them, I wouldn’t exactly say that’s friendly.”

Trump added at a campaign rally, "And by the way, with Iran, when they circle our beautiful destroyers with their little boats and they make gestures that our people -- that they shouldn't be allowed to make, they will be shot out of the water."

Content originally published at iBankCoin.com

 

22:01 Trump's tax reform plan may include placeholder for border tax, official says» Top News & Analysis
A senior administration official told CNBC that President Donald Trump is expected to unveil a tax plan on Wednesday that includes a slew of provisions including one that is designed to balance out cuts in the plan.
22:00 This Is How I Raised $6M In Series A Funding For Our Hong Kong Based Startup» Forbes Real Time
After months of work, we announce our Series A. One of the most commonly asked questions by entrepreneurs is how should I raise money? A simple guide for entrepreneurs to follow as they raise their series A.
22:00 An Insider's Guide On Where To Eat In Mumbai» Forbes Real Time
Need to navigate the Mumbai restaurant scene? We've done your homework for you.
22:00 Oil prices can tell you a lot about military spending» Markets

iraq oil

Governments generally increase military spending when they are involved in an armed conflict or when they perceive a security threat.

But interestingly, although perhaps not entirely surprisingly, military expenditure is also correlated with global oil prices.

Over the decade ending in 2016, patterns of increasing and decreasing military spending can generally be correlated with rising and falling oil prices, according the latest report from the Stockholm International Peace Research Institute.

This correlation likely exists partially because the annual budgets of petro-states largely depend on the price of oil. If an oil producer can make more dollars per barrel in a given year, then it can allocate more money to other projects, including military expenditures.

"Although the oil-price slump has had varying degrees of impact on the economies of oil-exporting countries, since 2015 military expenditure, in real US dollars, has decreased for the vast majority of oil exporting countries," the report's authors wrote. "This reflects the severity of the shock and highlights the need for sectoral reform to foster the diversification of oil exporters' economies."

"The decrease in oil revenues and associated economic problems attached to the oil-price shock have forced many oil-exporting countries to cut their total government budgets, which usually also includes cutting military spending," they added. "In some cases, the decreases have been so severe that it had affected regional and sub-regional trends (e.g. in Africa and South America)."

oil prices 2014 to 2017

Oil prices started falling in 2014, and then collapsed further after OPEC's decision in November of that year to not cut production. Crude oil dropped from over $100 per barrel in June 2014 to about $30 per barrel in January 2016.

Fast forward to November 2016, when the cartel, along with other producers like Russia, agreed to curb production slightly for six months in an effort to boost prices. However, oil remains suspended around $50 per barrel — far below the $100 per barrel mark.

From 2015 to 2016, oil producers that have seen military spending drop include Venezuela, South Sudan, Angola, Azerbaijan, and Iraq, according to data from SIPRI. In fact, of the 15 countries with the largest decreases in military spending since 2015, only two were not oil exporters: Guinea and Zambia.

biggest increases and decreases in military spending

Another region worth looking at is the Middle East. Data is unavailable for several states, including Lebanon, Qatar, Syria, the UAE, and Yemen, but combined total military expenditure in 2016 decreased by 17% compared with the prior year among those countries in the region for which data is available. Interestingly, those countries' combined spending had dropped by only 19% when compared with 2007.

"The decrease in 2016 came despite the fact that all countries except Oman were militarily involved in at least one armed conflict in the region," the authors wrote. "This demonstrates the impact of the fall in oil prices on the economies of several of the region's major military spenders."

Of course, there are always counter-examples, given that a handful of producers can better handle an oil shock. In particular, Kuwait and Norway were able to keep up existing spending plans in 2016.

But, it's still worth noting the larger trend.

SEE ALSO: Russia and Saudi Arabia could face economic and political consequences if the oil-production deal isn't extended

Join the conversation about this story »

NOW WATCH: This man spent 6 weeks working undercover in an iPhone factory in China — here's what it was like

21:54 Orthodox Jewish Family With Lots of Kids Finds Chrysler Pacifica Hybrid "Very Enjoyable"» Forbes Real Time
Chrysler Pacifica hybrid got a positive review from Rabbi Ezra Cohen, 36, father to eight and a resident of Oak Park, Michigan. Crossovers and SUVs are becoming more popular -- but some communities still rely on minivans.
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Wynn Resorts plans to start construction as early as December on its $1.5 billion Paradise Park, a waterfront development in Las Vegas, it revealed Tuesday
21:52 The China Chill in Hollywood» Forbes Real Time
After an incredible run for several years that peaked at over $6 billion invested in Hollywood, China investment in Hollywood has slowed dramatically in 2017. This article discusses the reasons why.
21:49 Russia Ready To Send Ground Troops To Syria: FARS»

Iran news agency FARS reports that according to Syrian military sources, Moscow has informed Damascus of its preparedness to dispatch ground troops to Syria.

FARS - which like most US media should always be taken with a gran of salt - quotes the Al-Hadath news, according to whose sources Russia has announced that in case of the Syrian army's request it is ready to send ground forces to Syria. The sources said that special Russian forces are prepared to be deployed in regions which are experiencing the most pressures by the terrorist groups.

They added that the technical aspects of the plan have been studied and prepared by Russia, saying that the plan can be implemented upon Russian President Vladimir Putin's order after Damascus' official request.

A Russian daily reported earlier this month that the country's soldiers are about to shoulder the responsibility of restoring security to the Christian-populated regions during the Syrian Army's imminent anti-terrorism operations in Northern Hama.

FARS adds that according to Russian Izvestia, the Russian units will help popular forces in Hama province to restore security to the town of Mahradeh, whose population are mainly Christians.  The daily added that terrorists are under the Syrian Army's siege from all directions.

There have been fierce clashes between the government forces and militants near Hahradeh since April 4th. "Informed sources" believe that the army intends to complete the siege of the terrorists in Northern Hama to clean the region up to the border with Idlib province.

A deployment of Russian troops in Syria may coincide with a deployment of US ground forces to Syria. Two weeks ago, Bloomberg reported that Trump's national security advisor, H.R. McMaster was planning on sending between 10,000 and 50,000 troops to Syria. Needless to say, a showdown between thousands of Russian and US troops in Syria is unlikely to have a happy ending.

21:49 Lawsuit filed against Fox alleges racial discrimination» AP Top Business News at 12:01 a.m. EDT
NEW YORK (AP) -- An expanded lawsuit filed Tuesday accuses Fox News Channel of racial discrimination "that appears more akin to Plantation-style management than a modern-day work environment."...
21:45 JD Power Lowers 2017 Auto SAAR As High Discounts "Threaten Industry's Long-Term Health"»

After a disappointing March for the auto OEM's, a hopeful wall street has set it's sites on a rebound in April with consensus SAAR estimates currently set at 17.25 million, up from 16.53 million in March.  Per the chart below, the March 2017 print for auto sales was the lowest in over two years, despite massive incentive spending by the OEMs.

 

Of course, OEMs didn't bother to adjust production levels to sinking sales which pushed inventory days to the highest March print since 2009.

 

But while wall street seems to be in a phase of perpetual optimism, JD Power and LMC Automotive have decided to lower their expectations for 2017 sales and warn that consumer discounts remain high enough to "threaten the industry's long-term health."  Per Reuters:

U.S. auto sales in April likely fell almost 2 percent from a year earlier, with consumer discounts remaining at levels high enough to threaten the industry's long-term health, industry consultants J.D. Power and LMC Automotive said on Tuesday.

 

The consultancies also lowered their full-year 2017 forecast for new vehicle sales to 17.5 million units, from a previous forecast of 17.6 million.

 

April U.S. new vehicle sales will be about 1.48 million units, a drop of nearly 2 percent from 1.51 million units a year earlier, the consultancies said.

 

The forecast was based on the first 13 selling days of the month. Automakers are expected to report April U.S. sales results on May 2.

 

The seasonally adjusted annualized rate for the month will be 17.5 million vehicles, flat versus the same month in 2016.

Of course, as we've noted numerous times before (see "Morgan Stanley: Used Car Prices May Crash 50%"), the real story with the auto industry isn't the sinking SAAR levels but rather the growing level of incentive spending required to keep sales from crashing even further. 

"While industry retail sales pace remains high, it is being powered by elevated levels of incentive spending which pose a serious threat to the long-term health of the industry," said Deirdre Borrego, senior vice president of automotive data and analytics at J.D. Power.

 

Excessive discounts can help sell new vehicles, but undermine resale prices.

 

The consultancies said consumer discounts averaged $3,499 per new vehicle sold, the highest ever for the month of April. The previous record was set in April 2009, during the height of the Great Recession.

But, auto investors don't seem to be all that worried so we're sure everything will work out just fine when OEM's release April sales on May 2nd.

21:39 Stocks in Asia higher on back of solid US earnings; dollar/yen gains, Trump tax plans eyed» Top News & Analysis
Asian markets opened higher, following the rise in U.S. indexes on the back of strong earnings announcements.
21:34 Signs Aimed At Crazy Sports Parents Should Include These Extra Warnings» Forbes Real Time
Take this article with you to your kid's next ballgame to make sure you stay calm.
21:30 Here We Go Again: Another Futures Fund Is Caught In A "Short Gamma" Trap»

Remember when the catalyst for the relentless, seemingly inexplicable broad market melt-up in mid-February was revealed to be an overeager short-biased hedge fund, which had been caught in a "short gamma" feedback loop, forced to buy more S&P futures the higher the market went? Well, as RBC's Charlie McElliggott writes, the "short gamma" feedback loop appears to have returned as yet another fund is now caught in the same trap, and the market will soon test just what the fund's point of margin call max pain is, potentially taking the S&P to 2,400 - if not far higher - on short notice.

As McElligott laments, "It’s awkward to write about this…AGAIN" which however won't stop him from doing just that, and explains as follows:

GUESS WHO'S BACK...MORE 'SHORT GAMMA' COCKROACHES, from RBC's Charlie McElliggott

The same dynamic at play during our last equities ‘melt-up’ is seemingly back ‘in-play.’  Remember the hypothetical story on the multi-billion dollar open-ended futures fund which found itself ‘synthetically short’ size SPX due to its strategy where it sells multiple upside calls for every in-the-money long call? Well the macro ‘relief rally’ yesterday reintroduced that very same ‘gap risk’ which this type of strategy hates.

Well, we are now getting closer to ‘launch’ as the same situation is speculated to be ‘out there’ again.  There was some covering in 2330s and 2370s yesterday, while most of the size seemingly sits at the 2400 level.  As the market is sniffing out the upper strikes that such a strategy might be short, there is a self-fulfilling ‘short gamma’ as we push ever-closer to the pain-points.  Of course, today’s +++ earnings run is only further feeding into the anxiety, with strong #’s from CAT, DD, BIIB, MCD etc squeezing futures higher.  The fact of the matter is, the closer to actualizing these (short) upper strikes, the more likely we are to see that ‘itchy trigger finger’ on their delta-hedging.  I would keep an eye out on 2380 / 85 levels for possible next ‘breakpoints’ which could induce further forced covering.

If we were to then push onward to / through the 2400 level, then it almost seems the whole market will ‘act short’ simply based on stops, as SPX / ES would be making new all-time highs, which could set-off ‘buy stops’ from shorts, or potentially drag new longs into the market on the momentum break.  This is OUTSIDE of the potential ‘short gamma’ from the above trade(s).  That said, the real chunky OI in both SPX and SPY options sits at 2425 / 2450 levels.  A break to those levels would see serious ‘short gamma’ pain.

Mind you, this is all very relevant in relation to my current view that we are realistically still in the midst of a macro ‘range trade,’ especially in regards to rates / ‘reflation,’ as the commodities complexcontinues to really struggle as Crude falters and the Chinese liquidity driver fades.  My message has been to watch said “reflation trap” then, as there is still significant basis to short “reflation” at the 2.35/40 level—especially with this US data dynamic of ‘soft’ data rolling and ‘hard’ data now biased towards ‘missing.’

Caveat emptor.

21:20 Think Tank Reports ISIS Is Falling Apart: "May Actually Lead To More Terrorist Attacks Across The Globe"»

Authored by Daniel Lang via SHTFplan.com,

It’s difficult to quantify how much of an effect ISIS has had our collective psyches. Since this organization started making the news several years ago, we’ve been inundated with utterly horrifying stories about ISIS on a nearly daily basis. These people do things that are so wicked, it’s hard to believe that they were committed by human beings. Because of that, I suspect that long after ISIS is gone, their organization will be a talking point for decades in much the same way that Hitler and the Nazis are still brought up on a regular basis today.

Fortunately, it appears that ISIS is becoming history as we speak. All evidence suggests that the moment of collapse for the ISIS caliphate is rapidly approaching. In fact, the RAND Corporation recently published a report that spells out just how much ISIS has declined over the past few years.

The report found that ISIS, also known as the Islamic State, “has lost substantial control of territory and people since 2014 in Iraq, Syria, Afghanistan, Libya and Nigeria,” putting it in danger of losing its state, which it calls a “caliphate,” altogether.

 

But control over territory and people isn’t the only thing that makes ISIS a formidable terrorist organization. The group has recently been focusing heavily on external attacks, some of which are mounted without any direct orders from ISIS leaders.

RAND reported that ISIS has lost 57% of its territory and 73% of its population. And much more importantly, polls suggest that their support in the Muslim world is rapidly dwindling. ISIS isn’t just a terrorist group. It’s an insurgency that tried to carve out a state from Iraq and Syria, and no insurgency could have made it this far unless they had at least some support among the population. Now ISIS is losing that as well.

However, this encouraging news comes with a catch.

It’s important to keep in mind that the RAND Corporation is a major facet of the military-industrial complex. So what they think will happen after the caliphate collapses is very telling.

The group still has enough supporters, though, to be considered a serious threat to countries in the Middle East and around the world. Rand also found that ISIS attacks have shot up in recent months. The data suggests that ISIS “has begun to move from an insurgent group that controls territory to a clandestine terrorist group that conducts attacks against government officials and noncombatants,” the report said. This is the model of ISIS’ predecessor organization, Al Qaeda.

 

Though it seems that the US-led campaign against ISIS has been successful so far, ISIS remains a long way from extinction.

 

“Fully eliminating the threat the Islamic State poses will require continued American leadership for years to come,” the report said. “… In the short and perhaps medium terms, this contraction in territorial control may actually lead to more terrorist attacks across the globe. But over time, the group’s capacity to recruit, fund, organize, and inspire such attacks will likely diminish, and its brand may lose its allure if the Islamic State no longer controls territory in Iraq and Syria.”

In other words, the military-industrial complex is licking its chops. That’s because ISIS, which is largely a creation of the West, is about to replace Al-Qaeda as America’s elusive bogeyman. Long after their hellish caliphate is dead, they’ll be launching attacks on the United States from far-flung lands, which will surely be used as an excuse to decimate our freedoms, and drag us into many more wars in the future. A lot can happen between now, and when ISIS “loses its allure.”

21:17 What's Really In Your Favorite Chicken Sandwich? Dr. Oz, Fast Food And Subway» Forbes Real Time
If you ever enjoy a chicken sandwich at Subway or other top fast food restaurants, you might find these results very interesting.
21:12 San Francisco Judge Blocks Trump's Sanctuary City Order»

To our complete 'shock,' a federal judge in San Francisco has just blocked Trump's Executive Order intended to withhold funding from communities that limit cooperation with U.S. immigration authorities.  The basis of the finding is that only Congress, not the president, has authority to attach new conditions to federal spending.

"The Constitution vests the spending powers in Congress, not the President, so the Order cannot constitutionally place new conditions on federal funds. Further, the Tenth Amendment requires that conditions on federal funds be unambiguous and timely made; that they  bear some relation to the funds at issue; and that the total financial incentive not be coercive. Federal funding that bears no meaningful relationship to immigration enforcement cannot be threatened merely because a jurisdiction chooses an immigration enforcement strategy of which the President disapproves."

U.S. District Judge William Orrick, an Obama appointee, issued the temporary ruling moments ago after San Francisco and Santa Clara County argued that it threatened billions of dollars in federal funding. The decision will stay in place while the lawsuit moves through court.

Ironically, an attorney for the Justice Department, Chad Readler, downplayed the usefulness of the Executive Order admitting at a recent court hearing that it only applied to three Justice Department and Homeland Security Department grants that amounted to less than $1 million nationally and possibly no San Francisco funding at all. 

Meanwhile, for the first time we learn that the DOJ, at oral argument, also contended the sanctuary cities EO was toothless--merely an exercise of Trump's "bully pulpit" to "encourage communities and states to comply with the law."

But, Judge Orrick disagreed with the scope of the Executive Order saying that it attempts to "to reach all federal grants, not merely the three mentioned at the hearing."

It is heartening that the Government’s lawyers recognize that the Order cannot do more constitutionally than enforce existing law. But Section 9(a), by its plain language, attempts to  reach all federal grants, not merely the three mentioned at the hearing. The rest of the Order is  broader still, addressing all federal funding. And if there was doubt about the scope of the Order, the President and Attorney General have erased it with their public comments. The President has called it “a weapon” to use against jurisdictions that disagree with his preferred policies of immigration enforcement, and his press secretary has reiterated that the President intends to ensure that “counties and other institutions that remain sanctuary cites don’t get federal government funding in compliance with the executive order.” The Attorney General has warned that  jurisdictions that do not comply with Section 1373 would suffer “withholding grants, termination of grants, and disbarment or ineligibility for future grants,” and the “claw back” of any funds previously awarded. Section 9(a) is not reasonably susceptible to the new, narrow interpretation offered at the hearing.

...and apparently Judge Orrick didn't think the DOJ's arguments were even "legally plausible."

So, if the DOJ believes that the scope of the Executive Order would only impact $1mm in federal funding and was "merely an exercise of Trump's 'bully pulpit', then we have to wonder whether the whole thing was just a charade to avoid more "flip-flopping" accusations?  What say you?

Here is the full order:

21:08 Fox anchor joins lawsuit alleging racial discrimination» Business and financial news - CNNMoney.com
Fox News' legal troubles grew even larger Tuesday, with new plaintiffs, including an anchor, joining a suit alleging racial discrimination and harassment at the network.
21:00 Should central banks open up payment and settlement systems to non-banks?» Finextra Research Headlines
The rise of nonbank giants such as PayPal and WeChat is leading central banks to reassess to whom th...
20:56 Get In Your Best Cycling Shape With Trek Travel And 13-Time Woman World's Cup Champion» Forbes Real Time
Check out these riding camps in beautiful cycling hotspots in the U.S. and abroad.
20:55 Trump to propose massive tax cuts for businesses» AP Top Business News at 12:01 a.m. EDT
WASHINGTON (AP) -- President Donald Trump plans to propose massive tax cuts for businesses big and small as part of an overhaul that he says will provide the biggest tax cuts in U.S. history....
20:55 Fannie Introduces "Innovative Solutions" Allowing Student-Debt-Laden Millennials To Buy A Home»

So what do you do when a massive student loan bubble results in crippling leverage for an entire generation of your population rendering them financially unqualified to obtain mortgage financing and their 'God-given right' to a slice of the 'American Dream'?  Well, you simply change the rules to allow mortgage lenders to ignore all that pesky student debt...anything less would simply be evil and potentially racist, sexist and all sorts of other -ist words.

Luckily, Fannie Mae is right on top of the issue and has just released new rules allowing millennial borrowers to, among other things, simply exclude student loans, credit cards and auto loans that are "paid by someone else"...wink wink...when applying for a new mortgage.  As an added benefit, taxpayer subsidized mortgage loans can also now be used to repay student debt...Hooray for taxpayers!

Fannie Mae announced new policies that will help more borrowers with student debt qualify for a home loan. These innovations address challenges and obstacles to homeownership due to a significant increase in student loan debt over the past decade and provide access to credit for qualified borrowers. The new solutions give homeowners the opportunity to pay down student debt with a mortgage refinance, allow borrowers to exclude non-mortgage debt paid by others as part of the loan application process, and make it more likely for borrowers with student debt to qualify for a mortgage loan by allowing lenders to accept student debt payments included on credit reports.

 

Student Loan Cash-Out Refinance: Offers homeowners the flexibility to pay off high interest rate student debt while potentially refinancing to a lower mortgage interest rate.

 

Debt Paid by Others: Widens borrower eligibility to qualify for a home loan by excluding from the borrower’s debt-to-income ratio non-mortgage debt, such as credit cards, auto loans, and student loans, paid by someone else.

 

Student Debt Payment Calculation: Makes it more likely for borrowers with student debt to qualify for a loan by allowing lenders to accept student loan payment information on credit reports.

 

“We understand the significant role that a monthly student loan
payment plays in a potential home buyer’s consideration to take on a
mortgage, and we want to be a part of the solution,” said Jonathan
Lawless, Vice President of Customer Solutions, Fannie Mae. “These new
policies provide three flexible payment solutions to future and current
homeowners and, in turn, allow lenders to serve more borrowers.”

You know, because more debt is exactly the cure for millennials suffering the financial consequences of too much debt. 

But, at least this should help with inflating Housing Bubble 2.0.

Housing

20:52 Trump Administration Mulls More Trade Actions» WSJ.com: US Business
The Trump administration is considering launching trade actions to protect certain U.S. industries, while at the same time ramping up free-trade talks with the EU, Japan and the U.K., Commerce Secretary Wilbur Ross said in an interview.
20:46 Perrigo Reaches Agreement With Auditor Over Royalty Accounting» WSJ.com: US Business
Ernst & Young demanded the Dublin drugmaker adjust its accounting for the multiple sclerosis drug Tysabri after Perrigo sold the royalty rights in a deal worth as much as $2.85 billion.
20:38 An Angry Canada Responds To Trump's Lumber Tariff... And What It Means For The Economy»

After last night's announcement of ~20% tariffs on softwood lumber imported from Canada, Prime Minister Justin Trudeau lashed out at the Trump administration saying the U.S. could suffer from a "thickening" border as trade tensions between the two countries escalated, sending the Canadian currency to a 14 month low.

As a reminder, the United States announced it would impose preliminary anti-subsidy duties averaging 20 percent on imports of Canadian softwood lumber, Commerce Secretary Wilbur Ross said on Monday, escalating a long-running trade dispute between the two neighbors. The move, which affects some $5.66 billion worth of imports of the construction material, sets a tense tone as the two countries and Mexico prepare to renegotiate the 23-year-old North American Free Trade Agreement.

Speaking to a technology company in Ontario, Trudeau said he would defend the national interest: "standing up for Canada's interests is what my job is, whether it's softwood or software," Trudeau said, prompting applause and cheers.

"You cannot thicken this border without hurting people on both sides of it. Any two countries are going to have issues that will be irritants to the relationship and, quite frankly, having a good constructive working relationship allows us to work through those irritants."

Elsewhere, Canada's Natural Resources Minister Jim Carr said the U.S. move to set tariffs on softwood lumber shipments are an “unfair and unwarranted trade action.”  Speaking to reproters in Ottawa, Carr said that Canada is looking at an aid package for lumber industry and workers which could up to $300 million, and added that a court challenge of duties is possible, and that Canada has won all of those cases in the past.

Carr also said free trade is in the best interest of both nations: "There are irritants in the trading relationship, they aren’t new."

Canada's Liberal Party leader says the two countries are economically interconnected, but it's not a one-way relationship. He said that millions of U.S. jobs depend on smooth flow of goods, services and people back and forth across the border. The Prime Minister also vowed to stand up for Canadian interests after Trump's decision sent the Canadian dollar to a 14-month low.

Yet while the currency fell, shares in Canadian lumber companies rose as the level of the new tariffs came in at the low end of what investors were expecting. Shares in West Fraser Timber, which would pay the highest duty rate of the affected companies, rose 5.6 percent to C$59.50 and the Canfor stock gained 3.5 percent to C$18.82. The average 20 percent anti-subsidy duties announced late on Monday compared to a 20-30 percent range expected by RBC equity analysts.

As Reuters adds, softwood lumber joins dairy as a key target for U.S. President Donald Trump, who tweeted a new attack on Canada's supply management system for dairy on Tuesday. Last week the president called Canada's dairy protections "unfair." "Canada has made business for our dairy farmers in Wisconsin and other border states very difficult. We will not stand for this. Watch!" Trump tweeted Tuesday morning.

* * *

So what does Trump's announcement mean for the Canadian economy? Here is a summary of the key takeaways from a BofA note on the escalating trade war between the US and Canada.

  • Trade uncertainty back to the forefront after US announced preliminary duties on Canadian softwood lumber exports.
  • The announcement on tariffs was accompanied by negative comments regarding NAFTA, which may herald NAFTA renegotiation.
  • Downside risks to growth intensify as higher tariffs lower exports and higher uncertainty delays investment.

And the details:

Trade uncertainty back to the forefront

US wants to renegotiate NAFTA

The US is likely to open the North America Free Trade Agreement (NAFTA) for renegotiation and is willing to use tariffs to contest what it considers unfair trade. This has been our long standing view, but we  got clear evidence that the US will be very active on the trade front after Wilbur Ross, US commerce secretary, announced on April 24th the imposition of preliminary duties of almost 20% against Canadian  softwood lumber exports. Ross said that the US is using countervailing duties after it was “not able to achieve a fair result” through negotiation with Canada. He said that Canada benefits from a provision in NAFTA that allows Canada to supersede US sovereignty.

Downside risks to Canadian growth

The imposition of countervailing tariffs along with the comments on NAFTA increases uncertainty regarding trade policies for the North America region, which will likely delay investment. Although we believe that Canada is not the main target of US anti-trade policies, it is certainly very exposed to US trade. Higher tariffs will have a negative impact on production in the Canadian lumber industry (Lumber exports  are almost 1% of Canadian GDP). Growth in Canada has been surprising to the upside, in line with our more constructive view of the economy. But the likely renegotiation of NAFTA and an active US trade policy put downside risks on our 2.3% GDP growth expectation for 2017.

Renegotiation of NAFTA is positive, but…

We expect the US to send a notification to open NAFTA for renegotiation soon. That will open a 90 day window for countries to prepare. Any renegotiation is likely to be lengthy, going well into 2018. And an institutional renegotiation of NAFTA has a good chance of ending with an updated agreement that benefits the region by incorporating new sectors into the treaty (e.g., energy, ecommerce). Consider the TPP blueprint that the staffs of the three countries involved had already agreed on as a starting point. But in the meantime uncertainty will likely be high as countries take different postures or even actions such as the impositions of tariffs to improve their leverage. The risk is that it all ends in a trade war, although the strength of the value chains in North America makes the latter an unlikely scenario, in our view.

Back to dovish BoC

The increase on trade uncertainty will be highlighted by the BoC, which will support our strategists’ view of a weaker CAD, in our view.

20:33 US Commerce Secretary Ross fires new trade salvos as Trudeau calls Trump on lumber, dairy» Top News & Analysis
Secretary of Commerce Wilbur Ross vows more trade actions and new rounds of free-trade talks as well as reviews of existing deals, with Canada already feeling heat and its prime minister calling the White House.
20:28 Arconic CEO Leaves Door Open to Permanent Role» WSJ.com: US Business
Arconic’s interim CEO said he hasn’t decided whether he wants to the job permanently, following the abrupt resignation of CEO Klaus Kleinfeld and amid a continuing proxy fight.
20:22 WWE SmackDown Live Results: Winners, By The Numbers Analysis, TV Ratings And Reaction From April 25» Forbes Real Time
WWE SmackDown Live results and analysis from April 25.
20:19 Are You in a Partnership, S-Corp or LLC? Here's How Trump's Tax Plans Could Affect Your Taxes» WSJ.com: US Business
Cutting the tax rate to 15% for so-called pass-through businesses, as proposed by President Donald Trump as part of his tax plan, would be a radical change to the tax code.
20:18 Father Hangs Baby Daughter on Facebook Live, Then Commits Suicide: Police» Yahoo News - Latest News & Headlines

Father Hangs Baby Daughter on Facebook Live, Then Commits Suicide: PoliceThe gruesome footage was on the man's Facebook page for nearly 24 hours, authorities said.


20:01 'MLB The Show 17' Patch 1.04 Notes: Sony Works To Fix Online Experience And More» Forbes Real Time
MLB The Show 17 has a new patch. Could it fix the online issues?
20:01 Latest Current Account Switch Service figures published» Finextra Research Headlines
The latest figures for the Current Account Switch Service are published today (26 April), showing th...
20:01 Samsung Galaxy S8 facial recognition software not ready for payments» Finextra Research Headlines
Contrary to earlier reports, the new Samsung Galaxy S8 will not let users authenticate payments thro...
19:57 Yahoo's Marissa Mayer to Make $187 Million After Verizon Deal» WSJ.com: US Business
Yahoo Chief Executive Marissa Mayer is set to make some $187 million in the wake of the internet company’s sale of its core business to Verizon Communications, according to securities filings.
19:30 Trump Administration Sets Stage for Nafta Talks» WSJ.com: US Business
The Trump administration’s tough new approach to Canada on trade is helping crystallize support in the U.S. Congress for renegotiating the North American Free Trade Agreement and setting the groundwork for the increasingly complicated negotiations, current and former officials said.
19:24 Threads of Confidence Emerge in a Former Textile Town» WSJ.com: US Business
People in Richmond County, N.C., have a general sense of cautious optimism about the early days of President Donald Trump’s administration.
19:21 Mayer set to garner more from sale to Verizon than AOL's Armstrong -- who stayed on after his deal» Top News & Analysis
Marissa Mayer's five-year tenure at Yahoo produced few results but made her a boatload of money.
19:03 Google okays staff protesting May 1, asks vendors to do the same» Top News & Analysis
"We respect everyone's choice to act on their beliefs," a Google spokesperson wrote in a statement provided to BuzzFeed News.
18:57 Cramer: These 3 Dow components explain why the market isn't all that expensive» Top News & Analysis
Jim Cramer says reports from Caterpillar, DuPont, and McDonald's are a good litmus test for the market.
18:24 Few agencies have the regulatory czars Trump requested» Top News & Analysis
CNBC reached out to 20 agencies to inquire about the status of the regulatory reform appointment and the progress of the corresponding task force.
18:21 Cramer's charts show the market is not done going higher» Top News & Analysis
Jim Cramer inspects the correlation between the S&P 500 and the VIX to explain the market's surge.
18:19 Chipotle data breach overshadows big earnings beat» Top News & Analysis
Chipotle is expected to post earnings of $1.27 per share on $1.05 billion in revenue, according to Thompson Reuters estimates.
18:19 Chipotle: The Good and The Bad from Earnings» Barron's Most Viewed Today
The burrito chain is rebounding, but a payments breach could sour investors on the stock.
18:13 A 15% corporate tax rate could be very expensive» Business and financial news - CNNMoney.com
Reports Monday afternoon that Trump may propose a 15% corporate tax rate would seem to indicate that he won't lose sleep over adding substantially to the country's already-high debt.
18:13 Palantir Technologies settles hiring discrimination allegations» Top News & Analysis
Palantir Technologies has entered into a consent decree to resolve charges it discriminated against Asians in hiring for engineering jobs.
18:07 Chipotle Posts First Same-Store Sales Increase in a Year» WSJ.com: US Business
The restaurant chain swung to a first-quarter profit of $46.1 million, or $1.60 a share, compared with a loss of $26.4 million in the year-ago period.
18:05 US Steel is tanking after reporting an unexpected loss» Markets

Steel

US Steel is diving after reporting a loss for the first quarter of 2017.

The adjusted $0.83 per share loss was far below analysts expectations of earnings of $0.35 per share. Additionally, the company whiffed on revenues, generating $2.73 billion versus expectations of $2.95 billion.

"While our segment results improved by over $200 million compared with the first quarter of 2016, operating challenges at our Flat-Rolled facilities prevented us from benefiting fully from improved market conditions," said US Steel CEO Mario Longhi in a press release.

Following the news, shares of US Steel dived nearly 17% to $25.84 a share in post-market trading as of 5:56 p.m. ET.

Screen Shot 2017 04 25 at 6.01.54 PM

 

SEE ALSO: Caterpillar posts dynamite earnings but warns of 'geopolitical and market uncertainty'

Join the conversation about this story »

NOW WATCH: The disturbing reason some people turn red when they drink alcohol

18:01 John Kasich: The one campaign promise Republicans 'ought not to fulfill' is on Obamacare» Markets

John Kasich

Gov. John Kasich of Ohio believes the Affordable Care Act should be fixed, not repealed.

Kasich said in an interview with Business Insider that if there's "one campaign promise" Republicans "ought not to fulfill," it is repealing "Obamacare without a decent replacement."

"Well, you have to fix it, not repeal it," he told Business Insider during a Monday interview while promoting his new book, "Two Paths: America Divided or United." 

"We always say 'repeal and replace,' those are like, political words. ... It needs reformed. And, the exchanges need to be reformed. And with Medicaid expansion, you can, over time, begin to return that to a more reasonable match with the states. I mean there are ways to deal with this, I just don't want people being cut off."

Kasich, who sought the Republican Party's presidential nomination in 2016, has been an outspoken voice in the debate over healthcare. He visited the White House in late February and discussed healthcare policy with the president. The meeting occurred just before the introduction of the American Health Care Act, the Republican replacement for the Affordable Care Act.

Polling shows that Americans overwhelmingly agree with the sentiment expressed by Kasich. An April poll from the Democratic firm Public Policy Polling found that 62% of voters surveyed said they preferred Congress keep the Affordable Care Act and fix the problems with it. Just 30% of respondents said they would rather have Congress vote to repeal the law and start over with new legislation.

On his meeting with Trump at the White House, Kasich said the president was "extremely receptive" to the governor's views on healthcare.

"I even talked about the crisis with the pharmaceutical industry and how the government has to have some leverage on these prices," he said. "You know, I was there for a long time and it was a very pleasant meeting. Where it ended up was not where I wanted it to, and that's why I kind of stood against this healthcare bill."

"But to tell you the truth, I don't think the president has any hard feelings about this, hard feelings about healthcare," he added. "I don't think he's in stone on something. He'd just like to see something get done. And I think there's a battle for him inside this White House. Those who want him to be more reasonable and those who want him to be more hardline and whoever wins, it's like a tug of war, and we'll judge him on the basis of who he'll listen to."

Kasich, who said he has no sense of how the healthcare debate will shake out, expressed concern that "people that don't have power are not priorities for people in public office."

"Maybe it's always been that way, but I see it more starkly now," he said. "Maybe because of my job as governor. So, if you're drug addicted, 'Well, well.' If you're mentally ill, 'Well, you know. Well.' If you're really poor, 'Well, you know, bootstraps.' This is concerning to me because nobody should be left behind. And I see it happening too much."

"And we're going to fix Obamacare by repealing some of the tax increases on some of the richest people in the country and then have less resources to help people with mental illness and drug addiction?" he added. "It's foolhardy. It's nonsense. I don't buy it."

SEE ALSO: JOHN KASICH: Here's what's surprised me about Trump's first 100 days

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NOW WATCH: 'Just a loose hunch': Watch Alec Baldwin impersonate Trump and Bill O'Reilly on 'SNL'

18:00 Earnings could keep momentum going even if Trump's 'massive' tax plan is a letdown» Top News & Analysis
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17:56 The US just lost a trade battle with Mexico» Business and financial news - CNNMoney.com
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17:30 Trump has reportedly shelved one of the most controversial parts of his tax plan» Markets

trump

The Trump administration has reportedly dropped its plan to tax imports to the US from certain countries one day ahead of an announcement on tax policy, according to The New York Times

The so-called border adjustment tax would effectively impose a 20% levy on company imports, a charge that many firms said would raise their costs and leave consumers footing the bill.

House Republicans argued that the border tax would make up for revenues lost from other tax cuts. 

According to the report, the Trump administration may revisit the idea of a border tax later but is putting it aside for Wednesday's release of a new tax plan. The administration is set to announce a proposal to reduce the tax rate on many owner-operated businesses to 15% from 39.6%, according to The Wall Street Journal

The border tax emerged as an unsavory aspect of Trump's promised tax reform. Retailers and carmakers in particular would be hit hard by a border tax, especially those that import products from Mexico. 

Earlier this month, Trump said he would rather call the border tax a reciprocal or matching or mirror tax"I don't like the word 'adjustment,' because our country gets taken advantage of, to use a nice term, by every other country in the world," Trump told the Fox Business network. 

SEE ALSO: Trump is trying to win over Democrats to his massive tax cut plan

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NOW WATCH: The disturbing reason some people turn red when they drink alcohol

17:27 Two Years with an Apple Watch: Our Review» Barron's Most Viewed Today
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17:23 Dessert is coming to Chipotle, but it's not what you expected» Top News & Analysis
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17:22 World's last male northern white rhino gets help from Tinder» Yahoo News - Latest News & Headlines

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16:56 Housing stocks take a hit from Trump's lumber tariff» Top News & Analysis
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16:44 Analyst says Canadian lumber tariffs will not affect home prices» Top News & Analysis
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16:37 The maker of UGG boots is up for sale (DECK)» Markets

UGGDeckers Outdoor, the maker of the popular UGG brand, has announced it is reviewing "strategic alternatives" that include the sale of the firm. 

“We have made significant progress in streamlining our cost structure, optimizing our retail store fleet, and realigning our brands, with the goal of improving profitability,” Dave Powers, the president and CEO of Deckers, said in a news release out April 25. 

According to the release, the firm's board of directors and management believe the move will enhance stockholder value. The release said:

"The Board believes now is an appropriate time to explore a broad range of strategic alternatives that may have the potential to unlock further value. While the Board conducts its review, the entire Deckers team remains committed to improving operations and profitability."

Moelis & Company, the New York-based investment bank, will advise the firm on the review.

Deckers Outdoor emphasized that "there can be no assurance that the strategic review process will result in a transaction" in a statement. Regardless, Wall Street has responded positively. Deckers' stock is up 7.2% in after hours trading.

The announcement comes a month after activist investor Red Mountain Capital, the California-based investment firm, suggested Deckers should find itself a buyer. 

Deckers Outdoors saw its stock price crash by more than 21% in February after announcing disappointing quarterly results across the board for its crucial holiday quarter. The company missed on earnings, revenue, and guidance.

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NOW WATCH: Scott Galloway on the biggest thing in tech in 2017: Amazon could eliminate the existence of brands with voice technology

16:28 Lawyers want Aaron Hernandez's murder conviction dismissed» Yahoo News - Latest News & Headlines

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16:17 TRUMP VOWS: 'The wall's going to get built'» Markets

trump mexico wall supporter

President Donald Trump, facing questions about his commitment toward funding the construction of a wall along the US-Mexico border, vowed Tuesday that the wall would be built and suggested it would come in his first term in office.

"The wall’s going to get built, folks," Trump told reporters during an executive order signing at the White House. "In case anybody has any questions, the wall is going to get built."

Trump said the wall would stop the "flow of drugs" coming over the border, "stop a lot of people from coming in that shouldn’t be here."

The White House had pushed to include funding for the border wall into a spending bill that will have to be passed by Friday to prevent a partial shutdown of the federal government. After pushback from lawmakers, Trump's administration seems to have softened on that stance.

Trump did say that the wall would be built "soon."

"We're already preparing, we're doing plans, we're doing specifications," Trump said. "We're doing a lot of work on the wall and the wall gets built."

Asked if the border wall would be built by the end of his first term, Trump replied, "Yeah, yeah sure, we have plenty of time, got a lot of time."

Watch Trump's remarks below:

SEE ALSO: Trump just blinked in the government-shutdown fight

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NOW WATCH: Trump's approval rating plunged to 35% in just 69 days — here's how that compares to other presidents

16:16 Arconic Q1 revenue $3.19 bln vs $3.06 bln year ago» MarketWatch.com - Real-time Headlines
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16:13 Capital One Q1 revenue $6.54 bln vs $6.22 bln » MarketWatch.com - Real-time Headlines
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16:12 Chipotle Q1 rev. $1.07 billion vs. expectations $1.05 billion» MarketWatch.com - Real-time Headlines
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16:11 Chipotle's sales grow for the first time since the E. coli crisis (CMG)» Markets

chipotle guac serving scooping

Chipotle on Tuesday reported first-quarter sales that topped Wall Street's expectations, as visits to its restaurants improved even while it cut back on promotions.

Sales at restaurants open for at least one year turned positive for the first time since Q4 2015, when outbreaks of E. coli were linked to Chipotle's food in 14 states.

The Mexican fast-casual restaurant chain said it earned $1.60 per share, turning a profit after incurring a loss in the same quarter a year ago.

Revenue totaled $1.07 billion.

Analysts had forecast Chipotle would report adjusted earnings per share of $1.29 on revenue of $1.05 billion, according to Bloomberg.

Same-store sales at restaurants open for at least one year rose 17.8% year-on-year (15.5% forecast) after a 29.7% drop a year earlier.

Chipotle hired food-safety experts to scrutinize its practices after the E. coli saga. Food costs fell 150 basis points, or 1.5%, to 33.8% of revenue partly because lettuce and bell peppers were no longer prepared offsite, Chipotle said. Had avocado prices not recently surged to a record high, food costs would have been even lower.

The company maintained its guidance for the year and said it expected same-store sales to be in the high single digits.

Chipotle confirmed last week that it raised prices by about 5% in about 20% of its locations. It had hinted the hikes were coming.

Some analysts have raised questions about whether Chipotle's stock is overvalued after a 25% surge since the start of the year. According to Morgan Stanley and Oppenheimer, the company will need to achieve EPS of at least $20 over the next three years to justify the current price, although they see that as unlikely.

As the shares rose this year, bets against Chipotle also climbed. Short interest has risen $296 million this year, according to the financial-analytics firm S3 Partners. The current short interest total of $2.2 billion represents about 16% of shares outstanding.

Shares of Chipotle rose by as much as 6% in after-hours trading.

SEE ALSO: Chipotle's biggest competitor is a soup-and-sandwich chain

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NOW WATCH: How to get a ton of food at Chipotle for under $5

16:09 Trump is trying to win over Democrats to his massive tax cut plan» Markets

trump schumer

The large tax plan set to be introduced by President Donald Trump on Wednesday is expected to include some provisions that will try and get Democrats on board with the proposal.

Politico's Nancy Cook and Ben White reported on Tuesday that the tax proposal, which will likely be broad outlines, will likely include provisions for infrastructure spending and a tax credit for childcare.

Both of the ideas are broadly supported by Democrats and have been a part of Trump's platform for some time. Democrats even came forward with an infrastructure plan in January, and Senate Minority Leader Chuck Schumer has said he is ready to work with Trump on infrastructure.

In practice, however, Democrats pushed back on Trump's infrastructure plan from the campaign, which would include $1 trillion in infrastructure spending in a joint private-public effort. Schumer has repeatedly said that the plan should be financed by the federal government rather than turning it over to private firms.

Democrats have also broadly embraced tax breaks on childcare in principle.

It is unclear whether Democrats would support the large tax cut even with the addition of these measures, as they may instead demand infrastructure and childcare be dealt with separately.

And for Trump, the large overall investment could draw the ire of some more deficit-minded Republicans. 

SEE ALSO: Republicans could be the biggest obstacle to Trump's massive planned tax cut for businesses

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NOW WATCH: Watch the trailer for Al Gore's new climate change documentary that takes aim at Trump

16:09 Fitbit says it's investigating report of exploding Flex 2» Top News & Analysis
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