Week in Review

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Week in Review

03/10/2018

For the week 3/5-3/9

[Posted 11:30 PM ET]

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Edition 987

Trump World

Just a week of pure chaos, especially Thursday.  Another key official from the White House, Gary Cohn, departs and yet our president is trying to convince us he can select from the top ten people in their respective fields to come work with him.  Yes, people are dying to work for Donald Trump, so he says.

Well, Thursday, the president announced his totally incoherent tariff policy on steel and aluminum, which I’ll get into in a bit, and then hours later, in a decision that was totally his and instantaneous, he agreed to talks with North Korean dictator Kim Jong Un.

Now just to get this straight.  I have totally supported the hard-line stance taken against the Kim regime.  My issue has been the tweets.  Trump could have accomplished all he has so far without them. The sanctions are working.  UN Ambassador Nikki Haley deserves a lot of credit in this regard as well.

I believe in talking to North Korea, but for crying out loud, you better have a  plan once serious discussions begin and on Thursday night, clearly the president was just impatient to get back to his regular date each evening with Fox News. I absolutely guarantee it.  See the Journal’s take on how he handled the meeting with the South Korean delegation at the White House.

On the other hand, there isn’t an American alive who knows what Kim is really thinking, or what he has in his arsenal, including chemical and biological weapons.  [Verification will be virtually impossible.]

And I can’t stop thinking, what is the real influence of his wife and sister?  No one is bringing this up...but are they a moderating influence?  We know what their roles are in the government, but who are they, really?

It’s just Kim and the two women, and one or two key generals.  Kim has killed off so many beneath him he viewed as a threat.

And what is China’s role really going to be?  Xi Jinping is a very bad guy himself.

But back to Trump, there was mass confusion among his staff, including press secretary Sarah Sanders, as to whether there were any kind of preconditions on the Trump-Kim meeting.  By day’s end, we were told there was nothing beyond what Kim himself promised...no nuclear or missile testing while talks were taking place (and in the lead-up to same), and the allowance of joint military exercises between South Korea and the U.S., while both Seoul and Washington would keep the pressure on with the sanctions....so here’s the rest of the story as we know it tonight....

....North Korea

Monday, a 10-member South Korean delegation led by National Security Office head Chung Eui-yong traveled to Pyongyang in hopes of encouraging North Korea and the United States to talk to one another.  It was then reported that the leaders of North and South Korea were going to meet at a summit of the two countries in April at the truce village of Panmunjom, while the two countries agreed to open a hotline between the leaders, Seoul also announcing Tuesday that an agreement had been reached with the Kim Jong Un regime to discuss dismantlement of its nuclear program with the United States. South Korean officials, led by Chung, then flew to Washington to brief President Trump.

Before they arrived in Washington on Thursday, Trump called the offer on talks sincere, but top administration officials stopped short of a commitment to open talks with Pyongyang.

But suddenly on Thursday night, South Korea’s Chung and other officials stood outside the White House in a rather extraordinary moment, delivering a message to Trump that Kim wanted to meet – soon, by May – to “achieve permanent  denuclearization” on the Korean peninsula, Trump agreeing to face-to-face talks.

“A meeting is being planned,” Trump tweeted after.

It was a stunning announcement and in true Trump fashion took the White House itself by surprise. Secretary of State Rex Tillerson was in Africa.

From the Wall Street Journal:

“Inside the Oval Office late Thursday, President Donald Trump interrupted a trio of top South Korean officials as they analyzed an offer to meet from North Korean leader Kim Jong Un and outlined possible diplomatic options.

“ ‘OK, OK,’ Mr. Trump said, cutting short the discussion.  ‘Tell them I’ll do it.’

“The South Korean officials looked at each other as if in disbelief, according to a White House official with knowledge of the meeting, as Mr. Trump continued. He would become the first sitting U.S. president to meet a North Korean leader, if Mr. Kim was sincere and understood the terms.  ‘Tell him yes,’ the president said.

“That unusual moment touched off a rush by U.S. officials to assemble a diplomatic strategy with little precedent in U.S. history.”

South Korean President Moon Jae-In, who led the pursuit of détente with North Korea during his country’s hosting of the Winter Olympics last month, said the news “came like a miracle” and the summit would set a course for denuclearization on the Korean peninsula, according to a presidential spokesman. Trump had agreed to meet Kim without any preconditions, another South Korean official said.

For his part, Kim Jong Un agreed to suspend nuclear and missile tests, and Chung said Kim understood that “routine” joint military exercises between South Korea and the United States must continue.

Pyongyang had previously demanded that such joint drills be suspended in order for any U.S. talks to go forward.

Japan, however, remained cautious: “Japan and the United States will not waver in its firm stance that they will continue to put maximum pressure until North Korea takes concrete action towards the complete, verifiable and irreversible end to nuclear missile development,” Prime Minister Shinzo Abe told reporters in Tokyo.

South Korea’s Moon has said sanctions should not be eased for the sake of talks and nothing less than denuclearization of North Korea should be the final goal.

China’s Foreign Minister Wang Yi called on the United States and North Korea to hold talks as soon as possible, warning at a news briefing in Beijing on Thursday that things “will not be smooth sailing.”

Earlier Thursday, Sec. Tillerson said that though “talks about talks” might be possible with Pyongyang, denuclearization negotiations were likely a long way off. But at the White House, there was a growing recognition that the North Korean offer for talks and South Korean desire to have them had put the United States under pressure to talk to the North, and that unless North Korea resumed aggressive activity like missile launches, Washington would likely take up the offer.

Funny how in October, Trump told Tillerson he was “wasting his time” trying to talk to Pyongyang.

Trump’s aides have been wary of North Korea’s diplomatic overtures because of its history of reneging on international commitments and the failure of efforts on disarmament by previous U.S. administrations.

Wed., Trump tweeted: “Possible progress being made in talks with North Korea. For the first time in many years, a serious effort is being made by all parties concerned. The World is watching and waiting! May be false hope, but the U.S. is ready to go hard in either direction!”

Thursday, Republican Sen. Lindsey Graham said that he hoped for peace on the Korean peninsula but warned Kim Jong Un that “it will be the end” of him and his regime if he tried to take advantage of President Trump.

“The GOP senator said that Trump’s diplomatic showdown with Kim presented the “best hope in decades” to peacefully resolve the threat of nuclear conflict – but Graham added that he is “not naïve.”

“I understand that if the past is an indication of the future, North Korea will be all talk and no action,” the South Carolina defense hawk said in a statement.

“However, I do believe that North Korea now believes President Trump will use military force if he has to.”

Graham added: “The worst possible thing you can do is meet with President Trump in person and try to play him. If you do that, it will be the end of you – and your regime.”

Trump tweet Friday night: “The deal with North Korea is very much in the making and will be, if completed, a very good one for the World. Time and place to be determined.”

Opinion

Uri Friedman / The Atlantic

“The past is indeed instructive. Consider this scenario: North Korea creates an international crisis, threatening to turn South Korea’s capital into ‘a sea of fire’ and advancing its nuclear program in ways that prompt the United States to seriously consider taking military action.  And then, just when it has reached the brink of conflict, North Korea leverages that crisis to bargain with South Korea as ‘equals’ and negotiate with the United States from a position of strength, despite being a much weaker power.”

But this was  two decades ago, “after analyzing how the North’s withdrawal from the Nuclear Nonproliferation Treaty and apparent effort to reprocess fuel for nuclear weapons in the early 1990s sparked a flurry of international diplomacy....

“In assessing the news that North Korea is now open to ‘denuclearization’ talks with the United States, ‘it’s really hard to conclude at this point that all of a sudden Kim Jong Un woke up one day and decided to genuinely give up nuclear weapons after [conducting] 90 missile tests and nuclear tests,’ since coming to power in 2011, Sue Mi Terry, a former CIA Korea analyst now at the Center for Strategic and International Studies, told me earlier this week. These, she noted, included a suspected hydrogen bomb and three intercontinental ballistic missiles.

“Kim may be hoping that the ‘playbook of provocation, then peace offensive, then negotiation, and concession,’ which worked for his father and grandfather, can work for him as well, Terry said.  Waves of diplomatic progress with North Korea have repeatedly receded over the North’s refusal to disclose all of its nuclear activities and verify that it is no longer engaging in them, because the North Koreans ‘don’t really want’ to relinquish their nuclear-weapons program.  This time around, the North Koreans could be opting for talks in order ‘to wait Trump out – buy time, avoid further sanctions or God forbid a [military] strike,’ she said.

“What Kim Jong Un actually wants is ‘to be bought off. What we may be starting is the haggling phase,’ Daniel Russel, who stepped down last year as the State Department’s top diplomat for East Asian and Pacific affairs, argued on Pod Save the World this week.  Noting North Korea’s habit of ‘driving up the fear factor’ to painful levels and then releasing ‘a flood of endorphins in the bloodstream of South Korea and the U.S. and Japan,’ he speculated that Kim is looking for ‘a rental deal where [the Americans] basically pay off North Korea month to month, week to week, to tamp down its misbehavior.’”

David Ignatius / Washington Post

“When it comes to global diplomacy, America under President Trump has become something of a hapless cartoon villain, detonating bombs on itself and running into walls – while our nimbler adversaries dart away in a blur of  dust.

“ ‘Heavy-handed’ is one word for Trump’s foreign policy.  ‘Unsuccessful’ is another. His strategy, if you can call it that, has been to disrupt America’s traditional economic and security relationships and commitments. He must imagine that this gives him new leverage, but mostly the result has been a series of self-inflicted wounds.

“Trade is the most obvious example of Trump’s clumsiness. While our economic competitors in China move to seize the commanding heights of technology, in artificial intelligence, quantum computing and robotics, Trump is trying to protect jobs in steel, coal and other industries that have been in decline for nearly 50 years. He seems determined to transform the United States into a lagging indicator, rather than a leading one.

“In the Korea drama, a slow-footed America will soon be paired with the diplomatic speedster.  Certainly, Thursday night’s announcement of Trump-Kim direct talks is promising, and perhaps evidence that the president’s braggadocio and belligerence have produced results. But what I see is a North Korea that has become a nuclear-weapons state and now, from a position of strength, wants negotiations with America.

“Trump thinks Kim is ‘sincere’ in his offer to discuss denuclearization, but few colleagues share that hope. We’ll probably be chasing Kim around a negotiating table for a while, which is better than ‘duck and cover.’”

Max Boot / Washington Post

“(Trump) threatened to rain ‘fire and fury’ down on North Korea. He called its dictator, Kim Jong Un, ‘Little Rocket Man,’ and bragged that his ‘nuclear button’ was much bigger than Kim’s. Administration officials claimed that deterrence couldn’t work and discussed the possibility of a ‘bloody nose’ strike that could have triggered a nuclear war.

“Now, in a head-snapping display of incoherence, Trump has agreed to meet Kim, giving the worst human-rights abuser on the planet, what he most wants: international legitimacy. Kim will be able to tell his people that the American president is kowtowing to him because he is scared of North Korea’s mighty nuclear arsenal....

“(South Korean President) Moon and Kim have, for their own reasons, snookered the credulous American president into a high-profile summit that is likely to end in disaster one way or another.  Kim is evidently willing to suspend his nuclear and missile tests while the talks are under say, but this is a minimal concession that can easily be reversed. He is most likely willing to do even that much only to buy time for his engineers to finish developing a nuclear warhead that can fit on an ICBM capable of reaching the U.S.

“The South Koreans claim that the North Koreans are willing to discuss denuclearization, but the likelihood is that they will only do so on terms that the United States should never accept. Kim may offer to give up his nukes if the U.S. will pull its forces out of South Korea and sign a peace treaty with the North. Trump, if confronted with such a scenario, may imagine it is a big ‘win’ for him, but that’s only because he knows nothing of North Korea and has no one at a senior level in his administration who does. Victor Cha was supposed to be the ambassador to Seoul, but his nomination was withdrawn by White House hardliners, while Joseph Yun, the top State Department envoy to North Korea, just announced his retirement.

“If Trump bothered to talk to North Korea experts, he would undoubtedly learn that Kim’s regime is pursuing its age-old aim of pushing U.S. military forces off the Korean Peninsula, enabling Pyongyang to use its military power to coerce South Korea into unification on the North’s terms – i.e., the extension of a Stalinist dictatorship across the entire peninsula. Even if that’s not possible, North Korea hopes at a minimum for a relaxation of sanctions just when they are beginning to bite.

“But of course the president doesn’t listen to experts. He just ignored the unanimous opinion of economists that trade wars are calamitous by imposing steel and aluminum tariffs. Now  Trump is rushing into a risky summit without having gotten anything substantial in return and without, apparently, having even consulted the State Department. It may make sense to talk to North Korea, but at a lower level, while maintaining the ‘maximum pressure’ sanctions policy. Eventually the regime may feel so much pain that it will be willing to bargain in earnest. But there is no reason to think that the time is now and much reason to assume that Trump, as usual, doesn’t know what he is doing.”

Peter Baker / New York Times

“When the establishment told him he should talk with North Korea, President Trump scorned the idea. ‘Presidents and their administrations have been talking to North Korea for 25 years’ and had been made to look like ‘fools,’ he scoffed, and then rattled his saber. ‘Sorry, but only one thing will work!’

“Five months later, Mr. Trump cast aside his skepticism and agreed to talk to North Korea with no more promise of success at negotiating an end to its nuclear and missile programs than his predecessors had. The main difference this time around is who will do the talking for the United States: Donald J. Trump.

“Shocking and yet somehow not surprising, Mr. Trump’s decision to do what no other sitting president has done and meet in person with a North Korean leader reflects an audacious and supremely self-confident approach to international affairs. Whether it is Middle East peace or trade agreements, Mr. Trump has repeatedly claimed that he can achieve what has eluded every other occupant of his office through the force of his own personality.

“So far, he has little to show for that. He has yet to successfully negotiate any new trade deals or renegotiate any old ones. A resolution between Israel and the Palestinians, which he once said would be ‘maybe not as difficult as people have thought,’ looks more distant than when he came into office. Beyond threatening ‘fire and fury,’ he has offered no original formula that suggests a path to unlock the North Korea puzzle.

“But in his penchant for unpredictability, his willingness to shift at a moment’s notice and his sense that only he can make the important decisions, Mr. Trump may find a kindred spirit in the man who would sit across the table, Kim Jong-un of North Korea.”

Trade Tariffs

Talk about idiotic.  After the previous week startling everyone by saying he was going to levy tariffs on steel and aluminum, including on Canada and Mexico, for “national security” reasons, which is absurd, President Trump then announced a policy that excluded our two NAFTA partners, for now, much to the relief of Wall Street and Mexico and Canada, but he talked of working out separate exemptions for others during his 15-day window and you just have to picture, it’s him and a handful of advisers who will be going off half-cocked handing out exceptions to the likes of the EU, Japan and Australia.

Tonight, Trump tweeted: “Spoke to PM@TurnbullMalcolm of Australia. He is committed to having a very fair and reciprocal military and trade relationship.  Working very quickly on a security agreement so we don’t have to impose steel or aluminum tariffs on our ally, the great nation of Australia!”

Who the [hell] is actually doing all this?  Who is writing it down?  These are formal negotiations, Trump wants us to believe, but it’s all off the top of his head.  It’s insane.

So the EU and Japan are looking to be excluded from the tariffs, with an EU Commission official saying tonight, “We need a dialogue with the United States.  It’s clear.  We need clarity.  We are an ally, not a threat,” said Jyrki Katainen.

If this incredibly reckless process doesn’t bother you, then you obviously believe three more years, or seven, of it is healthy for not just the country but the world. Good luck.  I will have long committed hari-kari.

Anyway...a day before Thursday’s trade announcement, economic adviser Gary Cohn announced he was resigning, Cohn having opposed the tariffs while being a bulwark against Trump’s economic nationalism.

The road was thus cleared for trade hard-liners such as Commerce Secretary Wilbur Ross and Peter Navarro, Trump’s trade policy adviser, to be the last to have Trump’s ear, which we’ve learned is the way the president often governs.

Trump exempted Mexico and Canada from the tariffs as officials reassess the North American Free Trade Agreement.

European Union Commission Vice President Jyrki Katainen said Friday, “When I read the speech of President Trump and when he was talking about economic security, to my ears it sounded very protectionist: economy without competition. There are economic security issues we have to address, but let us do it together and within WTO rules.”

The EU on Wednesday released its target list of retaliatory tariffs on American exports worth $3.5 billion should Trump push ahead after his 15-day window.  Tariffs would be imposed on items including bourbon, orange juice, corn, ladders and motor boats. [Earlier we heard Harley-Davison]  None are vital to European industry but they shrewdly target key Republicans and their districts or states.

Major Asian nations reacted sharply, warning of damage to relations amid industry calls for retaliation.  Japan said the move would have a “big impact” on the countries’ close bilateral ties, while China said it was “resolutely opposed” to the decision and South Korea said it may file a complaint to the World Trade Organization.

Meanwhile, Tesla’s Elon Musk went after China and its import barriers.

“Do you think the U.S. & China should have equal & fair rules for cars?  Meaning, same import duties, ownership constraints & other factors.”

Musk also noted that U.S. auto companies in China are barred from owning “even 50% of their own factory,” while there are five “100 percent China-owned EV auto companies in the U.S.”

For its part, Chinese Foreign Minister Wang Yi said at a news conference on Thursday, “Seeing China as a rival trying to displace the U.S. is a fundamental strategic misperception.  History teaches that trade wars are never the right solution. In the event of a trade war, China will make proper and necessary responses.”

Also on Thursday, eleven Asia-Pacific countries signed the trade pact formerly known as the Trans-Pacific Partnership.  It is has been renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

President Trump stupidly pulled the U.S. out last year, but the deal was salvaged by the remaining members, who signed it at a ceremony in Chile.  Chilean foreign minister Heraldo Munoz said the agreement was a strong signal “against protectionist pressures, in favor of a world open to trade.”

The main purpose of CPTPP is to slash trade tariffs between member countries, while reducing so-called non-tariff measures that create obstacles to trade through regulations.

The eleven nations are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Trump called the TPP a disaster for American workers.  Who it’s a disaster for are U.S. farmers, with a study by the Peterson Institute for International Economics saying the Asian members will be the big winners, while the U.S. is the biggest loser, especially since member countries have an incentive to trade with each other instead of with American companies.

For example, as Ed Gerwin writes in the Wall Street Journal, “Farmers and ranchers in Australia and Canada will face much lower duties selling to Japan and other TPP markets.  And TPP-11 suspends rules designed to protect the intellectual property of American content, software and pharmaceutical producers.”

Opinion

Editorial / The Economist

“Donald Trump is hardly the first American president to slap unilateral tariffs on imports. Every inhabitant of the Oval Office since Jimmy Carter has imposed some kind of protectionist curbs on trade, often on steel. Nor will Mr. Trump’s vow to put 25% tariffs on steel and 10% on aluminum by themselves wreck the economy: they account for 2% of last year’s $2.4 trillion of goods imports, or 0.2% of GDP. If this were the extent of Mr. Trump’s protectionism, it would simply be an act of senseless self-harm.  In fact, it is a potential disaster – both for America and for the world economy.

“As yet it is unclear exactly what Mr. Trump will do. But the omens are bad.  Unlike his predecessors, Mr. Trump is a long-standing sceptic of free trade. He has sneered at the multilateral trading system, which he sees as a bad deal for America.  His administration is chaotic, and Gary Cohn’s ominous decision on March 6th to resign as the president’s chief economic adviser deprives the White House of a rare free-trader, signaling that it has fallen into protectionist hands. Not since its inception at the end of the second world war has the global trading system faced such danger.

“The second danger springs from Mr. Trump’s rationale. The tariffs are based on a little-used law that lets a president protect industry on grounds of national security. That excuse is self-evidently spurious. Most of America’s imports of steel come from Canada, the European Union, Mexico and South Korea, America’s allies.  Canada and Mexico look set to be temporarily excluded – but only because Mr. Trump wants leverage in his renegotiation of the North American Free Trade Agreement, which has nothing to do with national security.  Mr. Trump is setting a precedent that other countries are sure to exploit to protect their own producers, just as spuriously.

“It is not clear whether other countries can respond legally when national security is invoked in this way. This puts the World Trade Organization into a rat trap. Either Mr. Trump will provoke a free-for-all of recrimination and retaliation that the WTO’s courts cannot adjudicate, or the courts will second-guess America’s national-security needs, in which case Mr. Trump may storm out of the organization altogether....

“Whatever the WTO’s problems, it would be a tragedy to undermine it.  If America pursues a mercantilist trade policy in defiance of the global trading system, other countries are bound to follow.  That might not lead to an immediate collapse of the WTO, but it would gradually erode one of the foundations of the globalized economy.

“Everyone would suffer. Mr. Trump seems to think trade is a zero-sum affair, in which a deficit is a sign of a bad deal. But the vast improvement in living standards after the second world war went hand in hand with a rapid expansion it world trade over eight trade rounds, each of which lowered barriers, imports are in fact welcome, because they benefit consumers and spur producers to specialize in what they do best.

“Without the WTO, cross-border trade would continue – it is unstoppable – but the lack of norms and procedures would leave disputes to escalate. The fewer the rules, the more scope for mercantilist mischief and backsliding....

“The best way to help the WTO would be for its other members to coordinate any action, including bringing in a WTO complaint about Mr. Trump’s tariffs. Even though that may burden the WTO’s court, it would be a vote of confidence in the idea that the global economy should be governed by rules.

“The world is a long way from the 1930s, thank goodness. Yet ignorance and complacency have put the trading system in grave danger.  Free-traders need to recognize that the WTO can help keep markets open in the face of protectionist lobbying, at home and abroad. It is vital they make the intellectual case for rules-based trade.  That will not be easy.  For the first time in decades, their biggest foe is the man in the Oval Office.”

Editorial / Wall Street Journal

“Donald’s Trump’s decision to impose steel and aluminum tariffs and the resignation of chief economic adviser Gary Cohn this week mark a dangerous moment in his Presidency. To wit, is this when an Administration that has pursued surprisingly sensible economic policies veers into the Herbert Hoover ditch?

“We use the Hoover comparison advisedly because he was the last Republican President who embraced tariffs as sound economic policy. George W. Bush imposed steel tariffs in 2002 but at least he did so in the name of getting trade-promotion authority through Congress. He put an initial time limit of three years and ended them early.

“President Reagan also agreed to targeted restraints on imports of cars and some other goods. But when Congress considered more dangerous trade restrictions, the Gipper issued a warning.  ‘Some of us remember the 1930s, when the most destructive trade bill in history, the Smoot-Hawley Tariff Act, helped plunge the nation and the world into a decade of depression and despair,’ he said in a weekly radio address in 1985.  ‘If the ghost of ‘Smoot-Hawley rears its ugly head in Congress, if Congress crafts a depression-making bill, I’ll fight it.’

“Reagan understood this because he had lived through the depression and absorbed the lessons of its causes. Hoover had doubts about Smoot-Hawley as it moved through Congress in 1930, and 1,028 economists signed a letter urging him to veto it. But the businessman-politician understood little about economics, and tariffs at the time were what the economist Joseph Schumpeter called the ‘household remedy’ of the Republican Party.

“Economists still debate the causes of the Great Depression, but there’s little dispute that the trade war that followed Smoot-Hawley made the downturn worse. Global trade contracted.  U.S. imports, which were $5.9 billion in 1929, fell to $2.1 billion over the next three years. Deflation took hold....

“What makes the current moment especially dangerous is a confluence of political forces not unlike those of the 1930s. This Republican Congress is less protectionist, but Congress over recent decades has ceded much of its trade authority to the President. The not unreasonable assumption was that Congress represented particular or regional interests while a President would act in the national economic interest.

“But even Members who created trade statues like 201, 301 or 232 never anticipated that a true-believing protectionist like Mr. Trump would become President and wield that unilateral power. He believes against all economic evidence and history that a nation’s trading balance is a zero-sum proposition – deficit bad, surplus good.

“Meanwhile, no other nation is ready to lead in America’s place. Chinese President Xi Jinping has auditioned for the job in places like Davos, but China’s policies have become more mercantilist and predatory under Mr. Xi’s regime. The world doesn’t trust China.

“The better news is that 11 other Asia-Pacific nations this week signed the tariff-reducing Trans-Pacific Partnership that Mr. Trump abandoned, and many other nations are striking trade deals with each other. This might limit the global damage from a protectionist America, though as the largest economy the U.S. can still do great harm.

“The question is how far Mr. Trump will go with his protectionist eruption....

“Looming as well is Mr. Trump’s vow to open a protectionist assault on China. Beijing’s bad practices need addressing, not least its intellectual-property theft and ill-treatment of foreign companies trying to operate or sell in the Chinese market. But this is best handled with market-opening diplomacy, not blunderbuss tariffs that are sure to lose at the World Trade Organization and invite retaliation.

“The danger with trade brinkmanship is that its outcome is impossible to predict.  If countries retaliate against Mr. Trump’s steel taxes, his Donald of Queensborough rules might command that he hit back in kind. If nationalist politics take hold in the U.S. or other countries, no one can predict the ultimate economic damage – or worse.  Some historians believe that Japan concluded from Smoot-Hawley in the 1930s that the U.S. wouldn’t tolerate the expansion of Japanese trade. We know where that led.

“The danger is compounded by Mr. Cohn’s departure and the emerging dominance of Mr. Trump’s antitrade advisers – Commerce Secretary Wilbur Ross, domestic White House aide Stephen Miller, U.S. trade rep Robert Lighthizer and protectionist-at-large Peter Navarro. If Mr. Navarro replaces Mr. Cohn at the National Economic Council, the rational move would be to flee the stock market....

“All of which puts the onus on Mr. Trump to reconsider his march to trade war. The policy successes of his first year have set the economy on the strongest growth path in 12 years. He risks that progress and more if he embrace the protectionism that doomed Herbert Hoover nearly a century ago.”

Greg Ip / Wall Street Journal

“The U.S. isn’t the only country that has a chip on its shoulder about trade. When it comes to China, so do countless others.

“For President Donald Trump, this could be an opportunity to lead a coalition against China’s predatory trade behavior. Instead, he is threatening a trade war with the countries that would make up such a coalition, over commodities that are much less vital to the U.S.’s economy and national security than the sectors threatened by China’s expropriation of intellectual property.”

Daniel Henninger / Wall Street Journal

“A few hours before former Goldman Sachs president Gary Cohn quit as the White House’s chief economic adviser, Donald Trump described his favorite management practice.

“ ‘I like conflict. I like having two people with different points of view, and I certainly have that. Then I make a decision. But I like watching it, I like seeing it, and I think it’s the best way to go.’

“In other words, the Trump presidency is a lot like a season of ‘The Apprentice.’...

“He’s certainly got the format down: This presidency is compulsively watchable because everyone – from the White House staff to the whole wide world – is always on edge.

“Last Thursday’s announcement of the steel and aluminum tariffs was straight from the Trump school of melodrama.  First the White House said Mr. Trump was going to announce the tariffs, then it said he was just holding a listening session with executives from the steel and aluminum industries.

“Then in an afternoon meeting that included the people designated to provide conflict on trade – the protectionist tag team of Wilbur Ross and Peter Navarro versus Gary Cohn’s anti-protectionists – Mr. Trump surprised everyone by abruptly announcing he’d impose a global tariff of 25% on imported steel and 10% on aluminum.

“The stock market fell about 500 points, and a week later Mr. Cohn was off the show....

“The tariff melodrama, though, has an oddly familiar feel to it, which is what got me thinking about ‘The Apprentice.’ It recalls two other great policy dramas that came and went: immigration and guns.

“On Jan. 9, Mr. Trump assembled congressional Republicans and Democrats around a table to talk about immigration and the Dreamers.  He told the group to put a bill on his desk.  ‘I will sign it.’  The attention the event got was extraordinary. Today – minimal movement on immigration.

“On Feb. 28, after the massacre in Parkland, Fla., the president gathered a bipartisan group around a big table to talk about gun control. It was mesmerizing. He even stiffed the National Rifle Association.  ‘We’re going to stop this nonsense,’ he said. ‘It’s time.’ Since then, next to nothing....

“You can write off these difficulties as ‘the swamp’ or the special interests resisting ‘Trump.’ But not all special interests are fake.  If solutions were as easy as Mr. Trump suggested on immigration and guns, we wouldn’t need politics, because we’d be living in utopia. Or on TV.”

Trumpets...

Trump tweets: “We have to protect & build our Steel and Aluminum industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”

“The U.S. is acting swiftly on Intellectual Property theft. We cannot allow this to happen as it has for many years!”

“Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with.  We must act soon!”

“From Bush 1 to present, our Country has lost more than 55,000 factories, 6,000,000 manufacturing jobs and accumulated Trade Deficits of more than 12 Trillion Dollars. Last year we had a Trade Deficit of almost 800 Billion Dollars. Bad Policies & Leadership. Must WIN again! #MAGA”

“If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S.  They make it impossible for our cars (and more) to sell there. Big trade imbalance!”

“The United States has an $800 Billion Dollar Yearly Trade Deficit because of our ‘very stupid’ trade deals and policies. Our jobs and wealth are being given to other countries that have taken advantage of us for years. They laugh at what fools our leaders have been.  No more!”

--From the Washington Post: “Special counsel Robert S. Mueller III has gathered evidence that a secret meeting in Seychelles just before the inauguration of Donald Trump was an effort to establish a back channel between the incoming administration and the Kremlin – apparently contradicting statements made to lawmakers by one of its participants, according to people familiar with the matter.

“In January 2017, Erik Prince, the founder of the private security company Blackwater, met with a Russian official close to Russian President Vladimir Putin and later described the meeting to congressional investigators as a chance encounter that was not a planned discussion of U.S.-Russia relations.

“A witness cooperating with Mueller has told investigators the meeting was set up in advance so that a representative of the Trump transition could meet with an emissary from Moscow to discuss future relations between the countries, according to the people familiar with the matter, who spoke on the condition of anonymity to discuss sensitive matters.”

It just needs to be said, Erik Prince is a really bad guy.

--Boy that Sam Nunberg is a real piece of work.  I’m glad he’s not my neighbor. He creeps you out...much as Carter Page does.

--New York Times: “President Trump’s lawyer secretly obtained a temporary restraining order last week to prevent a pornographic film star from speaking out about her alleged affair with Mr. Trump, according to legal documents and interviews

“The order, issued by an arbitrator in California and reviewed by the New York Times, pertained to the actress Stephanie Clifford, who had been paid $130,000 shortly before the 2016 election in what she calls a ‘hush agreement.’  In recent weeks, she had prepared to speak publicly about Mr. Trump, claiming his lawyer, Michael D. Cohen, had broken the agreement.

“The details of the order emerged on Wednesday after the White House’s spokeswoman, Sarah Huckabee Sanders, said that Mr. Trump’s lawyer had won an arbitration proceeding against Ms. Clifford, who goes by the name of Stormy Daniels.

“Ms. Sanders’ statement put the White House in the middle of a story that Mr. Trump and his lawyer had been trying to keep quiet for well over a year. The turn of events created the spectacle of a sitting president using legal maneuvers to avoid further scrutiny of salacious accusations of an affair and a payoff involving the porn star.”

We then learned later that Trump was livid with Sanders for her acknowledgement of the legal proceeding.

Clifford filed a lawsuit in Los Angeles on Tuesday asserting the nondisclosure agreement that accompanied her payment of $130,000 was void because Trump never signed it.  It’s a shaky argument.

Wall Street

The Trump rally has been reinvigorated after the ‘correction’ that lasted all of about seven days. Stocks rallied anew this week (after a little ‘trade-related kerfuffle’ the week before), as the Street chose to ignore the actual announcement on Trump’s beyond stupid tariff act and focus on the economy instead, with Friday’s jobs report just what the doctor ordered...313,000 jobs created in February, the most since July 2016, as reported by the Labor Department, but with an average hourly earnings component that was down from the prior month’s scare that led to the downdraft...a 2.6% annualized pace vs. the first-reported 2.9% that spooked Wall Street (since revised to 2.8%).

Frankly, everyone knew the 2.9% reading was an anomaly, it was just the algorithms took over and we had our crashette. 

The unemployment rate remained at 4.1% for a fifth straight month, still the lowest since 2000, as there was a big surge in the number hitting the labor force...and that’s good, sports fans.

U6, the underemployment rate, however, remained at a stubborn 8.2%, which should be lower given the overall strength in the jobs market.

So the bottom line is the Federal Reserve, at least according to traders, has its scenario for hiking rates three times this time, and maybe not the feared four moves, with the first one coming at the March 20-21 meeting.

Europe and Asia

First some economic data for the eurozone, EA19.  IHS Markit released its readings on the service sector, with the EA19 at 56.2 for February vs. 56.7 in January (50 the dividing line between growth and contraction).

Germany was at 55.3, France 57.4, Italy 55.0, Spain 57.3, U.K. 54.5.

GDP for the fourth quarter in the eurozone, as released by Eurostat, was 2.7% annualized.

Germany 2.9%, France 2.5%, Italy 1.6%, Spain 3.1%, Netherlands 3.1%.

Separately, the European Central Bank dropped a long-standing pledge to increase its bond buying if needed, taking another small step in weaning the eurozone economy off its protracted stimulus.

Keeping its broader policy unchanged, the ECB said it could still extend its 2.55 trillion euro bond purchase scheme beyond September if needed.

But it omitted a reference to bigger purchases, a signal that it remains on track to end a three-year-old stimulus scheme before the end of 2018.

Eurozone growth has been greatly aided by the huge stimulus program, and the ECB has been dialing back support in tiny increments.

While dropping the ECB’s so-called easing bias is largely symbolic as few if any expected bigger bond buying, it’s a precursor to an eventual change in monetary policy.

Speaking before President Trump’s announcement on tariffs, Thursday, ECB President Mario Draghi cited concerns about “unilateral decisions” producing heightened risks to the global economy.

Draghi said: “If you put tariffs against (those) who are your allies, one wonders who the enemies are. We are convinced that disputes should be discussed and resolved in a multilateral framework, and unilateral decisions are dangerous.”

Italy: Voters went to the polls last weekend and delivered a stinging rebuke, as expected, to the political establishment, with the populist Five Star Movement and the anti-immigrant Eurosceptic Northern League making sweeping gains.

But the results suggest a hung parliament and a period of intense, and protracted, negotiations shepherded by Sergio Mattarella, Italy’s president.

Five Star, led by 31-year-old Luigi Di Maio, picked up about 32%, while the center-right coalition fronted by former Prime Minister Silvio Berlusconi, took 37%, though it was the Northern League, at 18%, that outstripped Berlusconi’s Forza Italia to become the main conservative party.

The Northern League is led by 44-year-old Matteo Salvini, who said, “It is an extraordinary victory, which fills us with pride, joy and responsibility. It’s a vote for the future, Italians have rewarded the future.”

Salvini appeared to rule out an alliance with Five Star, which has been moving to the right, but I wonder.  Salvini said for now, “We want to govern with the center-right.”

The ruling center-left Democratic party led by Matteo Renzi suffered a dramatic implosion, falling to 19%, with Renzi resigning as party leader after.

So now, much as Germans had to wait for months and months before a new coalition emerged, Italians will be doing the same.

But the bottom line is over 50% of Italians went with parties that have heavily criticized the EU, and that is not good, considering Italy is a founding member of the bloc and Italians have traditionally been among its biggest supporters.

President Mattarella will oversee formal coalition talks beginning in April. Early elections could be called again.

One more...the big winner in the vote was Russian President Vladimir Putin.  Both Five Star and the League share a crazy affection for Vlad the Impaler. So you can see that any coalition that is formed is likely to be anti-West on issues such as Ukraine and Syria, for starters.

Germany: The Social Democrats voted to join Chancellor Angela Merkel’s next government, clearing the last hurdle to her fourth term and restoring stability in Europe’s biggest economy.

The vote by the SPD was better than expected, 66% of party members in favor.  Merkel will be re-inaugurated shortly, allowing her to move ahead with priorities that include working with French President Emmanuel Macron to strengthen the eurozone and coordinating on a  united European front against Chinese encroachment.

Social Democratic chairman Olaf Scholz is viewed as a front-runner for the key finance minister post that was part of the negotiations before the SPD joined the coalition.

Brexit: U.K. officials now don’t expect to clinch a Brexit deal by the end of the year and privately are talking about January as the real deadline, with exit day in March 2019, which leaves zero time for all 27 EU nations to approve of the accord.

EU chief negotiator Michel Barnier has long talked about October as a deadline in order to gain EU and U.K. parliaments’ approval.

The timing is critical because any further delays impede businesses who are already trying to figure out what the trade situation will look like come March 2019 and under what rules they will be operating. At the same time, British lawmakers will have a harder time rejecting whatever deal Prime Minister Theresa May brings back from Brussels.

So imagine.  A deal goes before Parliament just two months before Brexit. What do members do then?  It’s a take-it-or-leave-it situation.  It they don’t approve, it’s total chaos in crashing out.

Thus, October should still be the goal.

At the same time, Foreign Secretary Boris Johnson said on Thursday the government was prepared to quit the talks if the EU refuses to give a good deal, the Telegraph reported. 

So here we are, already just one year away, and the two sides are miles apart on some key areas, in particular how to avoid a hard border on the divided island of Ireland when Northern Ireland becomes home to the U.K.’s land frontier with the E.U.

On Thursday, EU Council President Donald Tusk said the Irish issue must be addressed before wider talks can move on.

“If in London someone assumes that the negotiations will deal with other issues first, before moving to the Irish issue my response would be: Ireland first,” Tusk said.

On trade, the EU says it’s offering the U.K. a trade deal that would keep tariffs and quotas off goods but would do little for services, which is a blow to the finance industry, which wants to secure mutual recognition of regulations so the City of London can maintain its status as a financial hub.

*Late tonight, Prime Minister May said she is not ruling out seeking Britain’s own exemption from U.S. tariffs, risking a further dispute with the EU that could sour Brexit talks in a huge way.

EU officials are pressing Trump to exclude the bloc, but British officials are saying they don’t want to speculate on how the issue could be resolved.  This could be a fatal mistake on May’s part. The U.K. is still in the EU.

Catalonia: The region’s parliament is slated to convene on Monday to vote on a new leader, though it is unclear whether the candidate put forward by secessionist parties will be elected or not. Jordi Sanchez is currently in jail as he awaits trial on charges of rebellion and sedition over Catalonia’s illegal referendum and unilateral declaration of independence from Spain last October.  I haven’t seen if a judge is allowing Sanchez to leave prison to attend parliament.

Earlier, Carles Puigdemont pulled back from his bid as he must be enjoying the beer in Brussels in his self-imposed exile.

Turning to Asia...China released its economic growth goal for 2018, 6.5 percent. The 6.5 is consistent with President Xi’s promise to deliver a “moderately prosperous” society by 2020.  Growth last year handily surpassed 2017’s target with a 6.9 percent expansion.

Spending to curb pollution will rise 19 percent in the 2018 budget as authorities strive to make greater progress on one of their key objectives.  According to the government’s review, days with heavy air pollution in key cities have fallen 50 percent over the past five years.

Defense spending is expected to rise 8.1 percent.  Premier Li Keqiang said China should make the military “strong as stone.” More on this below.

Separately, the Caixin private reading on the service sector came in at 53.3 in February vs. 53.7 in January.  Exports last month surged 44.5% year-on-year, imports up 6.3%.

Japan’s service sector reading for February was 51.7 vs. January 51.9.

Street Bytes

--On the week the Dow Jones rose 3.3% to 25335, still off the 26616 all-time high, while the S&P 500 gained 3.5% and Nasdaq 4.2%, the latter suddenly hitting a new high on Friday at 7560, a 12% move since the February low.

--U.S. Treasury Yields

6-mo. 1.87%  2-yr. 2.26%  10-yr. 2.89%  30-yr. 3.16%

Treasuries were essentially unchanged again on the week.

--The International Energy Agency said the U.S. is likely to overtake Russia to become the world’s largest oil producer by 2023, accounting for most of the growth in global supply.

U.S. crude production is expected to reach a record 12.1 million barrels a day in 2023, up from 10.6 million this year.

IEA Executive Director Fatih Birol, addressing an industry conference, noted that non-OPEC supply growth “is very, very strong, which could change the parameters for the oil markets in the years to come, led by the United States, but also Brazil, Canada and Norway.”

Global oil demand will grow at about 1.2 million barrels a day each year to a total 104.7m by 2023, with China remaining the “main engine of demand growth.”

--U.S. household net worth hit a record $98.746 trillion last quarter owing to rising stock markets and property prices.

--Health insurance giant Cigna said it had agreed to buy Express Scripts, the nation’s largest pharmacy benefit manager, in a $52 billion deal that will further reshape the health care landscape.  The move is the latest in a wave of consolidations as companies react to concerns over rising health care costs and the possibility of new rivals, in particular, Amazon’s move into the business.

Cigna and Express Scripts said the merger will allow the two to bring together patients’ medical and pharmacy histories to improve treatments and lower costs.

Express Scripts had been the last major independent pharmacy benefit manager, the company being responsible for the prescription plans of more than 80 million Americans.

Recently, CVS Health, which owns pharmacies, announced a merger agreement with health insurer Aetna.

--Billionaire activist-investor Carl Icahn said that he knew nothing about President Trump’s decision to impose tariffs on steel and aluminum imports before deciding to sell shares in a company, Manitowoc, that makes cranes for heavy construction.  Icahn, a friend of Trump’s and former adviser said, “Any suggestion that we had prior knowledge of the Trump administration’s announcement of new tariffs on steel imports is categorically untrue. We reduced our position in Manitowoc for legitimate investment reasons having nothing to do with that announcement.”

Icahn sold off $31.3 million of his stake at between $32 and $34 a share, and then after Trump’s tariff decision, the stock fell to about $26. It was the first time Icahn had actively traded the stock since Jan. 2015, according to regulatory filings.

--Airbus said it would be reducing production rates of the double-decker A380 and A400M military aircraft and said up to 3,700 jobs would be impacted in France, Germany, Britain and Spain. The European aircraft maker is slowing production of the A380 due to weak demand, while the A400 is plagued by cost overruns.

The A380, the jumbo hot dog I said made zero sense when it first came out, is seeing its production reduced from 12 aircraft this year to six per year going forward.

--Meanwhile, Airbus’ big rival, Boeing, would get hit hard by levies on imports of aluminum.  About 80% of an aircraft’s weight is made up of the stuff. But aluminum can be volatile, pricing wise, to begin with and big corporations are used to handling the price swings.

The bigger issue is China, a big buyer of Boeing aircraft, but the government could put a kibosh to that, let alone Commercial Aircraft Corp. of China Ltd., Comac, is looking to become a homegrown competitor with the jets it is working on, with first delivery of its C919 due in 2021.

--Now this was a stupid story today.  I’m watching CNBC and they became breathless after a Wall Street Journal story hit that Goldman Sachs CEO Lloyd Blankfein was stepping down by end of the year.

Oh, they kept showing his picture and acting like this was a giant story, and I’m thinking, if the story is true, I don’t think he’s done a great job in years, and like, whatever.

So at the end of the day, Blankfein himself says that the report may be premature.

“I feel like Huck Finn listening to his own eulogy,” he tweeted.

Goldman’s management committee was stunned when the story hit.  No one knew.

Well, it is true that Blankfein could leave tomorrow, or 2020, and that there are just two real candidates, Harvey Schwartz, 53, and David Solomon, 56.

This no doubt means the knives are out between Mrs. Schwartz and Mrs. Solomon.

--Target Corp. reported disappointing earnings, missing Wall Street’s expectations, though revenue of $22.77 billion topped estimates.  Same-store sales were solid, up 3.6%, with customer traffic increasing 3.2% and online sales jumping 29% in the fourth quarter.

For the current quarter, however, Target was less than rosy versus analyst forecasts.

CEO Brian Cornell said the company is committed to increasing employee pay to $12 an hour starting this spring (and to $15 by 2020), while it is accelerating its reinvention plan to make it more competitive with Amazon, which in combination squeezes profits in the short term.

Target is also accelerating rollout of its same-day delivery service beyond the test region in New York to Boston and Chicago.

--Kroger reported fourth-quarter earnings in line with analysts’ estimates but then the shares fell after it issued a disappointing profit outlook for 2018.  Revenue did jump 12.4% to $31 billion.

The U.S. grocery industry is under pressure from all sides, with Walmart and Whole Foods-owner Amazon taking advantage of their size and scale, while European discount chains Aldi and Lidl continue to expand in the U.S.  Both Walmart and Amazon have been growing their online and delivery businesses.  None of this is good for margins for the likes of Kroger.

--Multiple stories at week’s end that Toys ‘R’ Us is preparing to totally liquidate its bankrupt U.S. operations after failing thus far to find a buyer or reach a deal on restructuring its debt. The Company isn’t commenting.

--Dollar Tree Inc. reported a boost in fourth-quarter sales and profit, but the results were less than expected and the shares fell sharply.  Revenue rose 12.9% to $6.36 billion, and same-store sales were up 2.5%.

But the guidance for the rest of the year wasn’t great. Growth...just not as strong as forecast.

Personally, I am now buying tall trash can bags at my local Dollar Tree...for a $1!

--Snap Inc. plans to lay off about 10% of its engineers, 100 people, as the company struggles with slowing growth.  User growth for the messaging app has slowed significantly in the past two years, though Snap had hired about 2,400 people.

--McDonald’s has started offering fresh beef in its burgers sold at some U.S. restaurants, as it looks to improve quality and ward off competition from premium chains like Shake Shack.  The company hopes to roll it out to most of the 14,000 U.S. restaurants by the end of June.

--Canada’s economy gained a net 15,400 jobs in February, all in part-time employment, as reported by Statistics Canada. The jobless rate fell to 5.8%.

--Pharma felon Martin Shkreli was sentenced to seven years in prison for securities fraud today. The arrogant [jerk] broke down into tears as he made one last plea for leniency.

“I was never motivated by money. I was trying to grow my stature and reputation,” he blubbered in court.  “I took down Martin Shkreli with my disgraceful and shameful actions.  This is my fault. I’m not a victim here.”

The [jerk] then boasted about dodging jail – or, at the very worst, being sentenced to a cushy, minimum-security federal prison camp he called “Club Fed” in a livestream post after.  “I’d say there’s a good chance there’s no jail at all.”

He is currently at the Brooklyn Metropolitan Detention Center.  Just throw a pack of hyenas in his cell.

--I’ve been writing about the cost of California’s bullet train and on Friday, the state rail authority announced the cost of connecting Los Angeles to San Francisco would total $77.3 billion, an increase of $13 billion from estimates two years ago.

And get this. The authority also said that the earliest trains could operate on a partial system between San Jose and the farming town of Wasco would be 2029, five years later than the previous projection.

Hey, Bobby C.  You were right. It’s just never getting done. Period.  The logistics in going over or through some of the mountain ranges is a killer.

But it’s a hard project to kill with thousands of jobs already involved in it in one form or another.

-- Forbes released its 32nd annual billionaires list, with the U.S. having 585 with a net worth in the $billions, but Greater China – mainland China, Hong Kong, Macau and Taiwan – had 476.

Jeff Bezos tops the list at $112 billion, with Bill Gates next at $90 billion, followed by Warren Buffett ($84bn), French luxury goods company LVMH CEO Bernard Arnault ($72bn) and Mark Zuckerberg ($71bn).

Donald Trump toppled 222 places to No. 766 after Forbes estimated his fortune fell by about $400 million to $3.1 billion. His real estate empire took a hit, with Trump Tower being valued $41 million less than the previous year, owing to the rise of e-commerce pushing down the worth of properties in historically strong shopping areas.  For example, longtime tenant Nike said it was moving out of its 65,000-square-foot space in the 6 E. 57th Street property and it will be tough to fill it at a good rate.

Two of China’s best-known faces from the country’s tech boom, Tencent Holdings’ chairman Pony Ma Huateng and Alibaba Group Holding’s Jack Ma, became the first Chinese to enter the top 20 richest people in the world, with a combined wealth of $84.3 billion – almost the size of the Turkish economy, as noted in the South China Morning Post.

I really know little about Tencent, but its big business is online games and its WeChat messaging and payment app. The Hong Kong-listed company also has stakes in Tesla, Snap, and Spotify.

--The 90th Oscars ceremony saw its lowest ratings in history, a record low 26.5 million viewers, down 20% from last year’s 33 million.

Jimmy Kimmel repeated as host and the issue was there were no dominant films this year, which I see as the biggest factor rather than the Me Too movement.  I mean the top winners, The Shape of Water and Three Billboards Outside Ebbing, Missouri have box office receipts, as of a week ago, of just $57 million and $52 million domestically, respectively.

Foreign Affairs

Syria: As of Thursday, according to the Syrian Observatory for Human Rights, more than 900 civilians have now been killed in eastern Ghouta since the Syrian government launched its assault on the rebel enclave on Feb. 18. Russia’s Defense Ministry said Washington was flouting a UN resolution in Syria by failing to stop rebels it controlled from launching daily attacks on the Syrian army in Ghouta and shelling Damascus.

Moscow was responding to a UN allegation on Sunday that Russian aircraft had flown bombing missions over the region in defiance of a United Nations ceasefire.  Russia also rejected a U.S. allegation that Russia was ignoring the UN resolution on a ceasefire in Syria.

Syrian President Assad vowed to press ahead with an offensive in eastern Ghouta. Assad said in comments to journalists broadcast on state TV: “We will continue fighting terrorism...and the Ghouta operation is a continuation of fighting terrorism.”

On a separate front, Kurdish-allied Syrian Arab militias are redeploying 1,700 fighters from frontlines with ISIS to the Afrin region to help fend off a Turkish offensive against the northwestern region.

Meanwhile, a Russian military cargo plane crashed as it was descending to land at an air base in Syria this week, killing all 39 people on board, the Russian Defense Ministry said. The military blamed the crash on a technical error and insisted that the plane was not shot down. All on board were Russian servicemen, the ministry said.

Israel: As reported by the Jerusalem Post, “Hezbollah declared its ranks in readiness for the past two days, for fear of Israeli aggression on Lebanon,” the Rai Al-Youm newspaper published in London reported Thursday.

“High alert was declared in light of information received that the Israeli army is conducting secrete military maneuvers jointly with the United States, which are currently taking place in the country and in the Mediterranean,” journalist Kamal Halaf, who is close with Hezbollah, said.

“Citing sources in Hezbollah, Halaf added that U.S. military leaders gave the IDF (Israel Defense Forces) a green light to attack Hezbollah in Lebanon. The only thing preventing Israel from launching a surprise attack is fear of retaliation from the Iranian-backed group, the sources said.

“Also according to the Hezbollah sources, Israeli Prime Minister Benjamin Netanyahu persuaded the Americans to make a ‘quick surprise attack’ on Lebanese soil, but there is concern that such an attack could lead to all-out war in the region, since Hezbollah’s response would be ‘tough and very strong,’ Halaf wrote.”

I’m not sure about this story.

Meanwhile, Prime Minister Benjamin Netanyahu’s top communications aide, Nir Hefetz, signed a deal last Sunday to turn state’s witness according to Israel Police. This would make three major aides to turn state’s witness against the prime minister in the long-running corruption investigations that also involve his wife, Sara.

It was funny seeing Netanyahu and Sara at the White House this week, met by Trump and First Lady Melania. Only one of the four would appear to be clean.

China: Chinese Foreign Minister Wang Yi said on Thursday that China was looking to protect peace and stability in the South China Sea and that this is unshakeable.  Speaking on the sidelines of an annual meeting of China’s parliament, Wang said some outside forces were trying to muddy the waters in the disputed region.  That’s a crock.

China has repeatedly accused countries outside the region – such as Japan and the United States – of trying to provoke trouble while China and its neighbors are trying to resolve the matter through diplomacy.

Meanwhile, China announced an 8.1% rise in defense spending at the opening of parliament, the biggest rise in three years, with the official China Daily saying in an editorial, “China’s defense budget is neither the largest in size – it accounts for just one-fourth of the military spending of the United States – nor does it have the fastest growth rate.”

Editorial / Wall Street Journal

“The annual session of China’s rubber-stamp legislature opened this week, and Chinese Premier Li Keqiang announced an 8.1% increase in defense spending, the largest in three years. Lawmakers are expected to approve the military budget and constitutional changes to let supreme leader Xi Jinping serve as President indefinitely. All of this will amplify the angst in Asia about Beijing’s military buildup.

“The budget of the People’s Liberation Army (PLA) isn’t transparent, and the U.S. Defense Department estimates that spending is about 25% higher than Beijing’s figure. More important, Mr. Xi is remaking the military into an effective fighting force.  Under previous leaders, the PLA became top-heavy with generals whose main mission was to line their own pockets. They padded the ranks with followers and offered promotions in return for bribes. An anticorruption campaign has netted 16 top generals in the past six years.

“Mr. Xi has replaced them with loyalists, giving him the clout to reform the PLA.  He replaced regional commands that were personal fiefdoms with theater commands that require the army, navy and air force to work together, much as the U.S. did after the Goldwater-Nichols Act in 1986. Beijing is reducing the military’s headcount and investing the savings in sophisticated weapons. Since 2015 the PLA has shed 300,000 troops. Instead of relying on human-wave attacks, it is racing the U.S. to develop artificial intelligence for the battlefield.

“Under Mr. Xi the PLA is harassing U.S. forces in the international waters and airspace off China’s coast. Chinese vessels and aircraft are testing Japanese defenses around the disputed Senkaku Islands almost daily. Despite a promise by Mr. Xi that China would not militarize the seven artificial islands it reclaimed in the South China Sea, the PLA has built hangers for 72 fighter aircraft and 10 bombers.

“Beijing is also stoking nationalism at home to an extent not seen since the death of Mao Zedong. Feature films such as ‘Wolf Warrior’ show the PLA fighting abroad, while television documentaries extol the military’s reforms and growing strength.  Mr. Xi’s ‘China Dream’ slogan includes a ‘strong army dream,’ and last year he reviewed troops on Army Day without other senior leaders present.

“All of this raises questions about Mr. Xi’s intensions. The U.S. retains a military edge over China, but that is slipping as the PLA seeks to build a blue-water navy, and deploy weapons that could kill U.S. satellites and put American aircraft carriers at risk.

“Mr. Xi’s predecessors also increased China’s military budget. But his success in amassing personal power and his record of using the PLA to intimidate neighbors mean his moves to build military might will be closely watched from Japan through the Straits of Malacca to the Indian Ocean. One lesson of history is that rising authoritarian powers often make the mistake of tempting conflict in the name of nationalist glory.”

On a different topic, Taiwan, Beijing again warned the island not to pursue separatist activities.  Premier Li Keqiang, at the opening of parliament, said, “We will remain firm in safeguarding China’s sovereignty and territorial integrity and will never tolerate any separatist schemes or activities for Taiwan independence.”

Lastly, in remarks to donors last weekend at Mar-a-Lago, President Trump said he thinks it’s great that China’s president now holds that office for life and muses that maybe the U.S. will do the same someday.

White House officials said the remarks, which were received with laughter, were indeed a joke but of course, deep down, or maybe not so deep, Trump really wishes he had the same power.

Trump told the gathering: “He’s now president for life. President for life. And he’s great. I think it’s great. Maybe we’ll give that a shot someday.”

Russia: British police suspect Russians struck a former Russian double agent, Sergei Skripal, and his 33-year-old daughter, Yulia, who were found slumped unconscious on a bench outside a shopping center in the southern English city of Salisbury. British investigators believe Russians used a mystery substance, probably nerve gas, to harm Skripal in revenge for his treachery, a U.S. security source told Reuters.  Moscow rejected the claims as “groundless.”

British Prime Minister May was under pressure to retaliate against Russia for this “brazen act of war” on the streets of Britain.

Gavin Williamson, the defense secretary, said the government was being “pushed around” by Russia and “we have to change the way we deal with it” amid calls for fresh sanctions against Moscow and the expulsion of Russian diplomats.

Boris Johnson, the foreign secretary, already threatened sanctions if Russia was found to be behind the attack that left Skripal and his daughter in comas and Nick Bailey, a police sergeant, in intensive care.

On Thursday, Johnson repeated his insistence that Britain would respond “robustly” against any country found to be responsible.

Downing Street can’t do anything until it’s proved who was behind the attempted murders.

Random Musings

--Presidential tracking polls....

Gallup: 39% approval for President Trump, 55% disapproval [March 4]
Rasmussen: 44% approval, 54% disapproval (sliding in this one)

A new Monmouth University Poll had Trump’s approval rating at 39%, disapproval 54%, a decline from the 42 / 50 split at the end of January, which was a big improvement from December’s low of 32% approve, 56% disapprove.

Separately, in the Monmouth survey, 41% of the public approve and 42% disapprove of the new tax code reforms.

20% say President Trump is taking the threat from Russian interference in our elections seriously, 72% say he is not.

--Mississippi Republican Sen. Thad Cochran, 80, announced he was resigning effective April 1 due to health reasons. Cochran currently chairs the powerful Appropriations Committee.  This seat isn’t in jeopardy for Republicans.  This week, state lawmakers passed what would be the nation’s most restrictive abortion law, making the procedure illegal in most cases after 15 weeks of pregnancy.

--Florida’s Senate passed a school safety bill Monday placing new restrictions on rifle sales and including a program that will allow some school faculty to carry fire arms.

In reaction to the Parkland Massacre, the bill raises the age limit on the purchase of all guns in Florida from 18 to 21, expands the three-day waiting period on handguns to include all rifles and shotguns and bans the purchase and possession of bump stocks.

It also includes a $400 million package to fund the school system’s ability to address issues of mental health and allows law enforcement to seize and hold firearms from anyone held under the Baker Act for up to 24 hours or longer if they are able to obtain a risk protection order from a court.

Under an amendment proposed by Republican Rene Garcia, though, classroom teachers wouldn’t be allowed to be armed, but other school personnel including custodians, principals, librarians and counselors and current or former servicemen or JROTC instructors would be allowed to carry them, after 132 hours of appropriate training. This is known as the Marshall program and is opposed by Gov. Rick Scott.

But the bill passed, including then in the House on Thursday, without amendments to ban assault-style rifles or large-capacity magazines which were supported by students, parents and faculty members affected by the shooting.

Gov. Scott then signed it today. Three hours later, the NRA went to court to block it over the raising of the age from 18 to 21. 

--Related to the above, I said when I first saw the kids of Marjory Stoneman Douglas HS that I was concerned some of them were out over their skis.  I really bit my tongue on the issue the past few weeks.  I will continue to do so, except to say that you might have seen how some students are now going after one of the teachers, Jim Gard, for leaving “75% of his students out in the hallway to be slaughtered,” as one student, I’ve leaving nameless, claimed on Twitter.

And we saw how one parent lied in changing an email to make CNN look bad, for which, to his credit, Fox News’ Tucker Carlson later apologized because he ran with the original story.  Enough said...for now.

--The former CEO of Celgene, the company across the street from me, Bob Hugin, is running for the U.S. Senate as a Republican against incumbent Democratic Sen. Bob Menendez.

Editorial / Star-Ledger

“Bob Hugin, an ex-pharma executive, is attacking U.S. Sen. Robert Menendez on ethical grounds, as he should. New Jersey deserves better than Menendez, as he says.

“But is Hugin, who is seeking the Republican nomination to face Menendez this fall, the man to point the finger on ethics?  His stewardship of Celgene, the big pharmaceutical firm based in Summit, raises serious doubts.

“It was under Hugin’s leadership, after all, that Celgene waged a multiyear battle against legislative efforts to lower drug prices for the federal government and cancer patients.

“Not only  did Celgene hike the price of its blockbuster anti-cancer drug, Revlimid, aggressively; it fought to protect its monopoly at all costs.

“The tactics it used were denounced by Scott Gottlieb, head of the federal agency that regulates drugmakers – and a former big pharma board member himself – as ‘shenanigans’ that are ‘unfair and exploitative.’

“To be sure, Celgene wasn’t the only bad actor. But companies that make cheaper generic versions of drugs say Celgene was a pioneer in this regard and has one of the best-known records of abuse.

“Here’s how it gamed the system: Once a patent on a drug expires, generic drug companies are supposed to be free to produce their own versions of the drug, driving down prices. To do that, the generic firms need to start cracking the code on a drug early. They usually start by buying a sample from the brand-name company for research.

“But competitors say Celgene refused to sell samples of Revlimid, citing bogus safety concerns – essentially, that highly trained scientific teams in generics labs wouldn’t able to handle its drug properly....

“Silly as that sounds, it’s enough to prevent a competitor from getting a sample, proving to the Food and Drug Administration that its version is identical to the original drug, and getting that cheaper alternative certified for market.”

Well, the editorial goes on, and I frankly didn’t know about the process, but Hugin earned $100 million in just three years.

“A top saleswoman at Celgene also filed a whistleblower lawsuit, accusing the drugmaker of putting cancer patients in danger by hiding information about potentially fatal side effects.  Celgene didn’t contest those charges in court: it settled for an eye-popping $280 million.

“So, yes, New Jersey needs an ethical alternative to Robert Menendez. But is that leader really Bob Hugin?”

--A nine-day teachers strike in West Virginia was finally resolved Tuesday, after state officials approved a 5% pay increase for public school teachers that the unions had sought. This followed days of wrangling over the percentage increase in the Republican-controlled legislature, which initially didn’t want to pay more than 4%.  But lawmakers then agreed on budget cuts to fund the pay increase.

Many teachers stand to get a raise of more than $2,000 a year, with the average teacher salary being $44,700, near the bottom for the U.S.

--Talk about a nothing burger, according to a report by the U.S. Office of Special Counsel, a permanent office of investigators and prosecutors, Kellyanne Conway improperly used her official role when she discussed the Alabama Senate race on TV last year.

The report found Conway promoted the candidacy of Republican Roy Moore and opposed Democrat Doug Jones, which violated the Hatch Act that restricts political activity by federal employees in their official capacity.

Like whoopty-damn-do.  The Office of Special Counsel must have more pressing items to work on.

--One guy I really can’t stand is Pastor Robert Jeffress, who was blabbering on a Fox News show the other night about how God will forgive Donald Trump for his moral failings.  I believe in God. You have to be kidding me. 

--The Trump administration is pressuring New York and New Jersey to pay a greater share of a new rail tunnel beneath the Hudson River, which I can tell you is indeed critical to the regional economy and if both states weren’t Democrat in their leadership, you wouldn’t have the administration demanding the states put more “skin in the game” to pay for what’s known as the Gateway program.

Originally, the White House had committed to funding half the cost, a pledge offered by the Obama administration.

From the New York Post:

“President Trump needs to get behind plans for a new Hudson River rail tunnel and stop treating the project like a political poker chip, elected officials said Saturday.

“Trump has asked  GOP House leaders to cut $950 million in funding for the project...a move that drew the ire of local legislators on both sides of the aisle.

“ ‘This project is vital to 50 million people in the northeast corridor and to our American economy, and politics shouldn’t get in the way,’ said Senate Democratic leader Chuck Schumer.

“Rep. Peter King (R-Long Island) urged Trump to back the project.

“ ‘Trump must keep his commitment to Gateway which he made in the White House last September,’ King tweeted.  ‘Essential to New York & Northeast.’

“Trump’s aim in seeking to cut the project’s funding is unclear.

“King suggested on Twitter that Trump is motivated by a dispute with Schumer, who has blocked some administration appointments. Can’t let feud with Schumer hurt New York & United States,’ King said....

“A source familiar with a meeting in September where Trump told local legislators he backs the new tunnel said the project isn’t sexy enough to interest him.

“ ‘He asked, ‘Why are we putting all this money toward a tunnel that no one can see?’’ the source told The Post.  ‘ ‘Why don’t we do something at LaGuardia’ – because it’s visible.’

“Trump is more interested in using the Gateway project as a bargaining chip, the source said. ‘This is throwing spaghetti at anything – anything to do deals.’

“The $30 billion Gateway tunnel would supplement the existing century-old Hudson River tunnel.  Planners say the new tunnel is a must for Amtrak and NJ Transit train service.”  [Gwynne Hogan and Mary Kay Linge / New York Post]

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Pray for the men and women of our armed forces...and all the fallen.

God bless America.

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Gold $1324
Oil $62.12

Returns for the week 3/5-3/9

Dow Jones +3.3% [25335]
S&P 500  +3.5%  [2786]
S&P MidCap  +3.8%
Russell 2000  +4.2%
Nasdaq  +4.2%  [7560]

Returns for the period 1/1/18-3/9/18

Dow Jones  +2.5%
S&P 500  +4.2%
S&P MidCap  +2.6%
Russell 2000  +4.0%
Nasdaq  +9.5%

Bulls 48.6
Bears 15.5 [Source: Investors Intelligence]

Have a good week.

Brian Trumbore

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