Trade Deals Risk a Short Shelf Life Under Trump

(Bloomberg) --

When U.S. President Donald Trump announced a deal to avert tariffs on Mexico there was a palpable sigh of relief across the border. Crisis averted, at least for now.

But Trump’s threats on trade, following his earlier move to rip up the North American Free Trade Agreement and force a renegotiation with Mexico and Canada, have still wrought significant damage.

As Nacha Cattan reports, many in Mexico, from ordinary people to business leaders, are privately seething. It’s a painful reminder of just how much Mexico’s economy depends on the flow of goods north.

There's also the feeling this is a temporary reprieve. With his 2020 re-election bid formally underway, Trump will have an even more finely tuned ear to the mood of his base on issues like immigration, trade and jobs.

That is something China’s President Xi Jinping would do well to bear in mind as he prepares to meet Trump next week at the G-20 summit in Osaka to discuss their trade war.

When it comes to the U.S. president, a deal is a deal only as long as Trump deems it’s in his interests. For both Mexico and China, the next 18 months could be fraught.

Global Headlines

Just in: An independent United Nations human rights expert investigating the killing of Saudi columnist Jamal Khashoggi has cited “credible evidence” that it says merits further investigation into the alleged role played by Crown Prince Mohammed bin Salman, the Associated Press reports.

Insurgent 2.0? | Speaking to a packed arena in Florida last night, Trump tried to recapture the insurgent energy and anything-might-happen feel that fueled his 2016 White House bid. But much has happened since then, and not all of it lends itself to a rip-roaring rally. Complaints about political opponents stirred the crowd, but, as Trump ticked off a list of accomplishments, some people sat down, checked their phones or made an early exit.

• Democratic front-runner Joe Biden courted affluent donors just a short cab ride from Trump Tower, telling them that — perhaps unlike some of the party’s other potential nominees — he wouldn’t be making them political targets because of their wealth.

Not an ally | It’s going to be another hot summer in Turkey, where President Recep Tayyip Erdogan is planning to take delivery of a Russian missile defense system next month because his confidence in the U.S. alliance has broken down, Selcan Hacaoglu reports. Back in Washington, Trump is evaluating three sanctions packages in response to the missile deal, Nick Wadhams and Saleha Mohsin report, the most severe of which would all but cripple the Turkish economy.

Warning shot | The world’s most powerful central bank is making clear it thinks the law is on its side if Trump tries to remove Jerome Powell as Federal Reserve chairman. White House lawyers have provided a possible blueprint for demoting Powell to a governor-only post, Saleha Mohsin, Christopher Condon and Jennifer Jacobs report. But the Fed, which faces frequent attacks from Trump for not catering to his economic agenda, has hinted it won’t back down easily.

• Click here for more on how Trump made a rare American presidential intervention yesterday into another economy’s monetary policy.

Lights out | South African President Cyril Ramaphosa must find a way to rescue the country’s distressed power utility — problem is, the government can’t afford to. As supplier of 95% of the nation's electricity, Eskom would drag down the entire economy if it went bankrupt, with rolling blackouts largely responsible for a 3.2% contraction in the first quarter. Ramaphosa may announce measures to deal with the crisis tomorrow, but his options are limited.

Bad credit | China chose the eastern garden city of Suzhou to test its ambitious plan to reward or punish citizens for their behavior. And while the “Osmanthus” social-credit program has won national awards, Bloomberg News visited and found one big problem — most residents had never heard of it. If Osmanthus — which is supposed to help shape laws, regulations and standards across China by 2020 — is struggling to gain traction in a locality praised by authorities, what are the chances it can be implemented nationwide?

What to Watch

• Trump’s under pressure to choose a new Pentagon chief quickly amid rising tensions with Iran, but the abrupt and messy withdrawal of his previous pick, Patrick Shanahan, has raised questions about the rigor of the administration’s vetting process.
• Boris Johnson has extended his lead over his rivals in the race to become Britain’s next prime minister as Conservative members of Parliament narrow the field of possible successors to Theresa May down to two candidates over the next two days.
• As European leaders prepare for another round of horse-trading in Brussels this week, one candidate is emerging from the sidelines who could fit the bill to become the bloc’s top executive: EU antitrust chief Margrethe Vestager.
• Xi called for starting a “new chapter” with North Korea in a newspaper commentary published in Pyongyang ahead of the first visit by a Chinese leader in 14 years that starts tomorrow.

And finally... A Netflix miniseries chronicling the exoneration of five black and Latino teenagers in the 1989 rape of a New York City jogger has drawn fresh attention to Trump’s role in the incident’s aftermath. The president, who responded to the attack with a full-page ad in several newspapers urging reinstatement of the death penalty for violent criminals, declined again yesterday to apologize for promoting false accusations against the so-called Central Park Five. “You have people on both sides of that,” Trump said. “They admitted their guilt.” The teenagers’ advocates have long contended their confessions were coerced.

--With assistance from Kathleen Hunter, Karl Maier, Karen Leigh and Benjamin Harvey.

To contact the editor responsible for this story: Ruth Pollard at rpollard2@bloomberg.net

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