Wednesday Night #2318

Canada-U.S.
Can we all agree that Canada-U.S. Trade Minister Dominic LeBlanc and chief trade negotiator Janice Charette are candidates for sainthood?
Tariffs on Hold as Trump Claims Deal With Canada Is Near
President Trump announced a three-day delay on imposing 50 percent tariffs in a social media post on Tuesday night, roughly 90 minutes before the midnight deadline.
Let us hope that there is more substance to this claim than to his claims about peace talks in the Middle East
Thanks to Doug Sweet for pointing to The Real Political Risk for Carney Isn’t Failing to Get a Deal today’s column of inFocus with David Coletto (Founder and CEO of Abacus Data)
His conclusion: “I don’t think most Canadians will judge a deal simply by whether tariffs come off. They will judge what Canada gave up, whether the agreement produces stability (which most know with President Trump that’s almost impossible), and whether the government used this crisis to reduce our vulnerability to the United States.
That is the real political test. Carney doesn’t need a deal. But if he thinks we do, then the deal needs to does three things at once: eases economic anxiety, reduces uncertainty, AND doesn’t feel like we gave in all while President Trump will gloat.”

N.L., Quebec announce new Churchill Falls agreement worth billions — with help from Ottawa
Federal government to provide $10B in financing for electricity projects
Ottawa is calling it the largest clean energy investment in North American history.
The projects will create 23,000 jobs, according to both levels of government.
The deal will give Quebec a much-needed source of secure power, while N.L. looks to make additional revenue off of natural resources as it faces crippling debt.
And, as The Gazette’s Andy Riga points out, strengthens Quebec Premier Christine Fréchette’s argument that Quebec can achieve tangible gains through cooperation within Canada. The $70-billion deal allows her to present herself as a pragmatic leader securing Quebec’s long-term energy security and economic interests while reinforcing Hydro-Québec, a source of pride for Quebecers.

Afghanistan
Last Saturday, 15 August, was the 5th anniversary of the Fall of Kabul. Among the many commentaries and analyses, one question that appars is whether western nations should begin to reengage with the Taliban in order to mitigate the suffering of the population and perhaps extract some recognition of women’s and children’s rights.

U.S.-North Korea-South Korea
Trump’s fulsome embrace of North Korean leader Kim Jong-un whilst ordering the Pentagon to reduce its joint military exercises with South Korea (Trump Orders Pentagon to Curtail Military Exercises With Ally South Korea) has generated multiple critiques and analyses, among them this from International Intrigue: go help invade Europe, cash the Russian cheques at home, then watch while your rivals dangle even more concessions plus maybe even the prospect of yet another US presidential summit further legitimising your own regime. Perhaps the hope in Seoul and DC is that if you throw enough carrots Kim’s way, it might coax him towards dialogue and even restraint. And yet history suggests dictators are always happy to eat carrots and smile for photos, but they’ll eventually start demanding dessert.
NPR offers this analysis: Experts suspect that Trump’s decision to reduce the scale of Ulchi Freedom Shield was…likely part of a larger effort to convince North Korea to rejoin nuclear disarmament talks that broke down in 2019. South Korea similarly expressed such hope on Monday, stressing wishes that Trump and Kim’s “friendly relationship” lead to “meaningful dialogue” about the security of the Korean Peninsula.
Update: Kim Jong-un’s sister casts doubt on Trump’s claims of secret US-North Korea talks – President says he plans to meet dictator this year but Kim Yo-jong says Washington remains Pyongyang’s enemy

China
Chinese Foreign Minister Wang Yi is visiting South Korea for two days from Wednesday, stepping up engagement with Seoul as President Donald Trump sows doubts about Washington’s reliability in the region. Wang will meet South Korean Foreign Minister Cho Hyun to discuss North Korea and bilateral and global issues, South Korea’s Foreign Ministry said in a statement Tuesday.
Much as we loathe Pete Hesgeth, it seems unfair to blame him for not winning the war that Trump started and has exacerbated ever since.
SCMP reports that Claims Hegseth ‘on verge of losing job’ raise questions about future US-China defence ties
Donald Trump is losing patience with the Pentagon chief because of the stalled Iran war, according to several sources
China Wants to Shape What the World’s A.I. Knows
China is exporting more than A.I. models. It wants its data to influence the world’s chatbots, raising fears that Beijing’s narratives will spread with the technology.

What of the Middle East?
Jared Kushner, under the auspices of the Board of Peace’, had a rare meeting with Hamas’ leader who reiterated that Israel must first withdraw its troops from the 60% of Gaza that Israel occupies.  He then met with Netanyahu  who again insisted troops will not withdraw from strip until Hamas first disarms, So  as expected, the talks made no breakthrough on the stalled Gaza deal
Trump says no talks planned with Iran, Tehran says Strait of Hormuz still shut. Reuters comments: Our lead analysis asks if the conflict is running on autopilot, making the region one in which no actor, including Gulf states themselves, has control over what happens next

The economy
Trade & Transportation
An essential component of the global economy is Trade. With the closing of the Strait of Hormuz, Transportation of goods and comoities is under pressure and nations are actively seeking alternative routes. Thus, new interest in the the Arctic’s ‘ice silk road’.
Highlights of Peter Berezin‘s latest report:
Top Takeaway: Wall Street analysts expect record-high earnings growth on top of record-high profit margins. While stocks could rise into year-end, the longer-term outlook for equities is unfavorable.
• AI companies may need to generate $10 trillion per year in revenue to justify the capex that is being plowed into data centers. This is roughly equivalent to annual global spending on food or healthcare.
• Fortunately for the AI trade, hardware shortages remain acute. As such, while the risks to stocks are tilted to the downside over a 12-month horizon, it is too early to tactically position for a bear market.
• I would turn structurally more bullish on stocks if productivity growth were to accelerate. However, with US productivity growth clocking in at close to the 10-year average in Q2, so far there is little evidence of that.
• One reason that oil prices have fallen from their peak is that rising crack spreads have reduced the demand for crude. That is not a particularly encouraging sign for the global economy.
• Kevin Warsh’s unwillingness to discuss the Fed’s reaction function has increased uncertainty over the rates outlook, lifting bond yields in the process. Against the backdrop of a tightening labor market, yields are unlikely to fall much over the coming months.
• By itself, the recent intervention to support the yen will probably be insufficient. More fundamental factors such as lower oil prices or weaker global growth will be necessary.
• That said, the yen is extremely cheap by conventional valuation measures and has weakened more than one would have predicted based on changes in interest rate differentials. Thus, the long-term upside potential for the currency is large.

Affordability v Inflation
We urge all our economics gurus, aficionado/as and hapless bill payers to read The Meaning of the $20 Burrito That’s Tearing MAGA Apart by Justin Wolfers, professor of economics and public policy at the University of Michigan, and to take to heart the concluding explanation:
“The burrito discussion is helpful because it reduces the economy to something you can wrap your hand around and taste. You can see the aluminum foil wrapper, subject to a 50 percent tariff. You can taste the Mexican tomatoes, carrying their own 17 percent tariff. You might be chewing on Aussie beef, which has been tariffed, untariffed, threatened with another tariff and then exempted. The avocados for our guac come tariff-free from Mexico because of a U.S.-Mexico-Canada Agreement exemption, and those exemptions appear to be at risk. The cheese and sour cream come from American farms, which are struggling with worker shortages after Immigration and Customs Enforcement raids. And I would pass on the lettuce until food safety is improved. No wonder people aren’t happy about the price.”
NB We would take Professor Wolfers’ course anytime.

Wildfires and water bombers
As wildfires menace numerous regions of Canada, the climate crisis spurs Fire rangers of the Mongolian steppe to revive ancient knowledge and practices (photo essay)
As for modern technology, Peter Frise reminds us that The world wants more Canadian-made water bombers.
The key part of this story is the conclusion “The question now is whether De Havilland should expand production before more governments commit to buying aircraft.
[De Havilland Canada’s vice-president of operations Neil] Sweeney told CBC News that De Havilland would build another production plant if it could sell 50 planes to Canadian governments. But [McGill University aviation management expert John] Gradek argues the company is being too cautious. “Risk averse — and that’s the Canadian way, right?”
On Monday, 17 August, Doug Ford calls for purchase of 60 water bombers as part of national wildfire strategy
Ontario Premier Doug Ford said the country needs at least 60 new water bombers to build a national fleet to combat wildfires as part of a Canada-wide wildfire strategy.
He told municipal leaders that Prime Minister Mark Carney and the premiers recently talked about the need for a national strategy.

States Seek $200 Billion From Meta Over Child Social Media Addiction Claims
California, Colorado, Kentucky and New Jersey have taken the social media giant to trial in the first bellwether federal case over child harm.
Meta, the parent company of Facebook and Instagram, headed to federal court on Tuesday in a landmark case on children and social media addiction. Four states have accused the company of designing its social media platform to hook children, prioritizing engagement over user safety, misleading the public about the associated risks and illegally gathering data on minors. They’re seeking up to $1.4 trillion in penalties and product changes under consumer protection laws they claim Meta violated.  This case adds to a growing wave of lawsuits aimed at holding social media companies accountable for their product designs.
Mark Zuckerberg encouraged growth over child safety, ex-Meta executive testifies at trial
Trial includes claims from 29 states over children’s data collection and use
Witness for states says Zuckerberg was closely involved in decision-making
Witnesses testified about Meta’s culture, desire for profit
(Reuters) – A former engineering director at Meta Platforms testified on Wednesday that ​CEO Mark Zuckerberg fostered a culture that treated child safety as secondary to growth and engagement on Facebook and Instagram.
Arturo Bejar, a vocal critic of Meta’s ‌safety record, made the allegation during his second day of testimony in a landmark trial over claims brought by a coalition of states that could reshape Facebook and Instagram, some of the most popular apps on the planet.

Varia
Ukrainian cathedrals, Gaza’s archives, Iranian squares – modern war is systematically erasing human history
It is not enough now for war to kill, it must eradicate a people’s cherished and precious heritage too
Of international bodies, Unesco is active in keeping a record of the fate of cultural heritage worldwide, but a record is just a record. Its listing of Russia’s and Israel’s devastation of their hated foes is like watching a historic tragedy unfold in real time. (See Long reads)

Over 225,000 Canadians have signed a House of Commons petition to declare U.S. Ambassador Pete Hoekstra persona non grata — the rarely used diplomatic lever to kick an ambassador out of the country. However, as CBC’s Evan Dyer reports (and Jeremy Kinsman confirms) Hoekstra’s words and actions are mild compared to some of his (previous) gaffes and those of some of Trump’s other ambassadors – notably Charles Kushner (father of) in Paris who has been banned from meeting any French official. (See Long reads)

Long reads
Ukrainian cathedrals, Gaza’s archives, Iranian squares – modern war is systematically erasing human history

Hoekstra’s missteps in Canada are mild compared to some of Trump’s ambassadors
U.S. administration leaves posts empty, fills others with amateurs and friends