Daily Comment (September 25, 2018)

by Bill O’Grady and Thomas Wash

[Posted: 9:30 AM EDT] Good morning, all!  There was a lot of overnight news; below are the stories we are paying the most attention to:

Labour to reject Brexit deal?  Earlier this morning, Labour’s Brexit spokesman Keir Starmer fueled speculation of a second Brexit referendum by suggesting the Labour party will likely reject the Brexit deal as it currently stands.  In addition, he stated that remaining in the EU has not been ruled out.  Starmer’s remarks will likely harden the stance of EU negotiators who would welcome a second vote.  PM May is in a precarious situation as she is currently fighting a multiple-front war in order to secure a deal.  In addition to battling EU officials, she is taking on Tory rebels who want a clean break from the EU and Labour Party members who are pushing for more cooperation with the EU following Brexit.  At this time, it is unclear whether there will be a second referendum but the possibility is becoming increasingly likely.  We will continue to monitor this situation.

New Swedish government: Last night, Swedish PM Stefan Lofven was voted out in a confidence vote, which has led to the end of the Social Democrats’ four-year reign in parliament. At the moment, the two establishment blocs, the Social Democrats and Sweden Democrats, are vying to take control of parliament with neither side holding a clear advantage.  The confidence vote came only two weeks after Swedish elections saw the rise of far-right populist groups at the expense of the Social Democrats.  Rising concerns over immigration appear to be the driving force behind the Social Democrats’ loss of support.  Although expectations are relatively low for new elections, we are uncertain what the new government will look like.  Currently, the speaker of parliament is expected to meet with members of the coalition to discuss the formation of a new government, with many speculating that Ulf Kristersson, the leader of the Swedish Moderate Party, will be chosen as the next PM.

Iran blinks first?  Last night, Iranian President Hassan Rouhani stated that he would consider reopening nuclear talks if President Trump reverses his decision to exit the 2015 Iran nuclear accord.  Iran-U.S. tensions have been high since President Trump decided to exit the nuclear accord in 2017, and will likely be on display during the UN Summit, where both Rouhani and Trump are expected to take aim at each other.  Despite rumors, both leaders have stated they will not meet with the other during the summit.

Trade talks: As trade talks with China begin to cool and NAFTA negotiations near an end, the Trump administration has focused its attention on establishing bilateral trade deals with Japan and Europe.  While the president is in New York for the UN Summit he is expected to try to persuade Japan to enter into bilateral trade talks.  The negotiations will likely revolve around opening up Japan’s markets to more U.S. agricultural goods and setting new terms for trade in the automotive sector.  Currently, Japan is resisting trade negotiations as it fears the ultimate U.S. aim is to lower its trade surplus.  Meanwhile, discussions with Europe will likely focus on regulatory standards.  It is too early to conclude whether these negotiations have made any meaningful changes to the current trade arrangement, but the recent trade deal with South Korea suggests it may not be on par with the president’s rhetoric.  That said, we believe the president’s most prominent shift in U.S. trade will most likely be with NAFTA members and China.

Rosenstein lives: Although Rod Rosenstein verbally resigned from his position as deputy attorney general, he was convinced to take a meeting with President Trump on Thursday to determine whether or not he should remain in his position.  Rosenstein has been under increased pressure due to a New York Times article stating he was willing to wear a wire in order to build a case for invoking the 25th Amendment, which would start impeachment proceedings if the president is declared mentally unfit to be president.  It is worth noting that Rosenstein was believed to have said it sarcastically, but the remark will still not go over well with the White House.  It is unclear what the president will do as he has often questioned Rosenstein’s position as the overseer of the Mueller investigation.  It is widely expected he will be fired following the Thursday meeting, but the actual outcome is uncertain at this time.

View the complete PDF