Good morning. Here’s your Daily Situational Awareness for Wednesday, 09 August 2023.
TODAY’S BRIEFING:
- READ TIME: 6 Minutes, 45 Seconds
- Inside the Beltway
- (1) Biden Waters Down China Investment Ban
- (2) Top Biden Labor Negotiator Leaves While UAW Talks in Limbo
- Domestic INTSUM
- (3) Moody’s Cuts Regional Banks’ Credit Ratings
- (4) DeSantis Replaces Campaign Manager in Latest Shake-Up
- (5) MA Governor Declares Emergency Over Migrant Surge
- Global SITREP
- (6) Biden to Visit Vietnam on Winds of Change
- (7) AMLO: Mexico Will Not Join BRICS
- (8) Four Mexican States Decline New “Communist” Textbooks
- (9) Niger Says No to Negotiations
- (10) China, UAE to Hold First-Ever Military Exercise
INSIDE THE BELTWAY
- (1) BIDEN WATERS DOWN CHINA INVESTMENT BAN: A Biden administration Executive Order limiting U.S. investments in Chinese tech firms expected in the coming days will include a provision limiting the restriction only to firms that make at least half of their revenues from quantum computing, AI, and semiconductors.
- An official, speaking anonymously, said the order would take about a year to take effect due to additional comment periods and rule-making and will not be retroactive.
- Why It Matters: The limit on U.S. foreign direct investment (FDI) in the Chinese tech sector will be too little too late. The Biden administration seems to be attempting to “do something” without inviting a tit-for-tat response from Beijing, which could, in the end, be ineffective anyway. – R.C.
- (2) TOP BIDEN LABOR NEGOTIATOR LEAVES WHILE UAW TALKS IN LIMBO: National Economic Council Deputy Director Celeste Drake, Biden’s top labor negotiator, left the White House to take a deputy-director general position at the U.N. International Labor Organization.
- Why It Matters: Drake was a key player in the West Coast port, railroad, and recent UPS-Teamsters contract negotiations and is leaving while the Biden administration is still facing a possible strike by the United Auto Workers (UAW). The UAW contract negotiations, and the union’s endorsement of Biden in 2024, are running head-first into the administration’s electric vehicle (EV) push, with contract disagreements centered around the UAW wanting access to government money flowing to EV battery plants. The current contract is up on 14 September, and a possible government shutdown in the following weeks will likely dominate the Biden administration’s focus opening the door to a UAW strike. – R.C.
DOMESTIC INTSUM
- (3) MOODY’S CUTS REGIONAL BANKS’ CREDIT RATINGS: Due to funding risk and exposure to commercial real estate, major credit rating Moody’s cut the credit ratings of 10 U.S. regional banks, and it’s reviewing the rating of six other banks.
- The full list of 10 downgrades is: Amarillo National Bancorp, Associated Banc-Corp, BOK Financial, Commerce Bancshares, Fulton Financial, M&T Bank, Old National Bancorp, Pinnacle Financial Partners, Prosperity Bancshares, and Webster Financial.
- Moody’s cut all ten banks’ credit ratings by one notch, and the banks remained investment-grade (BBB- or better on Standard & Poors and Fitch’s scale, and Baa3 or better on Moody’s scale).
- Why It Matters: Higher interest rates are taking a toll on regional banks. The value of banks’ bonds has fallen, which has left them with unrealized losses, and customers are moving deposits into higher-yielding accounts, which strains the banks’ margins. Banks’ commercial real estate holdings should get hit hard if we experience a recession in 2024. – H.B.
- (4) DESANTIS REPLACES CAMPAIGN MANAGER IN LATEST SHAKE-UP: Florida Governor Ron DeSantis’ Chief of Staff James Uthmeier will replace Generra Peck as his presidential campaign manager after DeSantis brought Uthmeier onboard to diagnose and fix problems with his White House bid.
- Uthmeier said, “People have written Governor DeSantis’s obituary many times,” but DeSantis is breaking fundraising efforts and preparing a strong ground game for the primary.
- Why It Matters: The DeSantis campaign is showing signs of instability after three major staff changes in the last month and news that the campaign was spending more than it was fundraising. Some GOP donors are also souring on DeSantis and spreading their money around to other Trump alternatives. Uthmeier was central to DeSantis’ moves against Disney and post-Dobbs abortion policies, making it more likely his taking over the campaign will push “Chamber of Commerce” and Libertarian-leaning Republican donors away. – R.C.
- (5) MA GOVERNOR DECLARES EMERGENCY OVER MIGRANT SURGE: Massachusetts Governor Maura Healey declared a state of emergency due to a surge of migrants after homeless shelters hit capacity and the state resorted to placing migrant families in hotels and empty college dorm rooms.
- New York Governor Kathy Hochul declared a state of emergency in May after New York was hit by a similar wave of migrants that overwhelmed public services.
- Why It Matters: Northern blue states are now declaring states of emergency as immigrants claiming asylum make their way to New York, Illinois, Colorado, and now Massachusetts. The waves of asylum seekers are not only disrupting city services and local housing but, in many cases clashing with locals and creating political unrest. – R.C.
GLOBAL SITREP
- (6) BIDEN TO VISIT VIETNAM ON WINDS OF CHANGE: Speaking to reporters yesterday, President Joe Biden announced upcoming travel to Vietnam. “Vietnam wants to change our relationship and become a partner,” he said.
- Why It Matters: China’s maritime militia and fishing boats continue to batter Vietnamese waters, spurring high demand for foreign defense support in Vietnam. Vietnamese leaders likely fear worse if the trend continues. Meanwhile, India has been expanding its maritime and naval capabilities and signed a naval logistics pact with Vietnam last year. Back in June, India gifted Vietnam with a naval corvette, which follows another donation last year. An increased U.S. and Indian naval presence may be the initial cost for Vietnam’s support in the ongoing cold war against China. – M.S.
- (7) AMLO: MEXICO WILL NOT JOIN BRICS: Mexican President Andres Manuel Lopez Obrador (AMLO) said in yesterday’s press conference that his country will not be joining the Brazil, Russia, India, China, and South Africa economic alliance known as BRICS.
- “We are not going to participate in this bloc, in this association. Of course, we celebrate that other countries do. However, for reasons of proximity, geopolitics, we will continue strengthening the alliance with North America and the whole of the Americas,” AMLO said.
- Why It Matters: Mexico became the United States’ top trade partner earlier this year, primarily due to the reshoring/nearshoring of U.S. supply chains and the subsequent boom in manufacturing. Auto parts manufacturing, for instance, is up 16% year over year as of May. Mexico’s GDP growth is projected at 2.3% this year and should rise substantially with foreign direct investment piling in, particularly to the industrial north. A growing economy also helps lift the ruling leftist Morena political party’s chances of keeping the Mexican presidency following the June 2024 elections. AMLO’s decision not to join BRICS is a matter of economic and political pragmatism. – M.S.
- (8) FOUR MEXICAN STATES DECLINE NEW “COMMUNIST” TEXTBOOKS: The governments of four Mexican states – Jalisco, Chihuahua, Coahuila, and Yucatán – say they won’t distribute new textbooks from the Ministry of Public Education due to the books’ “communist” messaging.
- Conservative critics have expressed outrage in previous weeks that the Lopez Obrador administration is offering free textbooks to teach school children about socialism.
- Mexican President Andres Manuel Lopez Obrador (AMLO) said the four states would be in violation of the constitution and that he would take his message to the people. “Some states demonstrated against it, they are almost the same, and the same right-wing organizations, very conservative. Now, accompanied by the manipulation media that are against us and against the transformation of the country. We are going to inform and the people, the people, are going to decide”, AMLO said.
- Why It Matters: Those four states – two of which border the U.S. – are to the political right of the ruling leftist Morena Party, but you couldn’t call them “conservative” by American standards. Continued Morena rule – a majority of state governorships, a plurality of the Mexican House and Senate seats, and the presidency – is almost certain to result in expanded socialist policies and could eventually fulfill Mexican conservatives’ worst fear: the “Venezuelization” of the country. – M.S.
- (9) NIGER SAYS NO TO NEGOTIATIONS: Niger’s military junta rejected a request on Tuesday for a visit by representatives of the West African regional bloc ECOWAS.
- ECOWAS proposed the visit to negotiate a return to power for Niger’s former government.
- Niger’s foreign affairs ministry said public anger over ECOWAS sanctions against Niger made it “impossible” to welcome the delegation.
- Why It Matters: The U.S. still has 1,100 military personnel in the country for its now-defunct joint counterterrorism mission with Niger’s military. The military junta has ordered Western troops to leave the country and is ratcheting up propaganda against the presence of those forces. The deteriorating diplomatic situation between Washington and Niamey may morph into a deteriorating security situation for U.S. troops still in the country. – M.M.
- (10) CHINA, UAE TO HOLD FIRST-EVER MILITARY EXERCISE: The United Arab Emirates (UAE) Ministry of Defense announced late last month the first-ever joint military exercise with China late last month. The air force exercise, dubbed Falcon Shield 2023, will take place in China to “enhance mutual understanding and trust.”
- Why It Matters: China’s expanding footprint in the Middle East has been primarily economic, but we’re seeing an increase in military cooperation, as well. Continued development in military relations could eventually lead Middle Eastern countries to end U.S. defense contracts and instead purchase Chinese military equipment. – M.S.
Low Intensity Conflict SITREP (Next 48 hours)
- Tampa Bay, FL – Tampa Bay Social Democrats are planning a protest to demand Governor DeSantis release the Tampa 5 and drop charges against them. The protest is planned for Wednesday, 09 August at 0800 EDT at Hillsborough County Courthouse, 800 E Twiggs St, Tampa Bay, FL.
- Minneapolis, MN – University of Minnesota Social Democrats are planning a noise protest in support of the Tampa 5 to pressure prosecutors to drop charges. The protest is planned for Wednesday, 09 August, at 1730 CDT at 4th St and 14th Ave SE, Minneapolis, MN.
- San Pablo, CA – Weelaunee Defense Oakland, a sister organization to Defend the Forest in Atlanta, is planning to protest against a police training facility breaking ground this week. The protest is scheduled for Thursday, 10 August, at 1000 PDT at 1000 Gateway Ave, San Pablo, CA.
— END REPORT
M.S. indicates analyst commentary from Mike Shelby
M.M. indicates analyst commentary from Max Morton
J.V. indicates analyst commentary from Jared Vaughn
R.C. indicates analyst commentary from Robert Cook
H.B. indicates analyst commentary from Harrison Burge