North Korea

President Trump’s abrupt cancellation of peace talks with North Korea is allegedly due to a recent statement by North Korean leaders. But there could be more to the story.

The letter Trump cited as the reason for calling of the June 12 summit in Singapore — issued by North Korea’s vice foreign minister, Choe son Hui — said Vice President Mike Pence’s statements that the hermit kingdom could end up like Libya, and the U.S. position that North Korea must be willing to agree to full denuclearization, were “unbridled and impudent.” Choe Son Hui also called Pence a “political dummy” and that the U.S. could “taste an appalling tragedy it has neither experienced nor even imagined up to now.”

“We will neither beg the US for dialogue nor take the trouble to persuade them if they do not want to sit together with us,” North Korea’s statement read. “Whether the US will meet us at a meeting room or encounter us at nuclear-to-nuclear showdown is entirely dependent upon the decision and behavior of the United States.”

While the North Korean statement can certainly be perceived as threatening, it pales in comparison to past threats by Kim Jong Un’s regime, like when Kim threatened to attack the U.S. territory of Guam last August. And following a November ballistic missile test, President Trump referred to the North Korean leader as “Little Rocket Man” on Twitter.

Given that the peace talks were still a possibility given the tension of these past exchanges between Trump and Kim, the fact that the historic summit was cancelled due to this particular statement from North Korea is odd, especially considering that the White House Military Office even minted a commemorative coin referring to the North Korean dictator as “Supreme Leader Kim Jong-Un” in honor of the summit.

However, the news of the cancellation of the North Korean peace talks is less odd when taking the perspective of the weapons industry’s potential profit losses into account.

In January, Bloomberg reported that arms manufacturer Boeing won an additional six-year, $6.6 billion contract from the Pentagon to construct a new missile defense system, meaning the weapons giant now has a total contract of $12.6 billion through 2023. According to Bloomberg, the Department of Defense said the missile defense system Boeing was contracted to build would be “intended to stop North Korean or Iranian intercontinental ballistic missiles.”

And as Nasdaq reported last November, the weapons industry was seeing massive gains in the stock market due to the growing tension between the U.S. and North Korea. If the summit were to be successful in convincing North Korea to give up its nuclear arsenal, it’s likely these arms manufacturers would have seen significant losses on Wall Street:

The now familiar geopolitical tension between North Korea and the United States is one of the major reasons why shares of the U.S. defense contractors have surged multiple times in the recent past… In particular, companies that either manufacture high-end missiles or offer missile surveillance services like Northrop Grumman Corp. (NOC) and Raytheon Company (RTN) gained the most.

While such cross-border tensions hinting at the possibility of upcoming wars does not favor a nation’s GDP growth, these act as forerunners for stock market surges, especially for stocks in the aerospace and defense industry.

President Trump has, on multiple occasions, cast himself as a friend of the weapons industry. In 2017, Trump touted a new weapons sale between the U.S. and Saudi Arabia amounting to $350 billion over the next decade, with $110 billion of that money being exchanged immediately.

Just last month, Reuters reported on how the Trump administration’s “Buy American” campaign was loosening rules on international arms sales, making it even easier for defense contractors to secure deals with foreign buyers — like Boeing’s $10 billion fighter jet deal with the Gulf Arab nation of Kuwait –as a means of fulfilling his campaign promise to bolster U.S. manufacturing jobs.

Trump was acting on behalf of Boeing Co (BA.N), America’s second-largest defense contractor, which had become frustrated that a long-delayed sale critical to its military aircraft division was going nowhere, several people familiar with the matter said.

With this Oval Office intervention, the details of which have not been previously reported, Trump did something unusual for a U.S. president – he personally helped to close a major arms deal. In private phone calls and public appearances with world leaders, Trump has gone further than any of his predecessors to act as a salesman for the U.S. defense industry, analysts said.

In Trump’s letter to North Korea cancelling the June 12 summit, he made a veiled threat hinting at the power of American nuclear weapons, saying he would “pray to God they will never have to be used.” AS of 3 PM Eastern Time, Raytheon’s stock price was a little over $213 per share — a two-dollar increase from where it was at the start of Thursday trading.

 

Tom Cahill is a contributor for Grit Post who covers political and economic news. He lives in Bend, Oregon. Send him an email at tom DOT v DOT cahill AT gmail DOT com.

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