By Alan Murray and Geoffrey Smith
July 5, 2017

Good morning,

Stock markets are shrugging off the latest escalation of tensions with North Korea. Asian Pacific shares are up this morning, regaining half the losses they suffered yesterday after North Korea launched its missile test. But at the risk of arguing with the crowd, I think there’s more here than the markets are signaling. This is a dangerous game at an unstable moment.

On one side is President Trump. The U.S. Defense Department has confirmed that the missile fired Tuesday, on the eve of the July 4th holiday, was indeed an ICBM, and some experts believe it had the potential to reach Alaska and perhaps parts of the mainland U.S. That means North Korea now has achieved what President Trump tweeted in January “won’t happen.” The Trump tweet wasn’t exactly a line in the sand, but you can bet the President recognizes that he now faces the most serious foreign policy test of his presidency.

On the other side is Kim Jong Un – a man whom Western analysts alternately describe as both crazy and wily. He left no doubts about the game he was playing. The state KCNA news agency said this morning that Kim, “with a broad smile on his face” told officials, scientists and technicians to continue to send “packages of gifts” to the U.S.,” and noted that it came as Americans celebrated their Independence Day.

The U.S. and South Korea responded by firing deep strike missiles into South Korean waters as a “show of solidarity.” And at the request of U.S., South Korean and Japanese governments, the United Nations Security Council scheduled a meeting for later today to consider, in the words of Secretary of State Rex Tillerson, “stronger measures to hold the DPRK accountable.”

The U.S. options for responding are complicated, as this story by David Sanger in the New York Times nicely explains. But this one bears close watching.

News below.

Alan Murray



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