Understanding the US-China Trade Wars

What happens when two of the Big 4 Collide?

There is a theory that, no matter what Chancellors and Finance Ministers may say, there are only really four countries in the world who have a realistic measure of control over their own economy.  They are America (due to critical mass), Saudi Arabia (due to hydrocarbon market share), Russia (due to high levels of centralised control), and China (due to critical mass and high levels of centralised control). 

So what?

Any company with an international customer base or supply chain may well be caught in the US-China trade war cross fire, and neither they nor their national government will be able to do much about it.

What has happened so far?

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With US President Donald Trump having complained about China’s trade practices since before he took office, the two countries have recently imposed billions of dollars worth of tariffs on each other.  China’s actions have strategically targeted products made in Republican districts as well as goods such as soybeans, which can be purchased elsewhere. BBC guide to US-China Trade war 

US tariffs in theory make US-made-products cheaper than imported ones and encourage American consumers to buy American.  But as always there is a downside, and both US and international firms have reported that they are being harmed. And the IMF has chimed in with a warning that a full-blown trade war would be weaken the global economy.

What next?

It is possible that the current tariff tit-for-tat is merely the opening skirmish, with the real tussle still to come as both countries seek to fulfil their real aim of becoming the world’s long-term technology leader.  

"Every country now correctly recognises that their prosperity, their wealth, their economic security, their military security is going to be linked to keeping a technological edge," says Stephen Olson, research fellow at global trade advisory body Hinrich Foundation.

Chinese firm Huawei, banned in US federal agencies, and blocked from the Australian and New Zealand 5G mobile networks is at the epicentre of this economic, political and sociological conflict.

Business continuity advice therefore would be for any firm in any sector to analyse extremely closely its exposure to Chinese and US markets and supply chains, and not to assume that either will continue in perpetuity, profitable though they may be currently. And thereafter to make a plan for alternate markets and supply chains.

Because if the trade-war intensifies, there is little that any national government outside the big four would be able to do to help.