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The trade war – cutting through the noise

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The intensity of the trade war is something that has caught plenty of people by surprise – myself included.

With China rolling out the red carpet for Trump when he visited, and subsequent “deals” negotiated with his underlings, the markets assumption was that there was plenty of smoke but no fire.

The actual implementation of the tariffs represented something quite new in the dynamic between US/China relationships.

Still, the recent set-back during the mid-term elections has given Trump some pause and both sides seem to be moving towards a deal.

Several things are on my mind as of now.

There will probably be a trade deal

Some of the issues raised by the US administration are perfectly justified and well known by businesses operating in China – especially with regards to contentious issues like intellectual property or market access.

Even diehard proponents of China agree that there is plenty of reform needed in this area.

Thees issues are the ones which I consider easier to “plaster over” in the short run and not particularly new issues that have been raised before.

The only difference this time is the impetus and newfound speed that the Chinese government has in responding (or appearing to at least).

In this regard, I would have to give credit to Trump in negotiation. I don’t think I have ever seen the Chinese move this fast in response to these criticisms.

But even if there is one, a deeper shift is happening

There’s a much bigger shift behind the scenes where theres a growing acknowledgement that engagement with China in the hopes that they would converge with the Western system is not happening.

Xi’s administration is radically different from previous administrations.

Theres a much deeper hardening of this sentiment that is breaking out into other issues such as the South China Sea conflict, defense matters, cyber-security (ZTE, Huawei), the One Belt One Road and so on.

The two governing systems are fundamentally different at its core and Western governments are hardening their stances and moving towards containment rather than engagement.

Can they co-exist?

The most tricky issue where I don’t really have an answer but certainly hope they can.

PM Lee Hsien Leong has indicated multiple times that this is something that is on the forefront of policymakers – as Singapore may have at some point have to choose between who it wants its major geopolitical ally to be.

Ending Thoughts:

The next decade will be particularly trying and challenging for geopolitical relationships.

I am optimistic that in the short term, issues regarding trade will be resolved as its makes sense for both parties to come to the table.

On the other hand, I am much more concerned and worried about the wider term implications of the fundamental restructuring of UK/US relationships and the resulting impact going forward.

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