How China responded to the US on tariff increases was all over the news while I was settling into a hotel room in Geneva; I had a smile on my face, the kind when you think to yourself “I knew it”. This reminded me of an article I wrote back in January for the Private Client Network, which is copied below.
The article ended with ‘to be continued’ and five months later, after a brief breathing space with a seemingly imminent deal on the horizon, we are back to square one. A lot of people have an opinion on the trade war and my take on it is that it is never about who is right or wrong. It is simply two world superpowers with very different ideology, political systems and culture heritage sparring in the ring of history, which is never short of a good bout. Greek-Roman, Roman-Persian, Persian-Islam, Ottoman-Western Europe or the most recent memory of US/Western Europe-Soviet...the only thing difference this time is that US and China are not geographically next to each other and that, despite getting on each other’s nerves, the two economies are fundamentally intertwined. Neither has a decisively dominant position and hurting each other will not benefit either.
So, it is my hope and belief that the two leaderships know this and all the drama is only ‘smoke and mirrors’ to help gain a better position on the negotiation table and will not actually materialise. Both will, in the end, make compromises, otherwise we will all be in deep trouble. Let’s keep our fingers crossed and consider the implications to our own portfolios and lives in the long run, because it will have an impact - probably beyond an economic cycle.