to Great Power Competition
Analysts and pundits are misinterpreting the US-China ‘trade war’, failing to see its roots.
The US-China ‘trade war’ is not just a short-term situation based on deficits, greater access to the Chinese market, or even IP – it is the start of open economic competition between the world’s two leading powers.
Decades of US engagement with China was built on the assumption China would become a ‘stakeholder’ in the current system and the Communist Party would enact economic and political liberalizations.
These objectives have failed and the United States must now respond to a dedicated strategic competitor.
While short-term compromises may occur, long-term, global competition is the new, enduring game.
US-China competition will transform trade, industry, and investment practices.
Investors must be prepared for a new global paradigm which will change the playing field for years to come.
Responding to prejudiced commercial practices, regional military ambitions, and global economic programs, the US is beginning to respond to a new strategic challenge from China.
Unlike prior competitive challenges in history, US-China competition will play out substantially in trade, investment, and commerce, across industries, emerging technologies, and markets around the world.
Understanding of Chinese strategy and ambitions, and American and Allied interests will enable investors to sort the smoke of news cycle from the realities of global competition.
US-China competition will bring about new rules and practices with global implications.
China and the United States will seek to reduce their dependence on each other while seeking to outmaneuver each other, regardless of where tariffs and other immediate measures are ultimately set.
The dissolution will have major consequences for investors as markets and supply chains are disrupted:
Multi-national companies will be caught between competing national and commercial interests.
Emerging markets stand to gain or lose as supply chains reorient.
Demand for commodities will change as supply chains shift.
Investors must understand how their portfolio will be impacted in this new era of global unwinding:
Are sectors vulnerable to disruption by Chinese competition or retaliation?
Are investment theses predicated on old models of global growth and integration?
Are firms dependent on critical Chinese suppliers or markets?