TRADE WAR REALITY: A LONG TERM BIFURCATED GLOBAL "COLD WAR" ECONOMY

The new long-term reality is an increasingly and deliberately bifurcated global economy!

The US and its allies VERSUS China.

If it sounds familiar – it should in terms of 1945-89. The West won the last Cold War on the same basis – and the economic benefits accrued to the free capitalist states, a theme the Neocons are increasingly banding around. You just imagine the scene in the war room: “This is time Mr President..”

Expect to see this theme develop in coming months. This is no longer a trade spat – this is morphing into full economic war.

  • The US is willing to take a short-term hit in the form of higher consumer prices, and welcome inflation, from Chinese imports until global supply chains re-adjust and new domestic and international lines open, knowing the long-term damage is limited.
  • Meanwhile, the hit to China is long-term and directly on production, thus right across the economy right at the most difficult phase of economic transition. Chinese economists are talking about a 1-2% hit to GDP. I suspect much more plus increased domestic social and political tension. Xi is in more trouble than we think.

 

It may take longer than we think!

The two largest US imports from China left un-tariffed are Laptops and Mobiles – many now assume they are next on the list as the US strategy to Chinese pilfer of IP now seems to be driving a wedge between Occidental and Oriental tech. Maybe not – the damage has already been done… Firms are cancelling tech orders from Chinese firms.

But if you think how lucky you are not to own a Huawei, remember where your i-Phone was built.

 

 

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SOURCE:  05-23-19 - "Blain's Morning Porridge - May 23rd 2019 - Vote?"

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