Around the World in 100 Words, August, 2019: Week 32

For Hollywood, the summertime is all about sequels -re-build it and they will come- and this summer features the sequel to the U.S.-China trade war, with an additional 10% U.S. Tariffs levied yesterday against Chinese exports. I’m putting this one squarely in the Horror genre. And the plot will take several turns for the worst before the show ends and the lights come on. White knuckles and elevated heart rates are surely to follow. Both sides are pointing to the other as the monster, though the reality is not at all ambiguous. China is to blame here, with an economy that fails every test for following World Trade Order rules and where if the rest of the world adopted similar economic policies, consumers around the planet would be worse off for it. That they have gotten away with this for over 2 decades is a function of China’s enormous population, and where every country wants a piece of their pie and is willing to let China exploit them to get it. Intellectual property theft, artificial barriers to trade, Statism -or fascism if you prefer- where the Chinese government backs favoured companies -Huawei included- to capture market share and leaving non-State competitors trying to compete against their country not a corporate competitors, currency manipulation and economic extortion are all part of the Chinese economic model. You can blame Donald Trump if you want, but in this case, he is right to try to bring China into the 21st century economic order, and follow trade practices that every other country is expected to. The large economies of the West and East should do so as well, this might be the last time they have the opportunity to do so. In the meantime, expect higher volatility, market pressure and headlines of doom and gloom. But know this: the show will eventually end and the lights will come on. The boogeyman under the bed isn’t real and you have nothing to fear but fear itself. Before too long your blood pressure will return to normal and your portfolios will be just fine. I’ve been in the industry for over a quarter of a century and have seen this movie before, and know it turns out all right in the end. Let me know if you need me to hold your hand until then.

Martin