As global markets reel, nose dive, recover and reel again as continuing trade and military uncertainties plague policymakers; we look at some of the persistent issues.
The world’s strongest allies and friends are in a ‘spiteful’ and uneasy relationship, but no one is talking about it. All these animosities are hidden behind politically charged narratives such as trade tensions and currency wars and so on. But for the longest time, it is what it is - stemming from a historical dislike or (or even a racist demeanor) of one nation to the other. How do I hate thee, let me count the ways…?
Washington and Beijing.
Since China’s rise as an economic powerhouse, the US has been nothing but insecure. This insecurity is best manifested in its trade relationship with China, with one country getting the most out of it, while the other is on the defense trying to pull the other down with retaliatory tactics. Even during the recent G20 summit in Osaka – an opportune time to make amends on whatever trade bickering they are engaged in with one another, the trade war rhetoric went from bad to worse. Trump imposed another 10% tariffs on all Chinese goods not affected by previously announced tariffs. This is already on top of the US$250 billion of Chinese imports that are already subject to a 25% tax. China, on the other hand, [subliminally] devalued their currency to make exports (to the US) cheaper. This is also on top of the US$110 billion of retaliatory tariffs on US products entering China. The average Chinese tax on US products is now at 20.7% while the average tariff on other WTO countries is just 6.7%. If this is not love, then what is it?
Tokyo and Seoul.
Ever since the Japanese occupation of Korea and after World War 2, the Japanese and the Koreans have had unsettled business. This has been going on below the surface for years, but only last week we saw it again as Tokyo restricted the export of strategic chemicals to Korea that are used primarily in the manufacture of electronics – with Samsung and LG cutting sales forecast because of supply issues. Japan claims that Korea is shipping these strategic chemical to the North, which the South Koreans deny. We firmly believe that what ignited these tensions once again was a recent South Korean court ruling that stated that Mitsubishi should compensate Korean citizens for using them as forced labor during the Japanese occupation of Korea (1910-45). Yet Japan claims that all these issues were settled in a 1965 treaty that normalized relations between the two countries. It looks like someone is still harboring hard feelings and seem unable or unwilling to move on.
Washington and Brussels.
A friend in need - is a needy friend. Of course, the dispute surrounding the financing of NATO aside: Washington expects much from its allies in the EU in the trade war with China. Yet the EU remained neutral. Trump tweeted his disappointment by pointing out that French wines imported in the USA are treated much more favorably than American wines exported to France. The US imported $4.5 billion worth of European wines, yet Europe only bought US$553 million worth of American wines. Trump’s solution: tariffs. He is also looking at levying more duties on German cars. The EU has assured Trump that Europe will buy more American goods, but Europe’s biggest trading partner is still China.
London and Brussels.
An undecided and increasingly acrimonious Brexit is slowing Europe and painting further economic uncertainty for the entire continent. With a no-deal potentially causing major disruption across European supply chains if the doomsayers are to be believed. Given a lot of hostile verbal tussles between London and Brussels, life after Brexit means breaking away from Europe, and that means the UK will have to pivot towards the US and China. British exports to China are now at £22 billion a year, making China it’s fifth-largest export market – ahead of France.
Washington and London.
A breakaway with Europe is to embrace America, that’s the prospect of leaving the EU on WTO terms for the UK. Yet the UK is in a bind as Trump remains adamant about not giving the UK special treatment should the UK proceed with its digital tax on technology – a tax targeted against technology giants such as Facebook, Google, Amazon, and Apple which are obviously American companies. Damned if you do, damned if you don’t.