tirsdag 29. januar 2019

Trade war optimists are ignoring the lesson of recent history: China is not changing

The last days of 2018 were used for dire predictions for 2019, conjured up by those better informed or quicker to judge than your columnist. Gazing into balls of dark crystal, observers saw the damage caused by President Trump’s trade fight with China spreading further and faster than originally anticipated.

Factories in China and the United States have both posted weak order portfolios. American farmers are feeling the pain more acutely now – and they’re not being helped by a government shutdown that makes Chinese gloat about the drawbacks of partisan politics. Most eye-catching was a collapse in Chinese demand for iPhones, which evaporated almost US$75 billion of Apple’s market value in a single trading session. The Chinese government has announced a tried and tested remedy: infrastructure projects, used in the past to pep up the domestic economy and keep workers at bloated State Owned Enterprises employed. They can’t spend all working day in the now compulsory Xi Jinping Thought study sessions, after all.