“I had a great relationship with President Xi,” US president Donald Trump told Fox Sports Radio. “I like him, but I don’t feel the same way now.” Washington and Beijing’s troubled relationship has taken a turn for the worse recently, with the two sides clashing over everything from stockmarket listings and tech to Hong Kong. Consulates have been closed and credit cards blocked. Hong Kong’s leader Carrie Lam admitted this week that she has struggled to pay with plastic since she was targeted by US financial sanctions.
Ironically, trade is one of the few areas where the two countries still seem able to engage constructively, says Laura He for CNN Business. A cautious truce in January drew a line under a bitter two-year trade war. Scarred by recession, neither side appears inclined to resort to new tariff hikes for now.
The internet splits in two
On Monday, the US administration announced more measures aimed at choking off Huawei’s access to computer chips. Earlier this month Donald Trump signed an executive order barring US companies from doing business with TikTok and WeChat, two wildly popular Chinese social-networking apps.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A “new digital iron curtain” is falling over the world, says Garry White in The Daily Telegraph. The internet is increasingly divided into different tech spheres centred on US and Chinese software. American allies such as Britain and Australia have joined in with bans against Huawei’s 5G technology. Yet this “splinternet” is bad news for US tech giants too. They will have to “rein in their global ambitions” in a world where trading with both camps becomes nigh-on impossible. Global supply chains are also splitting apart, reports Debby Wu on Bloomberg. The chairman of Hon Hai, which assembles iPhones for Apple, declared last week that China’s “days as the world’s factory are done”. The Taiwanese group has shifted production to southeast Asia to avoid US tariffs.
An expensive divorce
Yet unwinding all commercial ties would be prohibitively expensive. Unless either side can find “a spare $5trn to $10trn” to reconstruct their supply chains completely then the US and Chinese economies will remain bound together for years to come, says Zachary Karabell in Foreign Policy. Talk of a new Cold War is historically illiterate. The US and the Soviet Union barely traded with each other; US-China bilateral trade in goods has fallen but is still likely to be $450bn-$500bn this year. Despite a pandemic and tariffs, that figure is only back to where it was in 2011. “The United States and China are not in a cold war. They are in a bad marriage.”
Once attuned to every development in the trade war drama, markets have become strangely blasé about worsening trans-Pacific relations, says Reshma Kapadia in Barron’s. The rich valuations of tech giants such as Apple, which makes 15% of sales in China, will be far less plausible in a world that is segmented into “incompatible” tech spheres.
-
Private school fees soar and VAT threat looms – what does it mean for you?Rising private school fees could see more than one in five parents pull their children out of their current school. Before you remortgage, move house or look to grandparents for help, here’s what you need to know.
-
Best and worst UK banks for online banking revealedWhen it comes to keeping your money safe, not all banks are equal. We reveal the best and worst banks for online banking when it comes to protecting your money from scams
-
AstraZeneca CEO’s £1.8mn pay rise approved despite shareholder oppositionAstraZeneca hiked its dividend to persuade shareholders to accept CEO Pascal Soriot’s pay rise. Is he worth his salary?
-
Adidas, Nike or Jordans - could collectable trainers make you rich?The right pair of trainers can fetch six figures. Here's how you can start collecting vintage Adidas, Nike or Jordans now
-
The industry at the heart of global technologyThe semiconductor industry powers key trends such as artificial intelligence, says Rupert Hargreaves
-
Three emerging Asian markets to invest inProfessional investor Chetan Sehgal of Templeton Emerging Markets Investment Trust tells us where he’d put his money
-
What to consider before investing in small-cap indexesSmall-cap index trackers show why your choice of benchmark can make a large difference to long-term returns
-
Why space investments are the way to go for investorsSpace investments will change our world beyond recognition, UK investors should take note
-
Time to tap into Africa’s mobile money boomFavourable demographics have put Africa on the path to growth when it comes to mobile money and digital banking
-
M&S is back in fashion: but how long can this success last?M&S has exceeded expectations in the past few years, but can it keep up the momentum?
