“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.
-
What happens if you can’t pay your tax bill, and what is "Time to Pay"?Millions are due to file their tax return this Friday as the self-assessment deadline closes. Though the nightmare is not over until you pay the taxman what you owe - or face a penalty. But what happens if you can't afford to pay HMRC your tax bill, and what is "Time to Pay"?
-
What does Rachel Reeves’s plan for growth mean for UK investors?Rachel Reeves says she is going “further and faster” to kickstart the UK economy, but investors are unlikely to be persuaded
-
What’s the outlook for the shipping industry in 2025?All we know for certain about the year ahead is that it will be volatile. But the container shipping sector thrives on choppy waters
-
What investors can expect from stocks and the economy in 2025There are reasons for investors to be hopeful about 2025, with slowing interest rates and moderating oil prices. But trouble may be brewing in bond markets
-
Why Wise could be worth a lot more than its share price impliesForeign-exchange transfer service Wise has the potential to become the Amazon of its sector – here's why you should consider buying this stock now
-
Can The Gym Group pump up your portfolio?Gym Group was one of the best UK small-cap stocks in 2024 and will beef up your profits this New Year
-
MoneyWeek's five predictions for investors in 2025MoneyWeek's City columnist gazes into his crystal ball and sees five unexpected events in store for investors in 2025
-
How buy-and-build stocks deliver strong returnsBunzl, DCC and Diploma became successful through buy-and-build – rolling up dozens of unglamorous businesses. How does it work and what makes it successful?
-
Singapore Technologies Engineering shows strong growthSingapore Technologies Engineering offers diversification, improving profitability and income
-
South Korean won hits 15-year low – what it means for 'Korea discount'After Yoon Suk Yeol's failure to declare martial law, South Korean markets are reeling, with the weakest won since 2009. Will this worsen the Korea discount?
