By Alec Hogg
I was among 400 financial market insiders yesterday at RMB’s annual Global Markets investment conference in Cape Town. The bank delivered a world class lineup, highlighted by an hour’s video link with former US Fed chairman Ben Bernanke.
My major takeaway confirmed what we witnessed in Davos where Chinese President Xi effectively assumed leadership of those promoting international collaboration and free trade. The new US Administration had a single representative at the WEF meeting. And his major contribution was to tell us that Trump Towers believes it can win a trade war against China.
Yesterday’s flown-in experts (and Bernanke) shared that a major confrontation between the US and China tops the global economic agenda right now. Most forthright of them was Ian Bremmer, CEO of global risk consultancy Eurasia, fresh from a meeting last week with Jared Kushner, son-in-law and trusted advisor of US President Donald Trump.
The way Bremmer explained it, the Trump White House believes a major confrontation with China is inevitable. He tells us that although Trump doesn’t read, his inner circle certainly does. They point to history where a major confrontation has happened 90% of the time when one major power is on the decline and another is ascending. So they reckon it’s best for the US to launch a pre-emptive strike while China is relatively weak.
That philosophy, says Bremmer, underscores much of what the new occupant of the White House has been doing in his first 25 days. For Trump, his key issues with China in order of priority are trade; cyber warfare; and North Korea.
He says we shouldn’t be misled by Trump backing down on Taiwan – it’s just not high enough on the agenda. Nor the US President’s regular engagements with Chinese entrepreneur Jack Ma. That, he says, has more to do with a determination to introduce Alibaba as a competitor to Amazon, whose founder Jeff Bezos is an avowed Trump enemy.
So what happens when this apparently inevitable trade war breaks out?
The way Bremmer sees it, countries will be forced to take sides. He sees India, Japan and possibly Russia aligning with Trump; and pretty much everyone else, including Europe and the UK, siding with China. But in the end everyone suffers.
For SA all this poses a fresh dilemma. As an open economy its interests are aligning with China. But duty free access to the US through AGOA is attractive. And with two BRICS members on Trump’s side, that much-hyped association looks doomed. Big decisions looming for SA in an increasingly uncertain world.