Xi will not blink
Welcome to this first edition of Punch Bag this year.
To start with the obvious, we’re convinced that 2019 is going to be an extraordinary year, not just politically - more about this later - but also economically, commercially and socially.
So let’s first try and make a few predictions…
For instance, it’s probably correct to predict that the final report by U.S. Special Counsel Robert Mueller will be a bombshell; that Brexit arguably will end in chaos; that Trump’s tariff war with China will prove to be an immense costly mistake for both countries; and coupled with that, Trump’s base will crumble. And yes, the world economy is likely to face a significant slowdown with seriously consequences on trade flows and thus the various sectors of our industry.
As for the impact of the Trump-initiated trade war, various commentaries in Asian media - such as the South China Morning Post - are increasingly expressing doubt that Chinese president Xi Yinping will be able to effectively counter Trump’s boisterous attacks on China’s economy growth. Attacks, by the way, which are just aimed at curbing China’s global economic and military power and have little to do with trade imbalances between the two countries, or infringements of intellectual properties for that matter.
So, economic and political pundits predict that Xi is the man who will blink first and thus loose face. Which is bad in China.
Although putting a slight break on China’s so far unbridled economic and military expansion around the world is probably not a bad move, we beg to disagree with a final scenario where Xi will blink and Trump will, for once, be victorious.
In fact, such a scenario would be firstly underestimating Xi’s intelligence and leadership and secondly assume that Trump has…well, the trump card in the tariff war. Which he has not.
We believe that, while Xi admittedly is under some pressure from his business community, the Chinese public and possibly members of his cabinet to make sure that the impact of Trump’s tariff war doesn’t run out of hand, he is - like the rest of world - first and foremost waiting for the outcome of the Mueller probe into alleged collusion between Russia and the Trump election team.
This bombshell, we believe, will divert all attention from issues such as tariffs, border wall, government shutdown and all other contentious and mostly dumb and often dangerous policy decisions by Trump.
From his office in Beijing, Xi will patiently wait for the ensuing chaos in Washington and the further detoriation of Trump’s position. Even attempts to bring the focus back on China by economic hawks like trade adviser, Peter Navarro, and U.S. trade representative Robert Lighthizer, will fail, because Trump at that moment will have other, far more pressing priorities to deal with, including a possible impeachment and declining support among his followers.
Like we said, it’s going to be an extraordinary year. But for now, just sit back and relax and enjoy this rest of the January 2019 edition of Punch Bag.
Nol van Fenema