Well, that was a fizzer. After sitting up to 2am last night, hoping to watch the Socceroos make an improbable path into the final 16 of the tournament, I went to bed deeply disappointed.
We had about a thousand chances to score, and took none of them. Peru had two, and took them both.
It’s a familiar story for the Socceroos. Australia just lacks the killer instinct in front of goal. It took the 38-year-old Tim Cahill to get on in the second half, when it was all too late, for them to start exerting some genuine pressure.
So I write this morning tired and a little miffed…
What’s been happening on global markets?
Have a look at the chart of the Shanghai Composite Index, China’s main stock market. It’s down sharply this year, and trading at levels last seen more than two years ago.
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Does this mean the threat of a trade war (or the start of one) will hurt China more than the US? Or is it more of a reflection of a lack of liquidity due to official attempts to cool the shadow banking system in China?
The Chinese stock market is a strange beast. I don’t pretend to know how it works. But if you take a look at Hong Kong’s stock market, the Hang Seng, (a seemingly ‘freer’ market than China) it’s a little worrying.
As you can see in the chart below, the Hang Seng just broke below its February lows. Ever since that February correction, the market has been in a consolidation pattern.
But last week, prices gapped lower and the Hong Kong market appears to be changing trend. It’s taking this trade war threat seriously.
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And so it should. With trade adviser Peter Navarro in control, who knows how far this will go. Navarro is fervently anti-China. In 2011 he wrote a book called ‘Death by China’, which was subsequently made into a documentary.
The real story behind the trade war
Earlier in the year when the trade war stuff started heating up, former Goldman man Gary Cohn quit the White House because of the support Trump gave to Navarro. Cohn didn’t want have anything to do with what was coming.
Now we’re seeing it. But it doesn’t appear as though the broader market is too concerned. They think this is all a part of Trump’s negotiating tactics, and that it will all work out without too much damage.
Maybe that’s right. But if Peter Navarro really does have Trump’s ear, you should be concerned. Consider this excerpt from the Asia Times:
‘The dispute between the world’s two largest economies has moved beyond narrow issues of trade or specific areas of prospective conflict: Washington now views China’s technologically-focused economic strategy as a challenge to America’s world position, and China views Washington’s demands on China as the equivalent of a “new Opium War,” as a senior Chinese official told Asia Times last week.
‘This is not a drill. Nor is the result of “Art of the Deal” negotiating on the part of the Trump Administration. Since 2015, China has sought to shift its economy from the smokestack-and-export model introduced in 1978 by Deng Xiaoping to a high-tech, consumer-focused model dubbed “Made in China 2025,” supported by $1 trillion in infrastructure investments to ensure Chinese preeminence in the Eurasian continent. The United States ignored China’s high-tech shift for years; now it has discovered that China threatens to leapfrog the United States in critical areas of high technology, military as well as civilian.
‘What for China is the new normal of economic life is viewed in Washington now as an existential threat. That was the nub of White House adviser Peter Navarro’s June 19 report, entitled “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World.”’
What this is saying is that the US doesn’t simply want to have fairer trade with China. It wants to reduce China’s ability to compete with the US by shutting off its access to technology and whatever else the US deems appropriate.
China’s not going to take it. The Wall Street Journal quoted Chinese President Xi Jinping as saying:
‘“In the West you have the notion that if somebody hits you on the left check, you turn the other cheek. In our culture we punch back.”’
And the Asia Times article mentioned above quotes from an interview a senior Chinese trade adviser had with German newspaper Der Spiegel last week:
‘“China has responded to the first installment of US punitive tariffs by imposing countervailing duties in comparable product categories. Should the US now impose tariffs on imports of another 200 billion, China will extend the conflict to other fields,” quoting Mao Zedong’s dictum, “You fight your war your way, and I will fight mine my way.”’
Them’s fightin’ words…
The US has been at the top of the pack for so long it seems to have forgotten that this is what countries do. That is, they cheat, lie and steal to gain advantage. The US have been doing it for decades, all with the aid of an international currency they can print at will to get what they want.
Now the shoe is on the other foot.
So keep a close eye on this Navarro character. He’s an ideologue, and ideologues are dangerous. In his quest to punish China for their perceived transgressions, he will end up punishing the people he thinks he’s helping.
If Trump continues to support Navarro, global markets are in trouble. But if Trump sees what’s unfolding and reduces his influence, this all might just blow over.
It’s testing times for the global economy.
Editor, Crisis & Opportunity