Trade war might help us

WHILE a trade war between the two big guys on the global block is not quite the last thing you should worry about, it shouldn’t rank near the top of your “Ten Most Likely 2018 Economic and Financial Disasters” list.

First, is an all-out ‘shooting’ – as in, firing financial and economic bullets and even ICBMs – war likely? Short answer: no.

What we have is, narrowly, “Trump being Trump”. Before November 2016, that was Trump being Trump to make money or win ratings.

Now, it’s President Trump being Trump – “negotiating deals” the only way he knows how and, you have to say, proving successful.

It’s a combination of bluster and threat wrapped up in outrageous demands, which you walk back from to arrive at an agreed middle point, and hopefully, more “your middle”.

What President Trump is not up for is those polite global conferences but equally he’s not up for blowing up what is a mostly mutually beneficial relationship. That provides the best assurance that the Chinese know the game, too.

These are not two gladiators in the Colosseum, with only one to emerge alive (and the other, often, barely so as well), but more like two preening peacocks. A lot of strutting, a lot of noise, but not much if any blood.

The second big point is that even if the duo does draw blood, does it necessarily mean we also bleed?

On the surface that might look threatening. China is our biggest customer, the US our biggest foreign investor. What happens on Wall St makes the world for us every morning.

Absent, though, the full-on war scenario and some areas of particular hurt, such as our steel industry, the direct threat is pretty limited.

We’ll keep selling iron ore and coal to China, the Chinese will keep coming as tourists and property investors. Indeed we might see even more of that if China “de-friends” the US and viceversa.

The more the rhetoric and even the threatened sanctions are ratcheted up, yes, we’ll likely see violent reactions on Wall St; that will flow into our market.

But we are in for that anyway this year, quite apart from any “China impact”. And these “China plunges” are likely either to reverse or be overtaken by other drivers such as US interest rates and what is actually happening in the US economy, most of which is unconnected to China.

Indeed, I’d argue that the “trade war” will actually create trading opportunities rather than “run for the hills” moments. But I should add immediately only for the pros.

At some point an American president had to do what Trump is doing. China has had just too much of a free ride in to the US market.

The Chinese will understand that much better than the “extremist free market simpletons” moaning from the sidelines.

If Trump holds his nerve we will actually get a better global trade environment.