28th May 2019
Economy, General News
It is getting warmer
Unfortunately this headline is not intended to suggest that things are getting better, but rather that Donald Trump’s trade war is heating up. In a way I feel reminded of the Cold War between the US and the USSR in my youth, when the odd skirmish or shot down spy plane reminded the world that things could get a lot worse.
The past week demonstrated as much in the trade war. The US indicated that China tech giant Huawei’s mobile phones would be pretty useless without US software. China riposted straight away by reminding the US that their global technology leaders would be thrown into a similar existential crisis if China stopped access to their rare earths deposits, without which mobiles, computers and advanced batteries are hard, if not impossible to build (China is home to 90% of currently accessible deposit of rare earths).
The taming of the comrade
At the time of writing, Theresa May is still Prime Minister until she specifies the timings of her departure in June. But the odds of that still being true upon reading are perilously slim. Last week, we wrote that the PM had a sword dangling above her head, and that a bad result for the Conservative party in this week’s European Parliament elections could be the thing to shake it loose. Now it seems she may not even survive long enough to see the results.
This week has seen a chain reaction take place in Downing Street. On Tuesday, Mrs May wrote a letter to opposition leader Jeremy Corbyn asserting her willingness “to compromise to deliver Brexit for the British people,” and pleading for Mr Corbyn to do the same. Her Withdrawal Agreement Bill (WAB) has been modified after the three defeats it has faced in the House of Commons – largely to win the support of MPs across the benches.
Huawei, trade and geopolitics
It would seem that there is more to the US-Sino trade negotiations than simple trade. Trump’s stated objective in the trade war is to end China’s unfair practices and to reduce the US’s balance of payments deficit. And that may be true to a degree. So-called “Rust Belt” production and employment is key to Trump’s ‘Make America Great Again’ promise to his electorate.
But some suspect a more sinister aim: continuing US technological superiority gained by restricting the development of Chinese industry and squeezing the supply chains of Chinese firms that are reliant on overseas products or services. On this reading of the situation, trade talks are just a cover. The rising pressure on telecom equipment giant Huawei – arguably China’s flagship company – supports this view.