The View

Don’t panic: the trade tiff is a realignment but not the end of the global economic order

Richard Harris writes that stock markets are indicating that the reaction to the US-China trade war talk is more of an adjustment than a cataclysm, and the Harley-Davidson episode suggests that companies will find a way around the damage

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US President Donald Trump holds up a signed presidential memorandum targeting China in the White House in Washington on March 22. Photo: Bloomberg

Richard has pioneered Asian investment management at senior levels for companies such as JP Morgan, Citi, BNY Mellon and several start-ups.

Published: 2:30pm, 28 Jun 2018Updated: 10:35pm, 28 Jun 2018

You know the trade issue is becoming hysterical when Donald Trump tweets that Harley-Davidson motorcycles made abroad would be “taxed like never before”. Even the president of the United States cannot tax an individual company for making an economic decision. They will tell him to get on his bike.

Analysts’ comments, too, are becoming increasingly emotional – that the trade skirmish means the end of globalisation, that confidence has been destroyed and that the economic world order, as we know it, is no more. They are wildly missing the mark. Of course we should be concerned that the trade tantrum will increase costs and slow economic growth but it is not the end of an era – merely a small evolutionary step in the global economy.

Trump is articulating a nagging unease in the US that they have carried the rest of the world for a long time. They have a point. Since the Marshall Plan lifted continental Europe off its knees in 1948, the US has been magnanimous, allowing largely unfettered access to its markets. Without seeming to look for it, they have received much in return; growing markets for US goods, a strong reserve currency to pay for imports, and the ability to attract hungry labour from around the world.

Trade, though, is business; it took decades of discussions with the World Trade Organisation to bring tariffs down to the low and relatively equal levels shared today by the G7. The US viewed China’s economic rise with similar benevolence, knowing it would provide cheap labour that coincided happily with the need to massively scale production into the digital revolution.

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