A Go player versus a golf player
On your left, Xi Jinping, general secretary of the Chinese Communist Party. On your right, Donald Trump, 47th president of the United States. Place your bets!
They are quite the contrast. Xi is a cold and considered man, comfortably seated at the head of a totalitarian regime, whilst Trump is impulsive and unpredictable. Yet the confrontation appears inevitable. Let’s try to get the measure of their strengths.
Whilst Donald Trump is upsetting his traditional allies and shaking up national and international institutions, Xi Jinping is systematically consolidating his regional alliances. As Uncle Sam changes direction within the course of single day, China’s central power steers a straight and stable course. And as Trump and his clan roll along to the golf green each weekend, Beijing is rolling out the red carpet for its neighbours.
On 2 April, Trump stupefied the world with his method of waging a trade war on all fronts, with the aim of making America great again. Whilst his goal is clear, his strategy for achieving it is less so. But an “adjustment” was required in response to the resulting financial chaos, particularly in US government borrowing rates. A 90-day ceasefire for all, except China, which had the cheek to stand up to the US.
Trump’s erratic tactics stand in contrast to China’s sangfroid. Beijing remains pragmatic, unencumbered by the frequent, contradictory and turbulent statements of the Washington chief. China simply responds blow for blow, without closing the door on negotiations. The statement from the spokesperson for the Chinese Commerce Ministry on 24 April was unequivocal: “China’s position is constant and clear: We will fight, if fight we must. Our doors are open, if the US wants to talk”. Yet another sign that Beijing need no longer be ashamed of its opposing stance to Washington.
The confrontation seems set to continue and time is an advantage for Beijing, which does not have to worry about elections. Meanwhile, time is marching on for Trump, towards mid-term elections that could overturn the White House’s control over Congress. What’s more, recent opinion polls paint a dim picture of Trump’s popularity. Will this be enough to make him change his tactics?
In the midst of all this, financial markets are mere spectators to this joust, fluctuating wildly in response to each US attack, attempted appeasement or turnaround. But beyond this implied short-term volatility, the match seems set to last and could shift to battlegrounds other than those of a trade war.
Final version of 25 April 2024, Clément Inbona, Fund Manager, La Financière de l’Echiquier (LFDE)
Disclaimer: The information, data and opinions of LFDE provided herein are for information purposes only and thus do not represent an offer to buy or sell securities, investment advice or financial research.