Will US-China global economic face off lead to war?

International SOS taps China market on B&R Initiative
March 26, 2018
BEIJING, Mar. 26 (Xinhua) -- International SOS, a provider of risk management and emergency services, is positive on the Chinese market and looking at opportunities from the Belt and Road Initiative as Chinese companies go global. Headquartered in London and Singapore, the world's leading medical and travel security service company believes that the Chinese market shows huge potential, according to Arnaud Vaissie, Co-founder and CEO of International SOS, in an interview. "As China enters the second phase of high-quality development with even more of an open door policy, we can better help Chinese companies establish their global mobility plans," he said. China's business travel market has become the largest in the world, ahead of the United States, according to Vaissie, citing the 9-percent growth rate last year and referencing a recent study on corporate travel conducted by Ctrip. The company is about to launch a new platform on WeChat for Chinese employees of its clients and to provide more services in Mandarin, he said. He said he was impressed by "the speed at which Chinese companies are expanding." … for more, go to http://en.silkroad.news.cn/2018/0326/89652.shtml 

Will US-China global economic face off lead to war?

KUALA LUMPUR (March 2018): About a century after the first American businessman to occupy the White House, the US elected another one last year.

Herbert Clark Hoover was elected as the 31st President of the United States in 1929 during the Great Depression. He was an American engineer, businessman and politician.

The following year, Hoover raised tariff on thousands of imported goods. It kicked off a global tariff war that reduced US exports by half and dealt a crushing blow to the American economy.

Today, like Hoover, Donald Trump is a rich international businessman and also a political outsider who “seized” control of the White House, facing intense pressure from struggling American workers.

Hoover and Trump may be separated by about a century but the US and the rest of the world, especially China and Russia, are today not that quite separated in terms of economic might, technology and military strength.

In the 20th Century, there was no super power to challenge the US. Today, in the 21st Century digital world, both China and Russia are certainly no pushover for the US.

As the Trump-initiated global trade war one gathers momentum by the day, some are asking whether the desperate US, saddled with a national debt of between US$20 trillion and US$222 trillion (Read these for context: https://ilovemalaysiachinasilkroad.blogspot.my/2018/01/is-us-debt-us20-trillion-or-us222.html and https://ilovemalaysiachinasilkroad.blogspot.my/2017/10/whatever-analysts-say-china-russia.html), will resort to conventional war with China?

Or ask this question: If the US fails to get the better of China, and the Americans suffer undue economic stress domestically, what will Trump do next?

Read on for some very pertinent views and observations:

"Sitting Ducks in China’s Bathtub - an Overture to World War III?

by Doug Casey

It’s always been true, as Bourne said, that “war is the health of the State.” But it’s especially true when economic times get tough. That’s because governments like to blame their problems on outsiders; even an imagined foreign threat tends to unify opinions around those of the leaders. Since economies around the world are all weakening, and political leaders are all similar in essential mindset, there’s good reason to believe the trend towards World War III is accelerating.

Many politicians and pundits in the U.S. blame “those damn Chinese” for taking “our jobs” by filling Walmart with tons of cheap goods, and the swarthy ragheads for making the price of oil too high (usually, but now too low).

The Russians, the Iranians, the Taliban (who will soon reconquer Afghanistan) and ISIS (which is carving out a new nation-state from the ruins of Syria and Iraq) are permanent members on the list of Bad Boys.

But now, since the Obama regime has decided to “pivot to the East,” you can underline China’s name on that list.

The “pivot” being the U.S. government’s new focus on meddling in Asia, as opposed to meddling in the Middle East and Europe. U.S. Defense Secretary Ash Carter says the U.S. will be the principal security power in the Pacific “for decades to come.” I’m sure the locals, including the Chinese, were thrilled to hear that.

It’s said that the U.S. government has combat troops (or advisors, as highly trained special ops guys are usually euphemistically termed) in about 100 countries. It’s hard to keep track of their latest “intervention”…although “interference” is a better word. Note that I said “they,” not “us,” in reference to Washington. The city has a life of its own and its interests are not necessarily those of the country it rules.

Let’s see…sending arms to a puppet government in Kiev to help put down a secession in Donetsk and Lugansk. Sending jets, and now ground troops, to Syria, which will quite possibly create an incident with the Russians. 150 soldiers to Uganda to fight the Lord’s Resistance Army and 300 to Cameroon to fight Boko Haram. And more troops to Iraq and Afghanistan to help out our “allies.” For the moment, they’re the best allies money can buy.

It’s hard to keep track of them all, with something new almost every week. But, on the bright side, war is nature’s way of teaching Americans geography.

So, with that in mind, we now have to learn where the Spratly Islands are. Let’s start with a map.

You’ll note the red line. In 2012 China decided that the entire area, right up to the shorelines of Vietnam, Taiwan, the Philippines, Malaysia, and Brunei, was part of its economic zone. The governments of all those countries also have claims to parts of the South China Sea, and the Spratlys in particular. You’ll also note the Paracels, another zone of contention, between China and Vietnam.

Believe it or not, from 1956 to 1972 (when he was jailed for his efforts) a Filipino businessman, one Tom├ís Cloma, also attempted to claim part of the Spratlys, and make it an independent country, Freedomland. This caught my attention, in that I was (very marginally) involved in three other island independence movements in the ‘70s: Nagriamel, Abaco, and Minerva. Those, however, are stories (all a mixture of tragedy, comedy, and pathos) for another day.

Until very recent times, the Spratlys were best known as a hazard to navigation, with about 750 islets, reefs, and sandbars, total land area about 1.5 square miles, spread over about 160,000 square miles of the South China Sea.

I’ve never been to the Spratlys. But their potential value is clear. It’s said up to 30% of the world’s fish catch comes from the South China Sea. And, almost needless to say, it’s conjectured that the area contains a lot of oil.

So, you’re probably asking yourself, “What is that to me?” The answer should logically be “Nothing, really, unless it’s a question on a quiz show.”

But the U.S. government, although it, as usual, has no dog in the fight, has decided to get involved. The catalyst for it acting now is that China is in the process of transforming at least seven reefs into usably large artificial islands, several with long airstrips.

I’ve looked at the history of who has used, and claimed ownership, of the islands over the centuries. All the adjacent countries have somewhat reasonable-sounding claims. And the Taiwanese, Filipinos, Malaysians and Vietnamese each have a military presence on one or more of the Spratlys. But only the recent Chinese efforts have drawn the U.S. government’s attention. Recently, they sent a guided missile destroyer, the USS Lassen, within the 12-mile limit of Subi Reef, which the Chinese are currently expanding. Reports are conflicting whether the ship was just innocently passing through, or trying to create a precedent.

I’d like to ask, how do you, I mean you personally, feel about that? I’d like to know. Scores of millions of Asian locals, who’d previously never even heard of the islands, and certainly can’t find them on a map, are getting worked up because their governments told them the islands were “theirs.” And now the U.S. is further complicating the matter. But here’s my take.

The Chinese seem quite out of line claiming the whole South China Sea as their economic zone. Shame on them. But how is that the problem of the U.S.? It’s the problem of the locals. Should the Chinese be able to build artificial islands? That’s a somewhat different question. I’d say, why not? Disputed or unclaimed land belongs to the person who uses it.

One thing is for sure: the U.S. government is asking for trouble flying military aircraft off the coast of China and sailing warships into waters they claim. How would the U.S. react if Chinese planes and warships were often seen off the West coast? Or if the Santa Catalina or San Juan islands developed independence movements that the Chinese backed?

The U.S. government feels pretty bold about its intrusion into the South China Sea, since no other government has a naval force even remotely comparable to its 12 aircraft carrier groups. But that boldness is foolish and unjustified. I’ve said for many years that those carriers are exactly analogous to battleships before World War II, or cavalry before World War I. They’re essentially sitting ducks, highly vulnerable to all manner of cheap, accurate missiles, both cruise and ballistic, that could swarm them en masse.

It will be a huge embarrassment to Americans (but a treat to divers a couple generations hence) when they’re sunk, and sprouting barnacles like the Japanese fleet in Truk Lagoon.

The U.S. knows that it’s China’s backyard, and they could sink any U.S. taskforce if they choose to. But they probably won’t. Why start a war when your enemy has a superior military, but you are growing your economy several times faster than he is? It makes more sense to wait…so it’s likely to remain a Mexican standoff, as opposed to an overture to World War III. But these things have a way of escalating unpredictably. In any event, it makes no sense to go to the other side of the globe just to provoke someone.

In the meantime, the U.S. carrier groups are prestigious, and great for sticking the U.S. government’s nose into far-off places where it’s not welcome. But they’re hugely expensive, at about $6 billion a ship, plus another billion or two per copy for its half-dozen escorts, plus another $200 million for each of the 50 or so F-35 fighters they’ll soon carry. Plus a few billion a year to keep each group operational. Not to worry on that score; the Chinese will surely lend the U.S. government more money to enable that.

There’s plenty of reason to be concerned about the roughly $1 trillion a year the U.S. spends on the military and “security.” Even though it’s more than the next 28 countries combined, it’s apparently not enough to keep America safe. In fact, it’s actually making the country less safe, by provoking and threatening other powers.

And if it doesn’t start a war in the short run, it’s going to guarantee a U.S. bankruptcy in the slightly longer run. All the “hawks” running for president this year (which is to say, almost every candidate) seem oblivious to the fact that, in anything but the briefest conflict, economic power completely trumps military hardware.

In conclusion, whenever you see a mention of the U.S. Navy and the Spratlys in the same paragraph, you’re seeing a reminder of an open vein helping to bleed America dry. And that’s the best case.

Editor’s Note: Unfortunately, there’s little any individual can do to practically change the trajectory of this trend in motion. The best you can and should do is to stay informed so that you can protect yourself in the best way possible, and even profit from the situation.

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Trump’s Tariffs Could Start a Real War

by Nick Giambruno, Senior Editor

Trump’s steel and aluminum tariffs may set his epitaph in stone… “Herbert Hoover II.”
History remembers Hoover as one of the worst American presidents.

Like Trump, he was a rich international businessman. He was also a political outsider. Hoover hadn’t held public office before his 1929 inauguration. And, like Trump, Hoover faced intense pressure from struggling American workers.

In 1930, he signed the Smoot-Hawley Tariff Act into law, raising tariffs on thousands of imported goods to record levels. This kicked off a tariff war, reducing American exports by half. It was a crushing blow to the American economy.

Nearly a century later, Trump seems determined to make the same mistakes…
Trump Started This Trade War Last Summer

Trump placed tariffs on steel and aluminum last week. China, of course, is the world’s largest producer of both.

The mainstream press called the tariffs “unexpected.” But they didn’t come out of nowhere.

Last month, I told readers of my advisory, Crisis Investing, that steel and aluminum tariffs were likely. (Paid-up readers can access the issue here.)

In fact, I’ve been pounding the table about a trade war—specifically a trade war with China—since September.

Frankly, I think Trump fired the first shot in this trade war last summer, when his administration launched an investigation against China using Section 301 of the Trade Act of 1974.

This rarely used provision allows Trump to “take all appropriate action... to obtain removal of any [trade] practice that is unjustified, unreasonable, or discriminatory, and that burdens or restricts U.S. commerce.”

Traditionally, World Trade Organization (WTO) members, including China and the US, have settled trade disputes through it. But Trump, using Section 301, has taken a unilateral approach.

The Financial Times describes it like this:

Under the 301 statute, which has not been widely used since the 1995 creation of the WTO, the US would in effect act as judge, jury and executioner on any grievance that it identifies.

No doubt, the investigation will ultimately show that China is pursuing unfair trade practices. This will give Trump all the justification he needs to further escalate his war.
A Record Trade Deficit With China

The investigation was the start of a major pushback against China.

Trump even said, “This is just the beginning, I want to tell you that. This is just the beginning.” He wasn’t bluffing.

In January, Trump fired another shot. He slapped tariffs on imported solar panels and washing machines. China is by far the largest producer of solar panels.

After that, in his first State of the Union address, Trump said that previous trade deals have “sacrificed our prosperity and shipped away our companies, our jobs and our wealth,” and that the “era of economic surrender is totally over.”

Then embarrassment hit…

In February, the Commerce Department announced that the US had realized its largest ever trade deficit with China during Trump’s first year in office. (He’d repeatedly promised to shrink the deficit.)

Trump sees the trade deficit as an economic scorecard between the US and China. Now, with a record high deficit, he has another convenient excuse to escalate the trade war.
One Promise Trump Can Keep

During his campaign, Trump threatened a 45% tariff on Chinese goods entering the US.

He also said China was sucking “the blood out of the United States” and “we can’t continue to allow China to rape our country, and that’s what they’re doing.”

Getting tough with China on trade is a campaign promise Trump can actually keep. Legally, he doesn’t need anyone’s cooperation, as he demonstrated last week.

It also caters to his base, which believes China is largely responsible for the loss of middle class jobs.

And, as I’ll explain shortly, the new tariffs are part of a much larger and genuinely dangerous conflict with China…

How the American Dream Slipped Off to China

China is displacing the US as the #1 world power.

Its GDP is on track to double compared to US GDP by 2030. In other words, China’s economy will soon be twice as large as America’s.

China has already surpassed the US in more ways than you’d think.

For the first time in modern history, Asia is richer than Europe in terms of private wealth. It will also be richer than North America within the next two years.

China is driving this shift.

The Chinese are some of the most aggressive savers in the world. They save more than 30% of their disposable income.

This is a big reason why more than 700 million Chinese people—the equivalent of nearly twice the entire US population—have risen out of poverty over the past couple of decades.

On top of that, China graduates four times as many STEM students (science, technology, engineering, and mathematics) as the US. And that doesn’t even include the Chinese students enrolled in US universities.

This is a powerful trend in motion. And trends in motion tend to stay in motion, unless something bigger stops them.

In this case, that trend stopper could be a war.
The Biggest Player in World History

There’s a 75% chance the US and China will go to war. That’s according to Graham Allison, a professor at Harvard.

Allison looked at the structural stresses that a rising global power creates when it challenges the ruling power. He studied 16 such cases. In 12 of them, the result was war.

This dynamic played out between Athens and Sparta. It played out between Germany and Britain. And today, it’s playing out between China and the US.

Lee Kuan Yew, the former leader of Singapore, put it this way:

The size of China’s displacement of the world balance is such that the world must find a new balance.

It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.

Military conflict between the US and China is not inevitable. But if history is any guide, there’s an excellent chance—say, 75%—that the US and China will go to war in the not so distant future.

The US government knows this. Steve Bannon, previously one of Trump’s closest advisers, said, “We’re going to war in the South China Sea… no doubt.”

As China overtakes the US, one or a combination of these three things will happen:

1. The US will do nothing. Current trends will continue. China will displace it as the most powerful country in the world.

2. The US and China will go to war (the traditional kind with troops and bombs).

3. The current economic battle between the US and China will escalate into an all-out economic war.

A full-blown economic war is the most likely and most imminent outcome here. I think it’s almost inevitable under President Trump.

China Won’t Cower in the Corner

Trump knows his supporters are passionate about trade and strongly anti-China. It’s a big reason why he won the election and could be reelected. I don’t see him backing down here.

That said, the Chinese have effective ways to retaliate.

They could dump Treasuries. They could limit imports from the US and reduce exports, like iPhones, to the US. They could also harass US companies operating in China.

China could also restrict access to rare earth elements (REEs). It has a virtual monopoly on REEs, which are absolutely essential to advanced electronics and military equipment. Think electronic cars, flat-screen TVs, drones, and fighter jets.

At this point, a full-scale economic war is pretty much baked into the cake. And as we’ve seen in the past week, it’s also imminent.

Unfortunately, this probably won’t end well for Trump or the US.

As Chinese commerce minister Zhong Shan said on Sunday, “There are no winners in a trade war. It will only bring disaster to China and the United States and the world.”

Nick Giambruno’s Note: My team just released an urgent briefing… It includes background details on the tiny rare earth element producer set to soar in the coming months as US-China tensions escalate. As you’ll see, it could hand you as much as 10 times your money… even more. Learn more right here.

Nick Giambruno

Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here. - International Man

US may boost projects in Indo-Pacific to counter Beijing’s belt and road plan
As China’s sprawling trade and infrastructure plan enters its fifth year, observers say Washington is considering policy response
PUBLISHED : Wednesday, 07 February, 2018, 9:32pm
UPDATED : Thursday, 08 February, 2018, 8:34am
Washington is considering boosting infrastructure projects in the Indo-Pacific to counter Beijing’s growing global clout through its “Belt and Road Initiative”, observers say, after last month’s Congress hearing on a policy response to the plan. “The US, including Congress, is starting to shift from awareness about the belt and road toward a response,” Jonathan Hillman, a fellow with the Centre for Strategic and International Studies, said. “Above all, the US needs to put forward its own positive economic vision. That vision need not be framed in opposition to the belt and road.” Hillman, who testified at the Congress hearing, said the Indo-Pacific strategy could be part of the US response. “But it needs to be operationalised. Geographically, the US also needs to work with partners and allies in other areas of the world, including eastern and central Europe, for example,” he said … for more, go to http://www.scmp.com/news/china/diplomacy-defence/article/2132435/us-may-boost-projects-indo-pacific-counter-beijings


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