The world is a split stage. The comedy of trade is playing on the right. On the left the New Cold War has begun between the Alliance of Autocracies and the fading ranks of the liberal, and not so liberal, democracies. The audience is intently focussed on the comedy. That is wrong.
A nuclear arms race is inevitable. The US policy of "Counterforce Deterrence" is dead. It cannot confront Russia + China. So the US nuclear umbrella is no longer credible for those nations that depend upon it. Nor can it guarantee the security of the US's own people.
The pursuit of a nuclear arms race is economically significant for all countries. It would add 1.0% to 1.5% of GDP to annual defense budgets. Europe is the fall guy. The EU would have to fund nuke spending on top of arming for conventional war with Russia. But there is another effect: nuclear proliferation as trust in the US nuclear umbrella erodes globally. Countries, like Japan & S. Korea, plus a few in the Middle East, may establish their own nuclear shields.
This means that the investment world is entering a whole new phase of higher risk. And the "normalcy" of trade talks and agreements will not last long. The Cold War will see to that.
But for all that, the New Cold War is very different from the one started in 1947. Back then the adversaries had alternative economic systems that were isolated from each other. Now China will use the long tail of its economic integration and manufacturing dominance of the world economy to its own ends.
China becomes strategically autonomous. But its trading partners will be made to depend on China's supply chain. The achievement of China's international economic and poltical goals will be accelerated and abetted by the waning of US power in its role as the Global Hegemon of Liberal Democracies. The Emergent Economies will increasingly and voluntarily fall into Beijing's clever orbit.
There are investment messages here. Any trade “peace” is a temporary lull. China will weather the global challenges much better than the US whose global reach is declining. Sovereign debt most places, but now in Europe too is a short. We are long Chinese equities and the RMB. China will ensure that emerging markets friendly to it will do well and not be exploited economically. Add countries like Brazil, Peru and South Africa to your long EM portfolios. Prepare for war: own defence stocks!