Investment Conclusion
The trade result of President Trump’s Asian trip is to dial us back to where we were in February of this year as measured by tariffs.
Some of the US “wins” need further evidence. For example on Rare Earths, China has paused absolute export bans and their extra-territorial extension for a year. But the licencing procedure for every shipment remains in place in Beijing. From there the supply chain is controlled and “delays” – de facto sanctions – are enforced.
So, no Big Break Through.
Not to go unobserved: the mood music in Japan and Korea was smooch. The mood music and body language with President Xi was pretty awful.
But there are other things far more important that are being ignored.
First the Chinese nuclear doctrine was changed during the week. China will now seek parity with US in nuclear war heads. The previous doctrine was to have enough nuclear weapons to deter the US. Trump’s response is to authorise a restart of nuclear testing. And Putin trotted out new nuclear powered and capable weapons.
The other decision was the US President’s authorisation for Korea to build nuclear submarines. This fits neatly into the expansion of AUKUS. The goal of AUKUS is to contain China. This confirms a new cold war nuclear arms race – an extension of the Manichaean confrontation between autocracies and “democracies”.
For how long, judged by mood music, can the trade and war disk rotate in opposite directions?
Despite the 12 month postponement of US tariffs and port fees on China shipping Japanese & Korean ship building remain a long recommendation. The reason is this pause does not change the urgency of the US re-building its own merchant marine before China pulls the rug from under US supply chains!!!!