*We are at "War"*
I think the recent developments of the trade war (war crying and drumming up more tariffs) will increase the possibilities for tariff to take effect. Previously, the trade war discussion is mainly talks without actions, but this time I think we will feel more pains before seeing any gains. Both China and US will feel the effect of tariffs before coming together to the negotiation table.
*Why compromisation wont happen now?*
Vice Premier Liu He met the US counterpart in May 2018. Initial agreement was both agreed to ceasefire. But 10 days later, US revives tariff threat on $50bln goods. Nothing has changed since then, apart from Trump trying to impose more tariffs.
Any softening in strong stance that adopted by US could be seem as weakness. Chinese took this opportunity to work with EU.
*Why trade war? When it doesn't benefit anyone?*
When one great power threatens to displace another, war is almost always the result (aka Thucydides Trap). The war in the 20th century will be fought in the cyber (war), trade (war) and finance (war). These 3 wars have to be fought out first before gun (war) to happen. Or we could have a new superpower before a gun (war) happened. I think US felt that their positions are being challenged on these 3 areas and they have to act before they lose more advantages in technology, military and capital.
*What's next*
Peter Navarro's comment on plans for investment restrictions on China should help to halt decline for next few days. If US indeed reach out to Wang Qishan for trade talk negotiation, market could see a relief rebound.
*What to watch*
It is unclear to me about what Trump trying to get out from this trade war. North Korea (wild card) could be part of the equation to resolve the trade war. The Chinese might give something to Trump in exchange of a withdrawal of US troops in Korean Penisula.
*Date to Watch:*
- Rumours that US is trying to invite Vice President Wang Qishan for talk.
- 6 July 2018: Tariffs to kick in.
- Nov 18: US mid term elections
*Chart levels*
- Hang Seng Index: 28,350pts, it is a 10% decline from recent high of 31500pts.
- Nasdaq: Could trend down to 7300pts (its 100 simple moving average)
