Scenario 1: The tariffs the US and China have placed on each other becomes permanent. China's currency devaluation holds. That pushes both economies to move away from each other and export and import much more to and from other countries.
Scenario 2: But scenario one is too much like saying global warming means temperatures might get warmer by a degree but everything else will stay the same. Not true. Scenario one is an attack on the very foundation of world trade. These tectonic shifts are bound to have impacts on the financial markets, almost all of it negative. The dollar will get expensive. Investing in the US, thus, will be disincentivized.
Scenario 3: The two powers don't stop at the tariff increases. They actively attack each other. For example, the US tries to "destroy" Huawei. China responds in kind. And all this action will sit on top of hundreds of millions of consumers in the US now paying higher prices on pretty much everything. They might not understand geopolitics. But everybody understands grocery bills. The Trump tariffs will be seen as a massive tax on the lower middle class and the middle class in America.
Scenario 4: A bi-polarization of the world and a new Cold War with a few hot flashpoints. This is an extreme scenario. And I don't think very likely. To suggest that the world might end up here is to not understand how complex the supply chains of the world are today. But one does have to make room for irrationality and incompetence.
The most likely scenario, though, is scenario zero. Nothing happens and Trump claims "victory." People will get tired of winning. Next month Trump might make "the biggest deal in history."
No comments:
Post a Comment