Dailies

In this follow-up note on the evolving US-China trade conflict, Stephen Jen provides a sharp diagnosis of the asymmetric shocks being experienced by each side. For the US, the hit is immediate and nominal, visible in market corrections and the "triple sell" of equities, bonds, and the dollar. For China, the impact is more gradual but real, hitting GDP, jobs, and long-term confidence.

Jen argues that both sides are misjudging the other's resilience. China believes that the US financial markets will ultimately restrain Trump’s hawkishness, while Washington is betting that economic pain will force Beijing back to the table. Yet both could be wrong. And as with the Ukraine War, a missed opportunity for early détente could give way to drawn-out attrition.

Regardless of near-term outcomes, the long-term strategic rivalry between the US and China is now embedded. The era of Davos-led hyper-globalisation has ended. What emerges is a fragmented world of regional production models, such as “In China for China” and “In the US for the US,” with global firms diversifying across geographies rather than seeking efficiency through concentration.


Key Quote

“The shock to the US is front-loaded and nominal in nature... The shock to China is very different in nature: it is real and amortised over time.”


Table of Contents

  • A nominal front-loaded shock for the US and a real amortised shock for China

  • Both sides are likely underestimating each other

  • Ukraine War as an example?

  • Strategic rivals

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