There's been a war of words in the media lately about whether recent tariff headlines coming out of Washington and Beijing constitute a trade war, a trade spat, battle, skirmish, or other descriptive word. While we love to name things, at some level what we call it doesn't really matter. The bottom line is we're in a period of escalating tensions with the world's second largest economy and little about it is good.
This obviously impacts markets in the short-term. According to Bespoke Investment Group, almost all the market's larger down days in the past few months have been related to tariff news.
This was also true of the market's performance yesterday, following the Trump administration upping the ante by proposing limits on investment by China into US corporations. The idea here is to thwart the ability of Chinese investors and companies (many of which are indirectly controlled by the Chinese government) to gain access to our most important technologies and, presumably, to take them home and copy them.
But who has the upper hand in this game of tit-for-tat trade-related chicken? Let's review the situation from both sides of the Pacific to get a feel for who is likely to blink first.
The first view is from excerpts of a recent Wall Street Journal article. The second is from Andy Rothman, an investment strategist at Matthews Asia, a highly-regarded mutual fund company based in San Francisco. I've heard Andy speak on several occasions and his first-hand experience yields beneficial insights.