Terry McCrann: US and China not at war over tariffs nor will world slide into depression

THE US and China have not “gone to war” over trade and the world is not headed back to a 1930s Great Depression future. At least not yet, writes Terry McCrann.

THE US and China have not “gone to war” over trade and the world is not headed back to a 1930s Great Depression future.

At least not yet — although, I’d venture to suggest, we won’t slide into it, by accident so to speak, anyway.

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These days, we are all just too interconnected. Unlike 100 years ago, we actually want — and need — what the other guys want to sell us.

What would Americans do without their latest version of an iPhone, made in China?

What would the Chinese do without much of the content on — in their case, mostly — their Samsungs?

And what would we do if the Chinese stopped buying our coal and iron ore, or even just bought less of it, because they couldn’t get their steel and all the other consumer goods into the US and Europe?

And their tourists and students stopped coming; and they stopped buying apartments in Melbourne and Sydney?

That’s the horror scenario of an escalating 1930s-style trade war, with cascading cutbacks.

And to which we would be very much the meat in the sandwich between the two fighting giants. Along with, interestingly, Japan — which would only make things worse for us as Japan is our second-biggest customer.

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US President Donald Trump is likely to strike a deal, says Terry McCrann. Picture: AP

It used to be said that if the US sneezed, we caught cold.

Think about what we’d “catch” if all three of the US, China and Japan started sneezing, or worse, actually “infected” each other.

But let me repeat: we are nowhere near there yet and are unlikely to reach such a “hot” state of play.

Once again, you have got to remember, this is President Trump being Trump and not a conventional president like all the others we’ve seen in recent decades and a President Clinton would have been.

He both absolutely “means it” like an “ordinary” politician never does; but he means it as a mechanism for striking a deal.

Indeed, the very brutality of it — in conventional geopolitical terms — makes it more likely that after a lot of strutting, with feathers fluttering peacock-style, we’ll get a deal.

And it should be a deal which is good for both China and the US — and so for us (and Japan). I have to add that the timing pushed everything very close to the edge of
the cliff — coming on the same day in Washington that the Fed, their version of our RBA, lifted its official interest rate.

It made for an “interesting” twofer.

It is especially “interesting” for us as it took the US rate above our RBA’s rate for the first time since 2000.

That has huge implications for our sharemarket, for our dollar and indeed for bank rates, which I’ll expand on in tomorrow’s paper.

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