Magellan Financial co-founder Chris Mackay blasts ‘shameless’ free-trade propaganda
Chris Mackay appears to have taken a veiled swipe at China for promoting itself as a supporter of free trade while at the same time dumping goods around the globe.
Magellan Financial co-founder Chris Mackay appears to have taken a veiled swipe at China for promoting itself as a supporter of free trade while at the same time dumping goods around the globe, as he warned of the growing threat of recession and stagflation from the trade wars.
In a letter to clients of his $2.4bn global listed investment company MFF Capital, Mr Mackay, without naming China, took aim at “alternatives” to democracies “shamelessly” propagandising free trade while bullying and discriminating with “ongoing, accelerating global dumping of massive overproduction (record recent trade surpluses), rather than rebalancing to consumption”.
“Political reactions matter over time, and challenges are of real and increasing importance. Post WW2 goodwill and belief in multinational institutions continues to be weakened with manipulations amplifying the fundamental erosion from US actions,” he said in a letter published late on Thursday.
“Contrary to 1990s optimism, entry in the WTO, other global bodies and increased country wealth, has not inclined leaders of single party states to democratise power.”
In the wake of Donald Trump slapping 145 per cent tariffs on goods coming into the US from China, the Asian powerhouse - as well as hitting the US with its own 125 per cent tariffs - has taken to social media to portray itself as standing up to US “bullying” in a series of videos.
The latest video posted by China’s ministry of foreign affairs, titled “Never Kneel Down!”, was released on Tuesday and accuses the US of deliberately forcing other countries to limit trade with China.
“Kneeling only invites more bullying. China will not kneel down … Bowing to a bully is like drinking poison to quench thirst,” the video said.
“When the rest of the world stands together in solidarity, the US is just a small stranded boat.”
China has been on the front foot reassuring other countries and regions it will not dump goods on their doorstep due to the trade war with the US.
China posted a record trade surplus of close to $US1 trillion in 2024, well above any other country, as it reaped the benefits of its role as a manufacturing powerhouse.
In his letter, Mr Mackay warned of the challenge of reversing a global trade landscape built over many years.
Effective capital markets fund themselves globally and are vulnerable well beyond supply chains and trade flows, Mr Mackay said.
“Trade barriers and subsidies built up over decades by mercantilism and cheating on undertakings and other obligations, have shifted manufacturing (in particular) and cannot simply be reversed in response to US populist actions not supported by economic understanding or regard to consequences and reactions,” Mr Mackay told clients.
“Country by country damages and consequences are unclear but deeper inflation, recession and stagflation become more probable over days and weeks without resolution,” he warned.
While countries responding to US populism may respond “sensibly to their challenged competitive positions and stagnant per capita standards of living”, Mr Mackay sees a greater prospect of short-term populist policies rather than true long-term improvements that bring about crucial change.
“More ‘quick fix’ electoral wins are expected, with populists and former and current socialists pursuing unsuccessful policies which damage over the medium to longer term,” he warned.
These include sub-scale government interventions, more debt and deficit spending, anti-business socialist policies and populist targeting of voter handouts (eventually) funded by higher taxes on business, he said.
“Uncommon are better quality governments, long term intelligent planning and focus, constant diligence underpinned by fair, cohesive, accepted societal contributions/shared sacrifices.”
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