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In the Global Fight for Economic Dominance, Trade Is the Easy Part

Shawn Donnan

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Trade is the easy part. It’s what comes next that should scare you going into 2020 and beyond.

That’s the big takeaway from the Bloomberg New Economy Forum that closed Friday in Beijing after two days of hearing from luminaries ranging from Henry Kissinger to Ray Dalio and Wang Qishan, China’s vice president.

At last year’s NEF, former U.S. Treasury Secretary Hank Paulson drew headlines for his warning that a new economic iron curtain might descend on the world. The theme of this year’s forum was that a tech war is afoot and that the curtain is descending rapidly. Even if the U.S. and China find a way to sign the first part of a trade pact in the coming weeks.

In his appearance this year, the former Goldman Sachs chief declared things had only gotten worse since his initial warning even as he again cautioned of the madness of decoupling the world’s two largest economies. A normally careful Kissinger went further: The world is now in the “foothills” of a new Cold War, he declared.

Gulp.

Here are some other takeaways:

Markets may be growing impatient but the Chinese have in recent days been offering optimism that the first phase of a trade deal with the U.S. could be done soon. President Xi Jinping told a delegation of business leaders from the NEF on Friday that he wanted a deal, albeit one on a “basis of mutual respect and equality.” Decoupling is an idea that businesses aren’t buying into. Especially when it comes to innovation. Bill Gates mocked the idea of nationalism in research, arguing that it had become a supra-national endeavor and that government’s hand was only holding it back. His own efforts to create a new model for the nuclear power industry — TerraPower — has been set back five years by a Trump administration decision that had scuttled plans to build a model reactor in China with the search for a site in the U.S. still continuing. But everyone is worried the tech wars are upon us and that no one can find an easy way back. Jerry Yang, the Yahoo co-founder, warned the world is at risk of tumbling back into the dark ages if it ends up bifurcated into rival technology spheres. No business has the capacity to handle that. A way has to be found to re-establish trust. It’s just no one is quite sure how. 

The lesson to remember: It only gets tougher from here. 

Charting the Trade War

In an election ostensibly about Brexit, no one is questioning the deal U.K. Prime Minister Boris Johnson negotiated with the European Union, according to Bloomberg Opinion’s Therese Raphael. That’s even though the pact brings higher costs and more trade restrictions than the failed one that cost his predecessor, Theresa May, her job. Click here for the full op-ed.

Today’s Must Reads

Last-minute deal | Japan and South Korea agreed to save their expiring intelligence-sharing pact, potentially averting a blow to U.S. efforts to strengthen its Asian alliance network. Struggling to compete | General Motors is having a rough time in China, with Cadillac a rare bright spot in a market where sales of its Buick and Chevrolet brands have taken a beating. Bottoming out | German manufacturers mired in a year-long slump appear to be rebounding, and French goods producers expanded at a faster pace — signs that Europe’s two biggest economies are stabilizing. Pushed into 2020 | House Speaker Nancy Pelosi and Trade Representative Robert Lighthizer edged closer but still fell short of a deal on the stalled U.S.-Mexico-Canada free trade agreement. Plowing profits | Trump promised to help embattled small farmers caught in the trade war crossfire. But big farms so far have been the main beneficiaries of the billions in aid payments.

Economic Analysis

Forecasting China | Sub-6% growth remains the Bloomberg Economics forecast for China’s economy next year. U.K. warning sign | A PMI contraction shows downside risks to the outlook are showing few signs of abating.

Coming Up

Nov. 25: CPB World Trade Monitor Nov. 26: Hong Kong trade balance, U.S. advanced goods trade balance Nov. 29: Vietnam exports

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To contact the author of this story: Shawn Donnan in Washington at sdonnan@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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