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The world will be different in 10 years

June 26, 2020

June 26, 2020

Trade war won’t save the dollarDmitri Demidenko

China can only be slowed down but it can’t be stopped

Word spoken is past recalling. The Senate introduces sanctions against Chinese officials for breaking human rights in Hong Kong - Beijing keeps silent. Donald Trump speculates on a possible total breakup with China - Beijing keeps silent. Assistant to the President and Director of Trade Peter Navarro asserts that the relations between the two countries are over - Beijing keeps silent.  Is Beijing worried about saying some stupid things after such a long silence? I don’t think so. According to ex-National Security Advisor John Bolton, actually China wants the Republican to be re-elected because his presidency damages the USA much more than China.  In fact, Trump is cutting off the branch he’s sitting on. But this rascal knows too that the problem is whether you’re sitting on the right side.

![LiteForex: The world will be different in 10 years][1]

All is relative in this world. True, the current US president exhausted China with import taxes. But do we know for sure that Joe Biden, a candidate for the Democratic nomination in the presidential election, doesn’t suffer from sclerosis? Nothing is worse that a revengeful person with a severe sclerosis: they take vengeance on everyone. As for Trump, he uses a trade war to take vengeance on his predecessors who had been turning a blind eye to China’s dishonest competitive practices. ​

The pretexts are obvious, but the reason is that winners never want to become runners-up. According to IMF, the US GDP may drop 8% in 2020, while China’s GDP will grow 1%. In 2021, it’s +4.5% and +8.2% respectively. If the countries return to pre-pandemic growth rates, China will have outrun the US as early as in 2029. And they won’t yield their leadership to anyone after. The main reason for China’s breakthrough is urbanization:  the percentage of Chinese urban population is now equal to the US’s one in 1940. When people move to a city, their income and expenses increase, which boosts GDP. This process can’t be stopped, it can only be slowed down and it’s what Trump is trying to do.

![LiteForex: The world will be different in 10 years][2]

I feel a bit sorry for Trump. It’s hard to be an Atlas: you can’t even scratch your balls or else the heavens will collapse. The US economy and stock market are so huge that investors can’t ignore the events which take place there.  I even don’t mention the dollar itself and its enormous share in conversion operations, global payments and gold/forex reserves of central banks. Well, things may change radically in 10 years. The runners-up can’t be better in anything: the winners won’t tolerate it. The White House is driving China into a corner and makes a common mistake. Don’t drive anyone into a corner, or you may be driven there yourself.

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Price chart of EURUSD in real time mode

![Trade war won’t save the dollar][5]

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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