Are Policy 'Refugees' Jumping The Trump Tariff Ship?

Donald Trump's world view is one of US superiority, and maintaining that superiority. But clearly, the customers are in Asia. Japan's Abe and Israel's Netanyahu have signaled more cooperation with China as both realize that Asia is where it's at economically. For Abe, Trump is perplexingly pushing Japan into China's camp:

Japanese Prime Minister Shinzo Abe's use of language became fodder for the commentary. Ahead of his Southeast Asia and Oceania tour to attend the APEC summit and other meetings, Abe stopped using the term "Indo-Pacific strategy," replacing the word "strategy" with "vision."
Explaining why Abe changed the wording, the commentary cited serious trade friction between Japan and the U.S. It explained that Japan downgraded the strategy to a "vision" because Trump rejected a request to reconsider his tariffs on Japanese products.

For Netanyahu, China's tourism industry is opening up to Israel. While Donald Trump could care less about Chinese tourism to the USA, Israel takes Chinese tourism seriously. The two countries share one thing in common, a long history. 

The Council on Foreign Relations has taken note of this thawing relationship, and would not be writing about it if it was not concerned. Obviously, with China possessing 10 cities with larger populations than all of Israel, what is the key for China to care? Technology, according to the CFR, is the key:

While visiting Beijing in 2017, Israeli Prime Minister Benjamin Netanyahu told an Israeli interviewer that China accounts for one-third of the investment in Israeli high technology. Chinese investment in Israel is also focused on Israeli infrastructure projects. 

Clearly, Israel wants China to offset BDS and voting tendencies at the United Nations. In exchange for technology, Israel wants a political as well as an economic advantage for engaging China. China supports the Palestinian cause, but "respects Israel". 

China wants a solution to the Palestinian/Israeli conflict, but stays behind the scenes as much as possible:

...Chinese President Xi Jinping – while hosting his Palestinian Authority counterpart Mahmoud Abbas in Beijing – revealed his plan to bring peace. Among other things, Xi’s plan envisages a two-state solution, calls on Israel to stop its settlements and hopes for more dialogue between China, Israel and the Palestinians to promote key projects. Although the proposal brings practically nothing new, it reflects the determination of the Chinese government to make a step further in the peace process. China’s UN ambassador Liu Jieyi has attempted to give the proposal an international boost since then.

While Donald Trump is busy trying to hide US technology to China, one wonders if that is a losing proposition. China simply increases its cooperation with Israel and with Japan, both highly advanced nations in the tech sector. 

While it is too early to view Japan and Israel as refugees from Trump policies, it is clearly true that it makes no economic sense for those two nations to tie their economic futures soley to a nation in the process of turning inward. Any nation threatening worldwide trade wars is seen as being unstable relative to what it once was. 

The fusion of Japan and Israel with China is simply pragmatism at work. Will moral and political tensions ultimately undermine this pragmatism? It is hard to tell. After all, Saudi Arabia has fused with Russia. These seemingly odd bedfellows may be the unwritten OPEC of the future. 

And we know that India has forged a close strategic working relationship with Israel. And we know that Russia, India, Pakistan and China have engaged in military exercises together.

So, what can we learn from all this bonding? It is pretty obvious that all these ancient civilizations in Asia are taking the pragmatic, patient route regarding their differences. There seems to be a level of trust that is emerging. What could be the endgame of all this activity? Here are a few scenarios:

1. The world is preparing to jump ship with regard to cooperation with America. This seems somewhat unlikely on the surface. Certainly though, it is always the USA that seeks to sanction over this or that misdeed. I am not making a moral judgement about this sanctioning process. But I am pointing out that it is a process that seems to be shunned by the rest of the world. It is a process that older civilizations appear, for the most part, to be abandoning.

2. China trades with a large, peaceful Muslim nation. As Trump pushes Indonesia away, it looks to China for trade. While China is reported to have mistreated some Muslims within its borders, it appears to have good relations with a number of Muslim nations, including Pakistan, Indonesia, and others. It appears that China is clearly benefiting from Trump's tariff behavior. China may not back down, because it simply does not need to back down. China can simply wait Trump out.

3. The US may return to pragmatism one day, but that is unlikely in a complete sense. Saudi Arabia has angered many with its treatment of women and the killing of a journalist who was a permanent legal resident of the USA,  The Saudi government needs to change because it is making it difficult for the United States to maintain pragmatism in the face of its unacceptable behavior. But on the other hand, as long as the US wants to exert control other sovereign nations, it is destined to set itself back economically. We are idealistic for the most part, but the world is pragmatic. That pragmatism is forged out of economic necessity.

The world is becoming a more peaceful place, while the USA is becoming a more belligerent nation. Since the USA is the nation with the most physical power, this presents a big problem for future world peace. There are no easy answers.

Look to emerging markets as a source of economic growth and investment. It may be a little too soon to do anything but speculate. There could be a major slowdown in world growth. US policies, coupled with the end of the business cycle, should be weighed in any investment decisions. After all, globalization without US involvement will look very different. 

China will increase trade with Latin America, and with Africa. Here is the bottom line, the US wants control. China wants prosperity. The US policy is destined for failure unless cooler heads prevail. As the Yale study cited above points out, education and entertainment will no longer be centered in the USA:

Disinterest in international affairs will erode preeminence of the US system of higher education. With perceived rising xenophobia and proposed cuts to US research funding, more scholars from developing countries – representing the bulk of more than 4 million students studying abroad – are looking elsewhere. English-speaking countries like Canada and Australia are obvious beneficiaries of America’s retreat, but so are China and Russia which have grown their share of international students from almost nil in 2001 to 17 percent in 2016, according to data collected by the Institute of International Education.


Internet access and mobile penetration make it easier for consumers to enjoy movies and TV shows from around the world, eroding Hollywood’s supremacy.

and finally:

Although the Golden Era of Globalization owes much to the openness of the US economy and society, America’s insistence on rewriting rules of engagement to its advantage won’t stop the growing interdependence among developing countries. Given that the geopolitical landscape already conforms to globalization, pursuit of “I win only if you lose” policy in international deal-making could transform “America First” into “America Alone.” 

Disclosure: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment ...

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Gary Anderson 4 years ago Contributor's comment

Update 1: It appears that Netanyahu has distanced himself from Trump's Iran military action. I am surprised, but did Bibi's tough talk on Iran emboldened Trump? It may prove out that Donald Trump was snookered into action that could endanger him personally, all to please Israel. Only time may show if this brief analysis is correct.

Beating Buffett 4 years ago Member's comment

Really? Where did you see that? For as long as I can remember, Bibi has been pushing the world to take a tougher stance with Iran!

Gary Anderson 4 years ago Contributor's comment

Exactly. That is why his turnaround is so puzzling. It is almost like he put Trump up to it and then didn't want to have any part of it. Articles are everywhere about this, BB.

Moon Kil Woong 5 years ago Contributor's comment

Sadly the US is driving a lot of global trade towards China due to our International policies of playing hardball with our allies. The worst is our decreasing relations with Europe which is increasingly buying direct from Asia now which will hurt our US band name products and our margins.

Cynthia Decker 5 years ago Member's comment

Interesting that you think sanctions are falling out of favor elsewhere. Do you think that's because they believe they don't work?

Texan Hunter 5 years ago Member's comment

They do work. They got North Korea and Iran to the negotiating table and got Libya to throw in the towel. The rest of the world simply doesn't have the stomach for sanctions because either they have no backbone, or because they'd rather have cheap oil and profits from other business deals even if it means turning a blind eye to abuses, than doing what's right.

Gary Anderson 5 years ago Contributor's comment

I sympathize with your moral sensibility. But the US has supported dictators because of pragmatic concerns and does so today. Since the USA seems to be making the most war these days, for selfish reasons, we cannot very well reason that moral sanctions are better for world peace than is patient pragmatism.

Gary Anderson 5 years ago Contributor's comment

I am not an expert on the significance of sanctions in history, the effectiveness of sanctions in history. But it is clear that they interfere with economic progress and cooperation.