Trade

Trump’s trade protectionism will eventually prove a loss-loss game

In the first stage, you believe this can work and that you will reap many benefits from putting the pressure on your business partners, however in a second stage, you realize that you have gravely damaged confidence and future growth opportunities with the same business partners.

This two-stage process sums up what a number of business leaders have explained in recent weeks as US President Donald Trump has strengthened his “America First” trade policy, notably deciding new tariffs for Chinese imports worth hundreds of billions in US dollars (USD).

On the one hand, people close to the Trump administration emphasized POTUS “hard approach” is a means of negotiation with a view to reaching a better balance for US trade; on the other hand, some business people and experts stressed on the fact that China has shown no sign of yielding to Trump’s pressure and that such a resilience could start a negative chain reaction for the global economy and thus for the US economy too.

Donald Trump’s policy is also to said be shortsighted as China will become more and more powerful in the future and more capable of crafting new ways of neutralizing US economic clout for instance by developing deeper, larger trade relations with Europe.

Trouble ahead? Hong Kong (HSI) stock market looks bearish

The “trade war” waged by US President Donald Trump against the United States’ major economic partners, especially China, seems to increasingly impact foreign stock markets.

While Wall Street reached new highs recently, the China stock market lost almost USD 1.000 billions YTD and Cyceon found out that the technical analysis of the monthly charts of the Hong Kong Hang Seng Index (HSI) shows potential for consolidation.

In the meantime, China exports growth slowed and the turnover of the Shanghai stock exchange shrank to 4-year low, possibly an indication of a loss of investors’ interest in the Chinese market; at least for some time.

This looks like a warning sign similar to the one observed in 2015 but for different reasons.

French group Total left Iran to the likely profit of Chinese partner CNPC

As early as July 2017, the French energy group Total announced within the framework of the South Pars 11 project (SP11) led in association with the Chinese group PetroChina (CNPC) that it took all possible precautions to restrain the field of influence of the the Iranian Revolutionary Guards Corps (IRGC).

Following the decision of President Donald Trump to withdraw the United States from the Iranian nuclear deal (JCPOA) signed in July 2015, Total said it would discontinue its participation in SP11 if it did not obtain a specific project waiver by the US authorities with the support of the French and European authorities before November 4, 2018.

Since then, the Trump administration has reinstated the sanctions against Iran and the Congress could toughen them a little more before the mid-term elections in November.

In the absence of a US guarantee and considering the significant fines paid by European companies to the benefit of the US government in recent years, the Total group has announced its definitive withdrawal from the SP11 project despite related expenditure valued at around 40 million euros, confirming a decision known for two months according to Tehran and especially the extraterritoriality of US legislation in Europe.

“Total had little choice for two reasons. The first is caution because even with the support of the French government, there was no guarantee that the US government would be comfortable with it. The second and most important is of course the possibility at any time for the US government to paralyze the financial activities of Total knowing that US banks are present in 90% of the group’s financing operations,” said an observer.

The decision of Total is also a disavowal for the European Union (EU) which Commission has yet adopted on July 16, 2018 a legal instrument – the Blocking Statute – with a view to protecting European companies in Iran against US sanctions. Finally, in accordance with the contract signed on July 3, 2017, PetroChina is expected to acquire Total’s shares and to chair the SP11 consortium.