Why should investors read James Mattis’ resignation letter?

Investors have been monitoring China’s economy for a long time and any good or bad figure from Hong Kong and Shenzhen does impact global markets. The resignation of US Defense Secretary James “Mad Dog” Mattis after two years with the Trump administration comes as additional evidence of how the United States might deal with the 21th century’s strategic environment.

Beyond the consequences of a US military withdrawal from the on-the-ground combat against the Islamic State (ISIS) in the Syria-Iraq area from stability and energy viewpoints, this is more about Russia and chiefly about China that Mattis’ resignation bears significant relevance.

“I believe we must be resolute and unambiguous in our approach to those countries whose strategic interests are increasingly in tension with ours,” wrote General Mattis in his resignation letter. “It is clear that China and Russia, for example, want to shape a world consistent with their authoritarian model”, stressed Mattis.

As a result, investors should understand that from a global strategic perspective, a number of US officials do envisage growing tensions – be it a cold or a hot warbetween the United States-NATO and a China-Russia axis. Although any military confrontation seems unlikely today, the loosening of nuclear weapons and nonproliferation treaties plus trade disputes have grown while China emerged as the world’s second largest economy and while the United States searched to meet the long-term challenge of its increasingly contested leadership.

Clearly, James Mattis writes that the relationship between the West and Asia is likely already engaged on a rocky road already, and any savvy investor should take this into account on a worldwide scale.


Likely a war between the USA and China within 15 years

For some time on the ground and more and more frequently in words, the main military concern of the United States as seen by its government and its Generals focuses on China.

Indeed, if the immediate threat from a cybernetic and political viewpoint originates from Russia, the real long-term threat against US interests would mainly originate from China, the sole country able to reach world leadership over the next decades.

US President Donald Trump has repeatedly demanded more military funding from his European NATO allies considering that “the United States needs a very strong European pillar (because) in 15 years it is a very strong likelihood that we will be at war with China,” said US General Ben Hodges at the Warsaw Security Forum.

Now retired and a former commander of the US Army in Europe, Hodges believes that the United States will not have the ability to deal with both Europe and Asia at a same time.

In addition to the needed increase in their military capabilities, Europeans must also make sure to restore their sovereignty at home, said Hodges, emphasizing that China owns more and more companies and infrastructure including more than 10% of European ports.

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.