My personal view on US-China trade dispute
While direct trade tariff may be on not too high possibility, US may actually choose to isolate flows on the capital account, which are used by trading partners such as Japan and China to “manipulate” the strength of the US dollar through purchases of US Treasurys, and to deal with these separately to normal trade flows. Steps could then be taken to ensure that capital flows are managed to deter “currency manipulators”. China should not back down and can afford to back down now. China has had a golden opportunity to appreciate the Yuan to 5:1 before 2007 crash. But China chose not to. My suggestion to them during 2006-07 was falling into a dead ear.
Now everything is too late. Inflation shows up and wage increase will surge to a high level, eating up people savings and corporate profits. China A-shares will need to wait for quite a while to show any significant growth. But housing bubble will continuous.
US is going to lead the 2nd recovery, not China.
I will write something about Rare Earth Metals when I have time. There seems to be too much misunderstanding among the Chinese investors. Stay tune.
