USA and China: the struggle for the iron throne of the world economy

On Sunday, after eight years of suspense, the whole planet learned of the end of Game of Thrones. All the planet? No. In the most populated country in the world that epis was not issued


On Sunday, after eight years of suspense, the whole planet learned of the end of Game of Thrones .

All the planet?

Do not.

In the most populated country in the world, that episode was not broadcast. The Chinese Internet company Tencent, which has the rights to broadcast the series of the American HBO, which is in turn the owner of AT & T, the largest telephone in the world, never broadcast the episode. Maybe he did it so that the fans of the series were not disappointed ... after all, Tencent had been editing the episodes for eight years so that no scenes of nudes were seen or tacos were heard. Or perhaps he did it by order of the Chinese Government. An order that, as is usual in the second largest economy in the world, was officially never issued.

Why was Beijing going to ban Game of Thrones ? Perhaps for the same reason that the American actors who work in series in that country have been, as explained by Foreign Policy magazine this week , suddenly dismissed from the shoot without any explanation: by the new wave of tariffs that Donald Trump has declared to that country. The first and second world economies have been locked in what is already, in reality, a cold economic war with a focus on technology and agriculture.

The conflict between Washington and Beijing is also combined with a worsening of the points of uncertainty in the world economy: political implosion in the United Kingdom by the Brexit, data between bad and very bad industrial production in the EU and the US, tensions in the Middle East, and a new collapse of the Turkish lira. With all these conditions, it is not surprising that Wall Street has suffered its worst week in eight years, just when the first season of Game of Thrones had just been broadcast.

The issue is that, although many world leaders - such as Trump, Xi Jinping, or Angela Merkel - firmly believe in a modern version of mercantilism and are determined to use public powers to favor their exports, economic relations are not a game of zero sum in which one gains what another loses. For example, by prohibiting Alphabet (that is, Google) from transferring its Android operating system to Huawei , so that it uses it on its mobile phones, the US has liquidated the Chinese company outside of its domestic cellular telephony market. But the biggest beneficiary of that is the Korean Samsung, which does use Android.

Apple and General Motors, Americans in Beijing

The Japanese investment bank Nomura believes that Alphabet's decision may cost 425 million dollars (375 million euros), a minuscule figure in a company that makes 125,000 million. Paradoxically, if Beijing adopts retaliation, who can lose out is the US telephone giant Apple, which gets 29% of its profits in China , according to the British bank HSBC.

Passers-by at the doors of an Apple store in Beijing.

Beijing does not need to impose tariffs. It is enough for him to employ informal protectionist policies, in the style of blocking the issuance of Game of Thrones, or to stir up the flame of nationalism through television, the press and the Internet, which are totally subject to state control, to launch boycotts against American brands or products. There China has no rival, and has many whites to choose from. General Motors, for example, sells more cars in China than in the US.

Damage to US agriculture

But, as the fact that Samsung can be an unexpected winner of sanctions against Huawei, the fronts of the trade war affect the entire world economy. This week, the Minister of Agriculture of Brazil, Tereza Cristina, announced that her country supports the candidacy of Chinese Vice Minister Qu Dongyu to the general secretariat of FAO (the UN Food and Agriculture Organization, according to its acronym in English ). The decision is a blow to the Brazilian Foreign Minister, Ernesto Araujo, very close to the Trump team, who had declared: "We are not going to sell our soul to sell soy and iron ore to China." An epic phrase that is destroyed by a percentage: 35%. In 2018, China bought 35% of all Brazilian agricultural production . And that was largely due to the increase, also by 35%, of the export of soybeans to that country, which skyrocketed when China closed its market last summer to shipments of that US crop in retaliation to the first wave of tariffs.

Already last year, the Donald Trump government had to approve a subsidy of 12,000 million dollars (10,700 million euros) to its farmers to compensate them for the trade war against China, Mexico, and Canada. On Thursday, it approved another aid package of 16,000 million dollars (14,280 million euros). Thus, the American taxpayer pays the commercial war bill in multiple ways: with higher prices, and with taxes. And, to all this, the Chinese pay nothing, because the one that pays the tariffs, contrary to what Trump says, is the importer, which in this case are the US companies.

But the impact is not only seen in the US. China has a lot to lose. Its economy slows down and, although nobody believes its economic statistics, because Beijing manipulates them to, among other things, smooth the ups and downs of activity, so that everything looks stable, it does not seem that domestic demand will compensate for the loss of the US market, among other things because the indebtedness of Chinese families has skyrocketed in recent years. That makes Xi Jinping's nightmare very real : that China never ends up becoming a leading economy, and that it be frozen in the so-called middle income trap , that is, with a level of development like that of Latin America, but without enter the land of the richest countries. In the end, the game for the iron throne of the global economy between the US and China can be very expensive to the two contenders.

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ref: elmuldo