“The world should prepare for a kinetic world war ala WWI and WWII”
WHILE the United States under the mercurial President Donald Trump is turning global trade upside down with his “Liberation Day” universal sky-high tariffs on imports from all countries then suddenly reverses and pauses the same tariffs a week later, China steadfastly steers a steady path of trade consultations with RCEP (Regional Comprehensive Economic Partnership) partners Japan and South Korea with ASEAN.
While all the chaos emanates from the US alienating all its trade friends and foes alike China continues its reliable “opening up” of its economy while continuing with its visionary leadership of the global economic community towards trade multilateralism and de-dollarization.
Little noticed is the People’s Bank of China (PBoC) operationalization of its Digital RMB (or Yuan) connecting 10 ASEAN countries plus six Middle Eastern including the UAE.
The Digital Yuan undercuts the U.S.-based system for international trade transactions of payments SWIFT (Society for Worldwide Interbank Financial Telecommunications) and bypasses 38 percent of the SWIFT system with a blockchain-run transaction system that warp-speeds settlements down to seven seconds, cut fees by 98% and in a secure and open system that in SWIFT would take 3-5 business days pass through several banks and open to US sanctions.
By some estimates, about $1.2-trillion of transaction will be diverted away from the U.S.-controlled SWIFT through this Digital RMB blockchain system.
Given that China is the top trading partner of 120 countries around the globe, the true ”liberation” is going to come from this Digital RMB or Yuan system as it helps countries and the world shed the vestiges of US Dollar hegemony that has abused nations long enough with sanctions and manipulations.
The Unipolar world that emerged after the demise of the 20th Century US rival Soviet Union has apexed today in Trump what an American peace advocate calls “MAGA-lomania,” a mage-country obsessed with its own power since the 1990s promising to make the 21st Century the “American Century.” To its surprise, it did not turn out that way as the 21st Century is now turning out to the Asian Century as the region rises with China.
Few Filipinos watching the Trump trade war run amuck realize that the main target of Trump’s trade tariffs now is Asia and ASEAN. China is hit with 125 percent tariff now while China raised tariffs against the U.S. To 84 percent with a universal export ban on seven critical rare earth minerals essential for U.S. defense, microchip, power and other high-tech production.
The US stock market plunged to a loss of $ 10-trillion prompting a Trump pause on tariffs except for China.
“MAGA-lomania” had come face-to-face with reality that the US cannot have its unilateral ways anymore, and the truth is while Trump continued to brag on raising the tariff on China to 150 percent (I lost count already) that is already a meaningless level – it has had to take a backfoot while China gains the upper-hand consolidating and continuously expanding its market with Asia, Middle East, Latin America and Africa.
The Philippines has and will continue to be an export under-performer even with the second-to-the-lowest tariff imposition by the Trump tariff tantrum, higher at 17 percent only than Singapore which was slapped a 10 percent tariff by Trump.
That, however, doesn’t matter as production cost is higher than other ASEAN countries starting with electricity which is 30% higher than Thailand, 50 percent higher than Vietnam and 60-70 percent higher than China.
The current Philippine foreign policy positioning also prevents it from taking advantage of the lower US tariff on it compared to the 49 percent for Cambodia, 46 percent for Vietnam, 36 percent for Thailand, 32 percent for Indonesia and 24 percent for Malaysia.
But even the PEZA (Philippine Export Processing Zone) authorities are hoping for Chinese re-shoring to the Philippines to circumvent the US Trump tariff wall will be frustrated by the government’s anti-China policy.
The “MAGA-lomaniacs” will have no choice but to settle down and negotiate with China after a month or two as the US dollar crash deepens due to the “flight from the dollar” created by the uncertainty of US assets for investors, inflation skyrockets in the US (as Nike says, they may move production out of China but to India as U.S. costs are too high) and cellphone prices and pharmaceuticals rise 50 percent to 100 percent due to irreplaceable components from China and Asia, etc.
Trump is known to relent when cornered, he is likely relenting on the attack on Iran, he is relenting on the Ukraine War, there’s a 50/50 chance he will relent on the trade war with China – otherwise the world should prepare for a kinetic world war ala WWI and WWII.