Keeping Up with Frank

The US / China Trade War and the Dangers of Escalation

June 03, 2019

“History shows that when countries are busy trading with each other, there is little appetite for conflict. People on both sides may prosper by selling or be happy in their hedonistic consumption. It is usually when trade stops that wars start.” Frank Giustra

Given the headlines over the past few weeks on the subject of trade wars, I think it would be worthwhile to revisit an article I wrote 4 years ago. It was titled “What Does China’s rise mean for the rest of the world”. I wrote it as part of a series of articles that Crisis Group board members (of which I am one) wrote in answer to the question, "What is your biggest concern for global security in the 21st Century?"

I chose to address the rise of China as an economic super power and the US response to this new reality. One of the areas I touched on was International trade and how it plays a historical role in conflicts. It gives me no satisfaction that I may have been prescient on this particular point.

I am deeply concerned that we are entering a dangerous era that feels very similar to the behaviour by competing nations that led to 2 world wars. In both cases, and to varying degrees, nations around the world turned to hatred and nationalism and the vilification of minorities as a response to economic hardship. This led to protectionism, tariffs and trade wars. When trade wars escalate, they eventually lead to currency wars as nations devalue their currencies to become more competitive. These actions inevitably lead to an economic crisis. What follows are political and social crises. All of these actions eventually end in war.

The global community needs to come together and encourage a change in direction. Otherwise, the current tit-for-tat retaliations, could easily spin out of control. Once the shooting starts, there is no going back.

Link to my December 2015 article posted by Internationl Crisis Group: