Geopolitical risks for the beginning of 2019! (Part 2)

The first part “Geopolitical risks for the beginning of 2019,” can be found in the Trader’s Blog.

The beginning of 2019 in the financial markets remains completely at the mercy of geopolitics, which is confirmed by the ambiguous dynamics of the American currency on political risks in the United States. But, in addition to political risks in the United States, other equally important risk factors remain that also affect global financial markets .

US – China Trade War

The trade war between the United States and China can be called the main geopolitical risk of 2018 and it remains the main risk of 2019 in perspective also. And this is despite the existing  10% tariffs on US and Chinese goods, which were achieved as a result of the G20 summit. At the same time, the possibility of introducing mutual tariffs in the amount of 25% is retained.

But, despite the loud statements by the US and Chinese governments about the increase in purchased goods and stricter copyright control, the US-Chinese trade war shifted from the level of exchange of tariffs to a new category of back-playing games. Games with arrests and litigation around patent law and political scandals, in which Canadian citizens and an executive of the large Chinese company Huawei were involved.

And if the scandal with the arrest of a an executive of Huawei has sort of faded into the background, the consequences that provoked this scandal resulted in direct persecution of Apple products in China, where banning of iPhone sales and use.

Moreover, if you think that the problems of Huawei and Apple are a local problem that will have little effect on the common global markets, then I would like to add that it is only the “tip of the iceberg” of legal proceedings. Thus, bans on Apple products have reached the German courts, which could be a precedent for the entire eurozone. It is worth noting the litigation around the patent law of Qualcomm, which such companies as Samsung Electronics, Apple, Intel, MediaTek, Huawei and LG Electronics are suing in a class action suit. Of course, in the high-tech market, the court between these giants is quite normal, but only until they are clearly followed by Big Politics, and the courts do not turn into explicit lobbyism, as it was in the case with Huawei in China.

Technological race is a very useful thing for the development of technology, companies and the end user, who end up with market competition with industrial espionage, which looks like a necessary evil in order to avoid monopolism in one area or another. But the apparent lobbyism, which covers the cover of law, is a threat not only for the high-tech industry sector, but also for the entire global economy, which can eventually fall under the “iron curtain” of law.

Against the background of court injunctions and lobbying in the world, 25% tariffs on Chinese goods in the United States look very harmless. But already this year it may cause a collapse of the high-tech manufacturing sector, which has shown the main growth dynamics of the last decades, which, in turn, may cause a new crisis.

Anton Hanzenko