Social Mood Argues All Out Trade War Possible, Watch Out Germany

Social mood influences everything,. It doesn't determine everything, particularly when individuals can buck society. Yet in the case of social mood and trade wars, the public in both the United States and China are ready for a fight. Two generations of nationalist education has made younger Chinese highly nationalistic. In 2012, there were riots and violence against Japanese businesses when the Diaoyu Island dispute heated up. A full on trade war with the United States will be popular.

In the U.S., Trump supporters are supportive of a trade war, as are many industries and part of the national security establishment. The anti-Russia hysteria can easily turn into anti-China hysteria.

FT: Why Trump and Xi may not be able to avoid a trade war

“President Xi Jinping literally doesn’t have a lot of options in his hand because you see there is a high nationalism in China. From my observation 90 per cent of Chinese people are willing to fight against the US in a trade war. But in the US I don’t think 90 per cent of Americans are willing to fight. So how can you expect China to back off from this situation?” the Chinese journalist asked Mr Kudlow.

The question caused the former TV pundit to pause.

“Does China want to be part of the global economic and trading system, I ask you,” he eventually responded. “They are in an impossible position, my friend. They cannot continue to break the laws of trade as they have for over 20 years. They have no supporters. Who is on your side? That’s what I am saying. It’s not a matter of saving face and this and that. It’s a matter of a newly first-rate, first world economy integrating itself into the rest of the world.”

Many media outlets and pundits live in a bubble, where Trump is hated by "everyone" they talk to around the world. But in the rest of the world, a lot of people like Trump and hate "everyone" the media and pundits talk to. Wholesale regime change is taking place in the West.

Rising nationalism has been a threat to the EU for years. Yesterday, nationalist Hungarians crushed the opposition in a vote that was almost entirely centered on immigration. The largest opposition party is a far-right party. What nation is most supportive of the push for migrants into Europe? Germany. What nation has a large trade surplus and keeps the euro priced such that Greece, Italy, Spain and others are mired in depression (because they will probably never accept the pain of reform)? Germany. As free trade comes under attack, the Germans will find themselves in a difficult position. Economically they are to much of Europe as China is to the United States. With the migrant issue and nationalist sentiment rising, they will have to walk a political tightrope.

NYTimes: Europe Caught in the Middle as Trump Threatens China

Which side would you choose?

That more or less sums up the dilemma confronting Europe as it watches the escalating conflict between its two biggest trading partners, the United States and China.

The United States is Europe’s biggest market for exports like cars and other goods, not to mention a NATO ally. But China is big, too — and getting ever bigger.

The Trump administration has also threatened the institutions that govern global relationships, calling NATO obsolete and stoking trade tensions. So China no longer automatically seems like the less reliable partner.

This is the view of the current establishment in Europe, but it won't be the current establishment in Europe for long if it really thinks there's a viable choice.