Simon Lloyd – Chief Investment Officer
As tensions remain high in the ongoing negotiations between representatives of President Xi Jinping of China and President Donald Trump of the US, all eyes are on the next deadline of March 2nd. If insufficient progress has been made by that stage, tariffs on $250bn worth of Chinese goods will rise from 10% to 25%, with impacts expected both in China and the US. At present, the expectation is that Mr Trump will stand by his Tweet from 24th February, delaying that punitive hike.
However much less attention is being paid to what are, arguably, at least as important to international business; the supplies of services. While automotive parts and food ingredients are tangible evidence of the two countries’ reliance on one another, there is arguably much greater value to be obtained for the US if access to banking and financial services was opened up. When China joined the WTO, it undertook to let in foreign electronic-payment services; however, Mastercard and Visa have both struggled to make any headway with the authorities. American Express was finally granted a license in late 2018, after agreeing to form a joint venture with Lianlian Group; while Mastercard may finally break a deadlock by linking up with Chinese clearing house Nets Union Clearing Corp.
At the same time, telecommunications services remain resolutely dominated by Beijing; freedoms promised are, eventually, shown to be only very narrowly defined, and permitted only at a pace that befits a nation of long history and long memory.
So, while the US soybean market continues to struggle, the stakes for service industries in the ongoing trade conflict are high enough to give both Mr Xi and Mr Trump vertigo, should either of them look down.