Is The Global Economy Heading for Divorce? Electric Car Wars. How to Evade Tariffs. And Fishing as a Cure – Plus More! #199
Grüezi! I’m Adrian Monck – welcome!
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1️⃣ Is Globalisation Heading For Divorce?
And Will China Lead Its Own Economic Bloc?
It seems like the world’s biggest economies – the US and China – are going for a trial separation. So who gets to keep the kids – or their globalisation equivalent, emerging economies.
The FT thinks China is trying to lure them away from Uncle Sam:
“Friction with the west has prompted Beijing to build its own alternative system focused on developing nations.”
Economists Brad Setser and Michael Pettis point out one big problem with the FT argument – China exports too much stuff.
Trade surpluses mean China’s wealthy save rather than spending money on goods and services at home, whilst Chinese workers “under-consume.”
This drives overproduction at home. China needs foreign demand to absorb the excess, which strains the economies of countries on the receiving end.
That makes it unlikely for big developing economies to want to join a China-led economic bloc. As Setser says:
India “didn’t join China’s trade deal (unlike say Japan ... ) and is exceptionally worried that Chinese exports are undermining its own manufacturing sector.
“Turkey competes with China in the EU market and isn’t gonna give up the EU for China...”
The world is unlikely to be able to divorce economically as long as there are huge trade imbalances between different political and economic blocks.
Germany also ran big trade surpluses, and it ended up making everyone in its neighbourhood – Europe – very unhappy.
⏭ China is also the new Germany when it comes to equipping global industry.
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2️⃣ How To Get Round the Globalisation Divorce
A US importer explains the tricks of doing trade...
That’s ShipHero’s Aaron Rubin explaining something that took economists a while to figure out.
When the US slapped big taxes on Chinese imports, it looked like they were pretty effective – China fell from being America’s #1 source of imports, and was replaced by Mexico.
Not so fast! Analyst Adam Wolfe checked the numbers.
Chinese imports can come in at Los Angeles, get on a truck for Mexico without ever formally “entering the US” and then sit in a warehouse in Tijuana before waiting for an online order from an American customer and then – off they go.
No taxes or tariffs paid.
Proving, when it comes to trade, goods move faster than rules.
⏭ The WSJ’s Josh Zumbrun also wrote a great explanation of how this works.
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3️⃣ Electric Car Wars
The Chinese drive to survive.
This week:
Apple pulled out of the Electric Vehicle (EV) game.
EVs from China’s BYD rolled off a 7,000 car transporter at Bremerhaven, Germany – and it launched a new supercar.
Passenger car sales in China dropped 25% year-on-year.
BYD’s home city, Shenzhen, unveiled new measures to boost EV exports.
The NYT wasn’t messing around: “China’s Electric Vehicles Are Going to Hit Detroit Like a Wrecking Ball.” And that’s despite the 27.5% tariff on Chinese vehicles heading for the US.
Wasn’t the Inflation Reduction Act (IRA) also supposed to protect US carmakers?
It gives a $7.5k tax credit per vehicle to consumers buying electric vehicles that don’t rely too much on Chinese imports.
Meeting the IRA’s strict sourcing requirements is very difficult currently given China’s dominance of battery metals processing and components. US car makers are scrambling.
Meanwhile, China’s car’s keep getting better. This electric SUV from Li Mega has a range of around 600 km (370 miles) and charges from 10% to 80% in just over 10 minutes.
With China’s home market stalling, the European and US car industries are about to feel the cold chill of cut price competition...
The answer? Help Chinese consumers buy more cars!
⏭ China’s EV champion will undercut gas-powered car prices too.
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4️⃣ Diplomatic Debate as Demolition Derby
A Polish politician delivers a masterclass in public speaking.
Poland’s Foreign Minister Radek Sikorski honed his debating skills at the Oxford Union with Boris Johnson, back when I was putting out the university newspaper.
Unlike Britain’s blustering former prime minister, Sikorski’s rhetorical skills have been deployed for diplomacy.
The clip above is 4’ long. Have a listen, as Sikorski demolishes the lies of Russia’s UN ambassador about the invasion of Ukraine.
⏭ What the Pentagon has learned from two years of watching the Ukraine war.
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5️⃣ Cutting the Working Week: Trend or Transition?
Dads just want to work less.
Average hours worked per employee have been declining across Europe for decades. The pandemic fast-forwarded that.
But is this really the end of the 40 hour week?
New research says no. Leading the less-work charge? It’s men – especially dads. As incomes have risen, they want more leisure time.
Modern knowledge workers get more done in less time. And evidence shows longer office hours reduce innovation and creativity. The future is about getting more done in fewer hours – flexibility with focused intensity.
Of course governments could reverse incentives to encourage working more. But should they? People already face longer commutes and less job security.
Given a choice, the evidence shows European workers prefer more time for family, hobbies, passion projects. There’s a message there for the US.
⏭ A short history of the 40-hour work week.
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6️⃣ Bless the Rains Down in Africa?
In Congo, rainfall is bringing power, not an 80s soft rock revival.
⏭ Toto’s ‘Africa’ from 1982. A thing of musical terror for my generation.
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7️⃣ Doctors Have A New Treatment – Fishing
PTSD victims are being encouraged to get casting.
Here’s the story – which is mainly an excuse to share with non-Brit readers a clip from televisual Rohypnol, Gone Fishin’.
⏭ The earliest fishing bestseller – The Secrets of Angling – came out in 1613.
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If you enjoy this newsletter – please recommend it!
Best,
Adrian
