WORST NEW ECONOMIC RISK: A US TRADE WAR

“I would say the policies that are embraced by the US administration around trade represent the biggest risk today to the global economy.” That’s the warning of Philipp Hildebrand, vice-chair of BlackRock, the world’s largest asset manager, and former chair of the Swiss National Bank. Hildebrand points to president Donald Trump’s tariffs imposed on $250bn worth of Chinese goods as evidence of a concrete risk, adding: “You have some very exposed countries.”

China tops the list of vulnerable nations, but Canada and the EU spent much of the 2018 fighting arbitrary tariffs introduced by the US. In January 2018, Trump introduced tariffs on solar panels and washing machines of 30–50%. Steel and aluminium tariffs followed.

Risk managers must prepare for retaliation, leading to disruption for export markets and supply chains, and ripple effects as interrupted parties seek to recoup costs.

StrategicRISK spoke to PARIMA chairman, Franck Baron to gauge his thoughts on how this risk will impact not only China, but other businesses operating in the Asia Pacific region.

“The Trump trade wars with China belongs to greater risk exposure our organisations are facing with which geo-political uncertainty and volatility are paramount. The truth is that this has become a significant source of risk and volatility for organisations especially when you have overseas operations, business and supply chain ties.”

China’s richest man, Alibaba founder Jack Ma, called the US-China trade war “the most stupid thing in the world”, saying it would be the US who lost most from such as dispute. No resolution is in sight.

Baron urged risk managers to give this issue a top billing in their organsations. “This should be seen by risk managers as a very legit, relevant and critical risk to be treated as such in our respective risk assessments, reporting and mappings with our top management.”

But political risks in the APAC region aren’t simply because of US foreign policy, said Baron, with the region also prone to rising tensions closer to home. “Despite the magnitude of uncertainties and tensions triggered by the Trump administration, this risk goes well beyond that. We are witnessing strong uncertainty trends across the globe and in Asia with a surge of populism, a fragmentation of multilateralism, growth of nationalism and a weakening of international bodies that are aimed to structure political and economic relationships between regions and countries.”

“The Trump trade wars with China highlights too the growing importance (even as a paradigm shift) of new economic and political leading countries such as China which may become the largest economy in the world in the next coming years,” Baron said.

“A big challenge is that this uncertainty is deeply impacting capability to long-term planning which makes our risk management role much more challenging,’ he added.