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As various announcements and actions by the US and China pertaining to tariffs and trade come forth, they of course have direct implications, but to a significant extent each action is intended to achieve some higher-level purpose. In some cases the goal is more clearly evident, and in other cases it sits deeper in the background. In order to more clearly understand what is going on and to anticipate how things might play out, below we have mapped out what we see as each side’s key overarching goals, connected the various actions taken to them, noted their interconnections, and recognized other factors at play.

A wise Chinese leader who I will keep unnamed told me that it pays to negotiate by finding out what the other party wants most and try to give it to them and to have them reciprocate rather than to find out what will hurt the other party and give that to them because little wars have a tendency to quickly get out of control to become big wars and anyone who has ever gotten into a big war wishes that they hadn’t because they are so horrible. He referred to World War I as the classic example, while noting that it was true for most wars. He hopes that the Chinese-US trade disagreement doesn’t move from a dispute to a war of any sort.

Within a decade or so there is a high likelihood that the Chinese equity market will be on par with the US and European equity markets in terms of its size and importance to global investors. The size of the economy and the related size of the cash flows that it throws off for companies will be of comparable size, listings on public markets are growing rapidly, and the opening up to domestic and foreign institutional investors is happening faster than most are ready for.

Investment Associate

Bridgewater is focused on understanding the historical cause-effect relationships of complex economic situations. As we look back at the events of 2008, we invite you to explore some of the crisis-era research and decision making that enabled our investment team to understand what drove the market and helped us weather the greatest financial storm of a generation.