Later today a plane will land at San Francisco airport and reignite a major diplomatic and military flashpoint – one that will have consequences for us all.
It’s another part in the story I’ve been telling you all week – what’s shaping up to be the biggest geopolitical story of 2017 (which comes hand in hand with an opportunity for tactical investors).
It all comes back to shifting relations between three particular nations. Or two, depending on where you’re from. What do I mean by that? That’s all part of the story! Let’s jump right in.
Demanding revenge
Let’s start with Donald Trump. I know, I know! You’re probably sick of hearing about him already and he isn’t even president.
But boil it down, and really Trump is just a symbol of change. He’s a catalyst. And his election/Twitter account has already forced us to rethink the dynamics of the geopolitical world. To that extent, he’s highly significant and affects us all.
Take America’s relationship with China. Trump successfully painted China as “the bad guy” in the US election. His “Make America Great Again” slogan played into that idea. You could loosely interpret it as “Let’s take all our jobs back from China”.
Whether or not that’s possible is a story for another day. But it’s set the world on edge about a trade war between China and the US. It’s also the backdrop of Trump’s dealings with China across a number of fronts. He’s set himself up to play tough. It’s part of his schtick. And it might play well with the people who voted for him in the US.
That won’t just mean being the tough guy on trade
It’s already spilled over into diplomatic relations. How? In Trump’s dealings with Taiwan and consequent challenging of the One China policy.
Which brings us back to the tarmac at San Francisco’s airport today. Taiwanese president Tsai Ing-wen will pass through the US on the way back from a trip to Central America. This comes off the back of meeting Republican lawmakers in Texas, and Trump taking a congratulatory phone call after his election.
These might seem like trivial events to us. They’re not. They’ve all taken place against the express wishes of China. And they threaten the One China policy, a key plank of relations between the US and China. It matters. If you doubt that, consider this editorial from the Global Times, a Chinese government-backed newspaper, with added emphasis from me:
Sticking to (the one China) principle is not a capricious request by China upon U.S. presidents, but an obligation of U.S. presidents to maintain China-U.S. relations and respect the existing order of the Asia-Pacific.
If Trump reneges on the one-China policy after taking office, the Chinese people will demand the government to take revenge. There is no room for bargaining.
First question: does Trump “respect the existing order”?
No. That’s part of his appeal, if you’re a Trump fan. He’s a historical arsonist, as Dan Carlin might put it, setting fire to the old order to allow a new one to flourish. (I don’t know if he’ll do that. But it is certainly “Brand Trump”.)
Second question: can you imagine Trump backing down?
Me neither. Playing tough with China is part of what got him elected. Let’s consider how this situation could play out over the coming months.
Trump continues to talk tough on trade with China. He refuses to respect the One China policy. The situation escalates until Trump becomes the first US president to meet the Taiwanese president in person.
That ramps the situation up even further. China is furious. Trump refuses to back down, but he agrees to meet with the Chinese leadership in order to “strike a deal”. The world tries to pull itself back from the brink.
The meeting is a success
However, minutes after the official talks are over, Trump tweets: “China has been stealing our jobs and our military secrets for decades. Now this. UNFAIR!”
What had started as the early maneuverings of a trade war becomes a diplomatic crisis. Neither side backs down. The crisis morphs into all-out conflict. Not in the traditional military sense; the conflict is fought entirely in cyberspace, but the destruction is real.
A huge cyber-attack against Taiwan disables large portions of the power supply. The island is plunged into darkness. US intelligence blames a Chinese-backed “bad actor” codenamed Hurricane Panda. (This is a real codename – according to certain cyber-security firms, it is to China what Fancy Bears and Cozy Bears are to Russia.)
In an effort to divert attention away from relations with Russia and unite the nation, Trump goes all in. He tweets: “China hacks Taiwan and expects no response. Big surprise! America has the most powerful cyber-forces on the planet. Watch this space!”
Right now it’s fiction.
But for how long?
More on that next week.
Nick O’Connor
Associate Publisher, Capital & Conflict
PS I think a US cyber conflict with China, rather than Russia, is much more likely under Trump. All the signs are there today if you’re willing to see them. Trump has the motive (talk tough on China, unite nation, deflect from Russia dealings), there’s a clear trigger (Taiwan specifically, trade generally), and he has the means.
What do I mean by “the means”? I mean the clandestine branch of the US military used for cyber operations – cyber-attacks. I’ve been researching this with Eoin Treacy for half a year now. We think it has big implications for the stockmarket. I’ll follow up on that next week.
Category: Geopolitics