Welcome to the 265th edition of Trade War.
Why the Israel-Iran war—now even more with the US bombing of Iran’s nuclear sites—puts Beijing in the hot seat. China’s central bank governor calls for a global financial system which relies on multiple currencies. And de-dollarization picking up while China cuts the amount of US Treasuries it holds to lowest level in 16 years.
Chinese companies seize on Brazilian market as trade and tariff tensions rise in the US and Europe and consumer demand remains sluggish at home. And local industry groups and labor unions worry as Brazil is swamped by Chinese electric vehicles.
European Commission President Ursula von der Leyen slams Beijing and warns of a new “China Shock.” US Ambassador to China uses softer tone in warning of “supply chain vulnerabilities.” And Trump’s reshoring plans may prove a “fools errand.”
Notable/In depth ~
Small parcels from China to US plunge with end to de minimis exemption
Jack Ma’s rehabilitation all about US-China AI rivalry
US withdrawal of aid to Southeast Asia helps China strengthen regional sway
Why the Israel-Iran war puts China in the hot seat
“The Iran-Israel conflict ongoing conflict is a very difficult situation for Beijing, primarily because of its very close relationship—both economically and strategically—with Iran,” I said in the Thursday live video, made before Saturday’s U.S. strikes on Iran’s nuclear facilities (a move that China’s national broadcaster CGTN called “a dangerous turning point.”)
“It’s a major [energy] provider for China,” I noted Thursday. “And China's provided a financial lifeline to Iran as it continues to buy oil from Iran. Strategically China also sees Iran as very important. It's a linchpin of its effort to demonstrate in the Middle East that it is a potential alternative to the U.S. as a geopolitical player.
“So in 2023 China brokered the Iranian-Saudi Arabian deal which saw the normalization of relations between those two countries, a huge deal for those two arch foes. A year later it also helped broker—what did they call it?—a national unity agreement between the Palestinian factions. So again Iran is very helpful and has been very useful for China both economically and strategically. And it's not lost on Beijing that Iran is a declared foe of American hegemony, and that fits in with Beijing's global stance as well.
“At the same time China is going to struggle to figure out how to actually play a constructive role [as Xi said China would on Tuesday]. The fact that it does want to play a constructive role, as it says, reflects the fact that it has absolutely no desire to be directly involved in any serious conflict.
“That means China is very unlikely to sell weapons to Iran, for example. It's not interested in being pulled into this [conflict]. It realizes that other countries that get pulled in--read the U.S.--are distracted, which although they don't want to see Middle East instability, does serve a purpose to China. It distracts the U.S. from focusing on China. At the same time Beijing . . . doesn't want to do anything that would torpedo this fragile trade agreement that it's negotiating with the U.S.”
Watch the whole Thursday live video below ~
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