“The new cold war could be potentially earth-shattering for those countries which trade with both sides, forcing them declare allegiance or be told which side to support.”
The odds are strongly in favour of the US-China trade war escalating, Every said.
“If NZ says it is going with the US then its goods will be boycotted in China.
“If the exporters want to stay with China and the rest of the country agrees then you are in a very different world than you have been historically.
“Your foreign policy options for the future would narrow very sharply and the country’s general direction would change dramatically.
“NZ is not alone.
“Many other countries have the same angst, which is ‘I want to sell to you and be friends with someone else’.
“At present everyone is doing both but at some point either the US or China will say we want you to pick a side.
“So my advice to NZ is don’t ignore the possibility, try to plan ahead and find the opportunities there as well as the threats.”
Every said the US can put together coalitions of trade more readily than China, which has few allies.
China is also outmatched by the US in geopolitics, resources, demography, education, the business climate, debt, trade and currency.
The US dollar is the denomination for about 40% of Swift transactions worldwide, followed by the Euro for 30% and the British pound and the Japanese yen for a further 10% combined while transactions in the Chinese renminbi are minuscule.
The new cold war has already started and trade is only part of it – China is making territorial claims in the South China Sea and it has also engaged in cyber attacks.
“China looks like it is indestructible because it runs a huge trade surplus but that surplus at present is with the US and Europe, not the rest of the world.
“But the US and Europe are those countries China wants to push aside and at the same time it is expecting them to bankroll China but that will never happen.”
Every said the enormous US external debt and China’s huge holding of US securities is actually China’s problem.
“China’s internal debt is staggeringly large and it is very vulnerable to economic downturns.
“If it tries to use US external debt as a weapon then the US will just default.”
