Greetings from LAX. CEO Daily breaks late today because I am in transit to Brainstorm Tech in Aspen following a whirlwind trip across the Middle Kingdom with Alan Murray and other Fortune colleagues. This has been a banner week for Fortune in China. It began with a stop in Guangzhou, on China’s eastern coast, where we formally announced dates for the Fortune Global Tech Forum in that city. (November 29-30. Mark your calendars!) From there it was on to Yunnan province on China’s mountainous southwestern frontier to lay the groundwork for the Fortune Global Sustainability Forum, a new conference to explore solutions to the world’s environmental and energy challenges.
Usually I focus on the news in this space. But forgive me if, just for a moment, I don my brightest plaid jacket to extol the significance of these two new platforms. The Tech Forum, which I’ll co-chair with Adam Lashinsky, builds on the spectacular success of last year’s Brainstorm Tech International, also held in Guangzhou. The year’s theme is “Innovation in the Age of AI,” and already we’ve confirmed a stellar lineup of speakers that includes Sinovation Ventures’ Kaifu-** Lee, Sequoia Capital China’s Neil Shen, Ping An Insurance Group’s Jessica Tan and more. (You can register for Tech Forum, and check out our new video, on the Fortune Conference page.) The Sustainability Forum will convene in fall of 2019 at a spectacular venue on the s****s of Fuxian Lake, one of China’s great ecological treasures. (More details about the Sustainability Forum here.)
Both of these conferences will be recurring annual gatherings connecting top executives, investors and government leaders from around the world with high-level Chinese counterparts. Already China issues loom large in the pages of Fortune magazine and, as diligent CEO Daily readers know, on the agendas of our established franchises like Brainstorm Tech and the Fortune Global Forum. (For example, in Aspen this week, Adam will interview Richard Liu, founder of Chinese e-commerce giant JD.com, while I’ll host an all-star roundtable on Chinese innovation.) With the addition of these two new China-based programs, no global media company comes close to Fortune in providing unique opportunities for the world’s business leaders to engage with China and gain first-hand insight into developments in a country that, for better or worse, now plays a pivotal role in virtually every major global challenge.
Which brings us to the news. The trade war between the world’s two biggest economies is staggering into its third week and both sides are sizing up the costs. On Tuesday, the Trump administration outlined tariffs on $200 billion worth of Chinese products, adding to the $34 billion worth of import tariffs that went into effect on July 6th. China promises to retaliate in kind. U.S. Treasury Secretary Steven Mnuchin acknowledged that trade talks between the two countries have broken down.” China blasted the U.S. for “acting erratically” and “blatantly abandoning” the established consensus on trade. And, for good measure, the Commerce Department said China’s monthly trade surplus with the U.S. widened in June to $29 billion, an all-time high. (The spike likely reflects exporters rushing to beat the July tariffs.)
How long will it all last, and which side will suffer most? Allianz economic advisor Mohammed El-Erian asserts the U.S. is “winning the trade war” and will emerge economically “better off” than the rest of the world when it’s all over. CNBC stock guru Jim Cramer thinks market movements suggest China already has “blinked” in the confrontation. Christopher Balding, an associate professor at the HSBC Business School in Shenzhen, says the prospect of a prolonged trade war “is causing growing alarm within China,” prompting key officials to worry that the ruling party has “made a significant miscalculation.”
Still, pessimism prevails. El-Erian’s blithe assessment is predicated on the assumption that tit-for-tat retaliations won’t “spin out of control” (which they seem already to be doing). And markets have underestimated the risks of this trade war from the outset.
Stephen S. Roach, former Morgan Stanley Asia chair and a senior fellow at Yale University, says the U.S. is “on track to lose” this face-off. Economists at UBS, who had previously dismissed the idea that a trade war would do significant damage to either economy, reversed tack Wednesday; they now see the potential for widespread supply-chain disruptions, rising inflation and slower U.S. growth. Washington Post columnist Catharine Rampell warns that Beijing’s next moves could include a propaganda campaign to get Chinese consumers to boycott American products, stricter environmental inspections and anti-monopoly rules for U.S. companies, and a host of other nasty punishments. Trump’s tariffs, she frets, have “backed China into a corner,” and may prompt Chinese leaders to “double down on the very bad behavior the United States has been trying to stop.”