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Increasing trade wars raise many questions

19.09.2019
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September 19, 2019

Japan and South Korea are quick to follow the example set by the US and China. The recent trip to China of Timo Helosuo, CEO of Kolster and Vice Chairman of the Finland-China Trade Association, made him think about a number of issues related to trade wars.

I ended my summer holiday by heading out directly for a business trip to China. Reflecting on the trade wars that broke out during my stay, it occurred to me that instead of isolated incidents, we are dealing with a much more widespread phenomenon.

By now, the trade war between China and the US is old news, and there has already been talk of the conflict winding down. Over the summer, many of us had time to wonder when the cross-border trade war might end – until it flared up again.

Further confusing the situation back in July were news of another trade dispute breaking out, this time between Japan and South Korea. The conflict has its roots in events back during the second world war. Japan restricted imports of its key technologies to South Korea, in turn causing some South Koreans to boycott Japanese products.

“Easy to get in, hard to get out”

One underlying cause for the clash between China and the US was the latter’s desire to bring China to its knees for its abuses of IPR and manufacture of counterfeit products, for example. Now, with the majority of Chinese imports restricted by US sanctions, China has begun taking countermeasures. The tension between Japan and South Korea may have significant ripple effects on the global electronics industry, as both countries are leading suppliers and manufacturers of components and consumer electronics.

What to make of all this? When governments get upset, they take it out in a manner that shakes up the entire world economy. The method is certainly one to attract attention, and its effects on business life may be widespread and disastrous at worst.

To those following the situation unfold, it is clear that a trade war is easy to get in but very difficult to get out of.

”Is your readiness in order?”

If trade wars become a more commonplace and permanent state of affairs, how should we learn to prepare for them? Is our risk readiness in order? It should, as the global trade relations may turn upside down in the course of just a single week. Forecasting such sudden changes is difficult for both businesses and the media, however.

What about us Europeans? Will we be able to take advantage of the rapid changes and make the right decisions? All of a sudden, European – and Finnish – markets and partners have become much more attractive to many Chinese companies, for example. Still, how sustainable is any new business done under the shadow of a trade war? And who might be the combatants and benefactors of the next trade dispute?

News coming in over the past few weeks have raised worry about the current path of mutual sanctions and boycotts and where it might lead us. As traditional power relations in global trade are shaken up, the effects are felt by contractors and consumers everywhere in the world.

Only one thing is clear – we are all on the losing side.

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Contact us

Timo Helosuo
timo.helosuo@kolster.fi
+358 40 576 1659
Kolster China Desk