Wealth Outlook 2024 - Slow then grow

100 Wealth Outlook 2024 | Unstoppable trends The implications of G2 polarization on global technology Where did G2 polarization come from? In June 2018, the Trump administration imposed tariffs on China to combat what it felt were unfair trade practices ( FIGURE 1 ). That led to a series of tit-for-tat trade war actions by the two countries. The succeeding administration of President Biden left these measures in place. Faced with an absence of vaccines and hospital capacity, China implemented a strict “zero-COVID” policy that made travel into, out of and within China all but impossible, and instituted lockdowns that inhibited global manufacturing and trade. This put great economic pressure on China and made it more isolated. During this time, the US banned the export of certain chips vital to China’s development of advanced weapons systems and China followed by restricting exports of rare earth elements essential to the US production of EVs. Then the Biden administration doubled down by invoking national security to make it harder for US firms to invest in certain Chinese companies. As tensions rose, the issue of Taiwanese independence became a greater political hot button. As a result, China accelerated its military operations in the Taiwan Strait even as Nancy Pelosi and other US elected officials flew into Taipei in solidarity. A rougher-than-expected unwinding of a property bubble added to China’s economic woes. China stepped up enforcement against alleged espionage activities by the Chinese operations of foreign firms. Faced with a souring political and economic environment, a growing number of Western businesses began rethinking their future in the country. FIGURE 1 US-China tariffs on each other and the rest of the world Tariff rates (%) Chinese tariffs on US exports Chinese tariffs on ROW exports US tariffs on Chinese exports US tariffs on ROW exports 30 TRADE WAR PHASE ONE AGREEMENT 66.4% CHINESE 20 EXPORTS SUBJECT TO TARIFFS 10 58.3% US EXPORTS SUBJECT TO TARIFFS 0 2018 2019 2020 2021 2022 Source: UN Comtrade, Trade Map and Market Access Map, as well as announcements from China’s Ministry of Finance’s and USTR, as of November 22, 2023.