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US seating President Donald Trump is scheduled to host China President Xi Jinping for a two day talk at Mar-a-Lago, Florida. Speculation around town is that the long awaited meeting smells of a Thucydides trap.

Thucydides trap was a term coined by Graham T. Allison to refer to when a rising power causes fear in an established power which escalates toward war. This was in reference to Thucydides ancient writing, “what made war inevitable was the growth of Athenian power and the fear this caused Sparta.”

From North Korean nuclear program to the currency trade wars, the scheduled meeting would be truly a battle of titans. Donald Trump was not short of words during his political campaign on China related issues and he may take a firm stand just to prove a point. This would be a no brainer for those who know him well.

The two major issues for Mr. Trump would be trade and North Korea. From his perspective, the problem with US – China trade is that it is not bilateral but favors the Chinese. US jobs have been lost or actually stolen according to Trump to China. Although Trump may be adamant during the trade negotiations, China holds the upper ground knowing that more than half of US trade deficit is owed to China.

Apart from China’s bid to control the South China Sea, Kim Jong-un, North Korea president nuclear ambitions talks would be on the table. Trump had earlier stated that America was willing to deal with the issue solo if China proves to be hard headed. China is among the largest trade partners of North Korea. Xi Jinping may not be willing to lose a trading partner at the expense of a nuclear risk that has not been substantiated as of yet.

Global markets may be rattled by any disagreement between the two power houses. Even the hand shake between the two world leaders would be analyzed. So let’s seat back and wait for Trump tweets to see how the meeting went.

 

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Posted by Timothy II Aperit

True believer in numbers. Statistics never lie. Bsc Financial Engineering MBA Finance ACCA