JPMorgan On The Risk Of Military Conflict With China

Authored by Michael Cembalest, JPMorgan Chairman of Market and Investment Strategy, via,

Chinese handcuffs part 2: the risk of military conflict

In a prior post, we illustrated how in-country sales of US subsidiaries operating in China are almost as large as Chinese exports to the US, leaving the US highly vulnerable to retaliation by China if trade wars escalate. These trade tensions are just one part of the broader Chinese-US relationship; some observers expect military conflict between the US and China as well:

* In a 2017 survey by C100, 50% of Chinese citizens, 33% of Chinese business leaders and 35% of Chinese policy experts responded that war with the US was “very likely” or “somewhat likely”. The percentages were only slightly lower amongst US respondents to the same question

* Harvard’s Thucydides’s Trap Project found 16 cases over the last 500 years in which a major nation’s rise disrupted the dominant state. Twelve of these rivalries ended in war and four did not. The project is directed by political scientist and Presidential advisor Graham Allison, whose recent book is entitled “Destined for War: Can America and China Escape Thucydides’s Trap?

* The Chinese state-owned newspaper Global Times wrote in 2015 that “if the United States’ bottom line is that China has to halt its activities, then a US-China war is inevitable in the South China Sea”

Perhaps, but there’s also enormous economic pressure on China and the US to find common ground. Compared to adversaries of the past 100 years, economic linkages between the US and China are much larger.  The chart below is something I’ve been working on for the last few months. The idea is to measure the economic linkages between adversaries of the past and present. To do this, we add the outstanding stock of bilateral foreign direct investment, the amount of bilateral annual trade, and the amount of government bonds owned by the other country’s Central Bank. Compare China/US today to Europe and Asia in the 1930’s, to US/Russia in the 1980’s and to India/Pakistan.

 I’m not by nature an optimist, but I believe these economic linkages will eventually push the US and China toward compromise and away from a shooting war or a full-blown trade war.

When I say “full-blown trade war”, I’m referring to across the board tariffs on both sides that move the needle on overall US tariff rates. The next chart illustrates the magnitude of Trump’s trade wars so far. 

For the last 75 years, tariffs on dutiable goods imports into the US have been declining. Trump administration tariffs mark the first increase in decades, although so far, the increases are small. 

Should Trump follow through with tariffs on an additional $100 bn in Chinese imports and on $275 bn of US auto and auto parts imports, the change in tariffs would start to have more of a Hoover-esque feel to them, creating more serious risks to the global trading system.


Quantify Four Star Mon, 07/09/2018 - 18:17 Permalink

5.5% isn't a game ender. 50% might be. The U.S. can survive without importing crap from China, can China's economy survive without exporting tons of crap. Japan, Taiwan, Singapore and S. Korea can pick up any manufacturing of items we might need.

In reply to by Four Star

DingleBarryObummer serotonindumptruck Mon, 07/09/2018 - 18:12 Permalink

So when does China do the Nuclear Option and dump all US Treasury holdings?

Good, I hope they do.

Look, the FED blew this bubble and a huge financial collapse/crisis will ensue, and prices correct to fair market value.  It's inevitable.  We can pop the bubble now and simultaneously get our manufacturing base back (via tariffs against China); or, we can kick the can down the road and build more and more debt, creating an even bigger crisis.

The economic Doom is coming regardless.  All we can do is mitigate it and try and coordinate/time it so we can gain a little something from it.

In reply to by serotonindumptruck

Quantify serotonindumptruck Mon, 07/09/2018 - 18:12 Permalink

They can dump it it would lower the strength of the dollar and we would just print an extra trillion and buy them back ourselves. What does it matter if the U.S. has 21 trillion of debt or 22 trillion. Matters not. They only have $1 trillion of our debt. Peanuts, it can be created with a computer input within a second. Just doom and gloom bullshit.

In reply to by serotonindumptruck

GunnyG Mon, 07/09/2018 - 18:00 Permalink

China is no threat militarily. Just more neocon bullshit. They can't feed their people and their ghost cities scam will collapse leaving a few hundred million more Chinese w/o a job. 

mark1955 mark1955 Mon, 07/09/2018 - 19:13 Permalink

False Flag Friday the 13th is coming in several days ( A key day for satanist and the illuminati )!

I smell a Giant of an American/NWO STAGED, False Flag Naval Confrontation Friday The 13th, between the United States and China...Please don't fall for it!


My Fellow American...Please Don't Comply with any more Wars!


In reply to by mark1955

mark1955 mark1955 Mon, 07/09/2018 - 19:30 Permalink


My Fellow Americans, Please remember, ANY ATTACK ( Power Outage, dos, emp strike, mass shooting, chem/bio/nuclear etc., ) AGAINST THE UNITED STATES, will have been conducted by THE UNITED STATES/NWO against us and NOT: China, Iran, North Korea, Russia, Hamas/Hezbollah!


China is NOT GOING TO ATTACK US, OUR OWN GOVERNMENT WILL and then Try and blame China Falsely!

In reply to by mark1955

An Shrubbery Mon, 07/09/2018 - 18:02 Permalink

Oh fuck off jp! You deep swamp assholes should be learn how to run a bank before you start waxing eloquent about the risk of war. How about the risk of war with your debt slaves?

wally_12 Mon, 07/09/2018 - 18:17 Permalink

How can we win any trade war with China when the cost to manufacture most everything in the U.S. would be 10 times more than in China. This is Kabuki theater and nothing will come of it.

European American Mon, 07/09/2018 - 19:42 Permalink

War with China is "Inevitable"? Pure Zionist PsyOps Bullshit Propaganda. It's running rampant because Trump is methodically, incrementally exposing the Deep State and it's wicked global agenda for con-TROLL-ing EVERYONE.

CashMcCall Mon, 07/09/2018 - 20:15 Permalink

THANK GAUD WE HAVE Commander Heel spurs DONALD F. TRUMP [Former draft dodging coward turned bully], to lead the new and Mighty DIVERSITY SPACE FORCE. [Star Spangled Kazoos!]

UH OH... waiting for the TRUMPTARDs to start talking their big brave NUKE TALK. 


PitBullsRule Tue, 07/10/2018 - 01:04 Permalink


There's no risk, its a sure fucking thing!

US LOST Korean War.

US LOST Viet Nam War.

US LOST Afghan War.

US LOST Iraq War.

You think now you're gonna beat a BILLION fucking Chinks?!

No Risk Asshole, its Gay-Raun-TEED!!

You LOSE round EYE!

gdpetti Tue, 07/10/2018 - 13:04 Permalink

Same situation vis a vis germany back in the '30s... didn't stop war then, in fact, such interconnection encouraged it... as the Nazi's had the same puppet masters that we had... and those masters like to see their puppets fight it out every now and then... to test the system, the people etc... to lay the groundwork for what follows... now it's 'out with the OWO, in with the NWO'... same situation.

In WW2, our mass bombing stayed away from our corporate factories. Do you expect anything different this time?