“I just don’t understand how anybody could be a winner,” the former Goldman Sachs Group Inc. chief economist and coiner of the BRIC acronym said in an interview in London. “Economics can be criticized for a lot of things, but one essential core aspect of international economic theory is that trade is in aggregate a win-win and less trade is a lose-lose.”
The U.S. and China accounted for 85% of nominal gross domestic product that has been generated this decade, and a trade war between the two will have negative consequences for everyone in the world, O’Neill said, adding that some nations such as India might be more insulated.
Emerging-market stocks and currencies have slid in recent weeks as the threat of new U.S. tariffs on billions of dollars of Chinese imports sapped demand for risky assets. On Wednesday, less than a week after hiking import tariffs on about $200 billion worth of Chinese products, U.S. President Donald Trump raised tensions again, moving to curb Huawei Technologies Co.’s access to the U.S. market and American suppliers.
“Even if these trade tensions are solved for now, I think in the future there will be further escalations,” said O’Neill, also a former commercial secretary to the U.K . “I don’t think the U.S. is going to willingly accept China becoming bigger than the U.S. easily.”
Emerging markets, nevertheless, offer the brightest investment opportunities even as they will remain volatile and vulnerable to changes in U.S. interest rates, he said.
“Emerging markets are the future,” he said. “They will be the best to be whether you are a big company or whether you are an investor.”
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