Bi-Weekly Geopolitical Report – What Would a U.S.-China War Look Like? (January 18, 2022)
by Patrick Fearon-Hernandez, CFA | PDF
(Note: As we shift to a bi-weekly publication schedule for this report in 2022, we introduce the accompanying Geopolitical Podcast, now available on our website and most podcast platforms: Apple | Spotify | Google)
We’ve written extensively about the worsening geopolitical tensions between the United States and China, which have already affected investors. For example, the Trump administration’s tariffs on Chinese imports have skewed economic developments in each country. Businesses in each country have suffered, while others have benefitted.
Looking ahead, the risks are even bigger. It’s important to stress that a U.S.-China war is not inevitable. On each side, the top leadership probably wants to avoid war. However, as each country flexes its muscles and pushes back against the other, there is a growing risk of miscalculation or mistake that leads to shooting and bloodshed. Even if the conflict became “World War III,” it would not necessarily look the same as World War II. A conflict between today’s two greatest powers would exemplify a new, unique form of modern warfare in terms of the domains in which it would be fought, the weapons utilized, the tactics and strategies employed, the alliances facing each other, and the goals pursued by each side. This report describes the likely lead-up to such a war and how it might be fought. As always, we wrap up with a discussion of the likely ramifications for investors.