Quarterly Review & Outlook-2nd Quarter 2018

A man should look for what is, and not for what he thinks should be.”

‐ Albert Einstein

In the 20 years following the demolition of the Berlin Wall, the relentless decline in

economic barriers fostered a period of global wealth creation with no historical parallel.

Still, the world has never been a free‐trade utopia. Germany and China, among others,

have run protectionist policies for decades, aided by deep and completely open U.S.

capital markets that were able to absorb the subsequent imbalances. Shortly after

implementing the first round of tariffs, President Trump himself floated the idea of “no

tariffs, no barriers,” which, viewed in this context, is less paradoxical than it seems.

None of this suggests the administration’s goal of a cooperative China will be achieved

soon, or at all. China faces enormous internal pressure, but its authoritarian government

has staying power, as well as options to make life uncomfortable for investors. The likely

outcome is a negotiated peace, but there is risk in backing them into a corner.

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