Hot spots

There is a giant chess game being played by global leaders, and the trade war may just very well be the opening. There are recent reports that say the U.S. accounts only for 0.1% of the global shipbuilding, while China accounts for 53% (South Korea 29% and Japan 13%). It also says that China builds all its ships meeting military requirements, or putting it in other words, all ships built in China are war ships. They also have steel and rare earth minerals, but they don’t have (enough) oil. They consume 10% of the global demand of oil (104mbd), and they import 72%, with 80% of that, or roughly half of China’s oil needs, flowing through the strait of Malacca (see below). In the 80’s (and still today), the “hot spot” was the straight of Hormuz, between Oman and Iran, where most of the oil in the Middle East is shipped to the rest of the world. But now, the shouth China sea and in particular, Malacca, is getting “hotter”, as the U.S. has decided to deploy 6 B2 Stealth Bombers in a military base close enough to knock out anything that intends to go throuh the straight into the South China Sea. Coincidentally, Taiwan happens to be there too, with a recent JV between TSMC and Intel. If there was any military conflict in that area, it will fall outside of NATO’s article 5 (north of the Tropic of Cancer) but it could fall under the purview of article 4 (consultation clause). As the trade war escalates with retaliatory measures, it’s important to understand the weak points of both oponents, since they will be used to elevate the conflict to the next level.

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