Blain’s Saturday Morning Porridge Oct 11th 2025 – Trump’s Gaza Win vs China “Judder” Moment
“China and the US were competitors. Trump has made them adversaries.”
The Gaza deal is an extraordinary win for President Trump. Banging heads together worked – and may have created conditions for the Middle East to move towards reconciliation. But, we had another “judder” moment as the trade conflict he triggered with China threatens to overturn the USA’s economic resilience.
Apologies for lack of Morning Porridge last few days. Early doors meetings in London…. This morning, it’s a Saturday special to give President Trump credit for Gaza. But first, the implications and potential consequences of the escalating trade war between the US with China.
China – Trade War Risks
Trump’s trade war with China threatens to turn hot. Yesterday the President threatened new 100% tariffs vs China in response to the Chinese placing additional export controls on the export of rare-earths and minerals critical to the manufacture of any and all the technological marvels the West relies on. The risk is a massive shock to global supply chains – unless Trump is prepared to once more TACO. (And even then it may be too late…)
Trump appears to have seriously miscalculated on China pushback since the start of the Trump 2 administration.
He hoped he’d fixed it. He was confident of doing a “deal” when he was due to meet Xi later this month. Now he is threatening to cancel any engagement. He expected to come back with renewed orders for American farmers to flog the soya-mountains that threaten to bankrupt them to China. He was hoping to present that as a triumph of deal-making. He reckoned such a “deal” was pragmatic, would appeal to American voters, and would keep both economies ticking and talking.
Problem is: China is no longer accepting the terms of a deal – it is setting them.
Deep down, Trump already knew that. He learnt the lesson after threatening China with 145% tariffs in April. China didn’t even blink – but came right back at him. Like so many others that have dealt with China, Trump had not factored Time into the equation. Now he knows.
Western Economies are essentially short-term – focused on immediate returns on investment, and 4-5 year political cycles. China plays for the long-term. In the last 25 years it has moved from a supplicant at WTO to the globe’s premier manufacturing power, with increasingly sophisticated military power. As has been pointed out many times – America is governed by lawyers, China is run by engineers.
9-years ago China saw the danger-signals presented by the first Trump administration of trade threats and rising political unpredictability. China wants economic stability and market access, and is more than willing to compete to secure its’ prosperity. Since the middle of Trump 1 and the threats he made against them, China has essentially disengaged with the US economy to compete directly against it. It no longer buys Boeing or US Treasuries!
China is making pragmatic decisions on how it sees the world over the next 30 years. It recently its scaled back its own domestic Comac airliner programme (decades behind the West), and has moved closer to Airbus which has substantial in-country manufacturing to move forward its tech. China is now outselling US (and European) cars globally. Aside from Chips, China pretty much makes everything it needs and can export. That did not happen overnight – but over a decade of deliberate decisions to invest, advance and compete, including projects like the Belt & Road plus associated development banks to build new supply chains for China into Africa and Europe.
Trump’s domestic political message has pinned the blame for America’s manufacturing decline on “unfair” Chinese practices, stealing jobs from the USA and unfairly competing in global markets. Thus, China was hit heavy by 145% punishment tariffs. But he was forced to TACO (Trump Always Chickens Out) on China tariffs when it became clear that the Middle Kingdom was not going to kow-tow and would lash back even more painfully on the US economy.
Now China is sending an even clearer message to the West. Nvidia may control the supply of chips, but China controls the supply of everything else that enables tech. (And it will become self-reliant on chips!) Today anything with a chip inside needs the batteries, magnets, rare-earths and stuff only China makes. Just as Trump (and previously Biden) sought to control China’s access to chips through rules that stopped third countries exporting US banned tech to China, now its doing exactly the same to the USA. And Trump is furious. He just got punched back – right where it hurts most – his deal-making acumen.
While most of the economic analysis on the effect of tariffs on the USA has been on how much inflation (and tariffs as stealth taxes) will impact consumption, or how much corporate earnings will be lowered by importers absorbing the costs, the real issue is supply-chain disruption. Chinese made widgets feature in everything and trade flows depend on widgets. We learnt that during Covid.
For all the talk about how resilient the US economy is – with spending holding up strongly, employment slowdowns being immigrant distortions, and inflation from tariffs being underestimated, a massive supply chain disruption will cause serious and sustained economic damage. That recession that had been looking so unlikely is now filling the rear-view mirror again!
What is China’s goal. The contest for Global Hegemon is in full swing. Many of my chums believe it could turn into a hot war – as China backs Russia versus Europe and prepares to seize Taiwan.
I doubt that. Yes, China now backs Russia and will continue to supply it to keep Europe on its toes, and to divide Europe from the USA – ably assisted by Russia’s trollbot misinformation campaigns and political destabilisation programmes. It will continue to make noise about Taiwan, to keep America focused and delinked from Europe.. but its aim is to win the contest without violence, through the defacto creation of a South-East Asia economic global centre of gravity led by China, alongside India, Japan and Korean, and the new Asian powerhouse economies, attracted to be members by the prospect of wealth, growth and prosperity! Part of the plan is to persaude Europe to join the programme.. and that get’s easier everyday that the US appears to be slipping into something autocratic and deeply repellant to European sensibilities.
As Sun Tsu wrote: “the supreme art of war is to subdue the enemy without fighting.”
Meanwhile.
Gaza – Hope
Give President Trump credit for the extraordinary ceasefire he’s cajoled into being in Gaza. It might not have been elegant or pretty in terms of classical diplomacy, but it could be effective and transformational. There is now hope where once there was little.
Removing Hamas as Iran’s proxy and sidelining Israel’s extreme right-wing opens the door to the prospect of regional peace and reconstruction. When the history books are finally written, Iran will be rightly blamed. Hamas was its proxy – its mission was to kick the Hornets’ nest through rape and murder on October 7th 2023. It’s leadership, safe in its Qatar bunker, and their paymasters in Tehran, knew exactly how Isreal would react.
The deaths of so many Palestinians at Israeli hands is tragic and horrible – but Tehran triggered it for propaganda purposes. They succeeded – persuading millions the Palestinians were the innocents (they largely were!), leaving millions of Jews around the world insecure and subject to mob hatred and hysteria. The Mullahs took they cynical decision to martyr Gaza – knowing full well Netanyahu’s reliance on the far-right would generate brutal and devastation. Their aim was to stop Isreal and the Arab States signing deals that would have recognised Israel’s right to exist, leaving Iran sidelined.
Where do we go from here? If Isreal can dial back enough of its fury to be constructive and the Arab states are prepared to re-engage, then the long-term outcome could be a new regional economy built around Saudi, Isreal and the UAE states. That’s exciting!
The immediate future will remain volatile while the hatred calms. Iran will remain a threat and will continue to ferment division, seeking to stop Saudi recognising Isreal. Isreal needs to dial back the ugly-settler rhetoric – clamping down on the hard-right, and accept and embrace global demands for real Palestinian statehood.
The upside potential for long-term regional reconciliation is tremendous – but the path to conflict is always paved with good intentions. Interesting and hopeful times ahead. For there to be lasting peace, we have support both Palestine and Isreal, Arabs and Jews. I stand with both.
Perhaps one day trendy Palestinian scarves sporting the twin motifs of the Star of David and a Cresent Moon may become commonplace?
Out of time, and off to walk the dog and enjoy the weekend.
Bill Blain
CEO – Windshift Capital
Author – The Morning Porridge
Partner – Shard Capital
