How our China trade war could become a war war

[Bloomberg]( Today’s Agenda - How trade war could [turn to war war](. - Elizabeth Warren’s trade plan is [downright Trumpian](. - The world must [stop Sudan drifting]( into new chaos. - Fiat and Renault [really need a deal](. Echoes of D-Day in the China-U.S. Conflict Seventy-five years ago today, Allied troops landed in France, beginning a campaign to destroy Nazi Germany. It’s a decent moment to consider how such a situation came to be and how something like it might happen again. Noah Smith points out that, just 34 years before D-Day, Britain and Germany were such close trading partners that war between the two was almost unthinkable. World War I happened shortly thereafter, and out of the ashes of that nightmare grew the Nazis and World War II. Today the relevant players are the U.S. and China, seen as so close economically they could never go to actual war. But the current trade conflict could be the start of a long process [driving the two countries into separate economic spheres](, Noah writes, making armed conflict likelier. Fortunately, the two are tied together by more than just trade: China is also the top foreign holder of U.S. Treasury debt. One fear constantly dogging the bond market is that China will sell its Treasuries, ruining the U.S. financially. But China has [too many foreign currency reserves]( and too few options to do that soon, writes Brian Chappatta. Meanwhile, we simply have a grinding trade war hurting economies around the world, with new fronts threatened in Mexico and elsewhere. John Authers suggests markets [haven’t fully priced in]( all these risks. A [global slowdown in mergers would be a big blow]( to markets, and Tara Lachapelle suggests we might be watching one unfold, thanks to the trade war. The Fed will [likely step in to bail us out](, but possibly not until September, writes Tim Duy. And lower Fed rates may come [too late to help housing or autos](, which are already strained, writes Danielle DiMartino Booth. If the currently unthinkable should happen and the U.S. should go to actual war with China, then many [lessons learned on D-Day would still be surprisingly relevant](, writes James Stavridis. We seem to have plenty of time to avoid that – but then time is always shorter than you think. Further Liberal-Democracy-in-Peril Reading: Denmark’s election is a reminder [centrist candidates can still win](. – Leonid Bershidsky Warren Channels Trump In the crowded field of Democrats trying to unseat President Donald Trump in 2020, Senator Elizabeth Warren has distinguished herself with a barrage of detailed policy ideas, the latest of which is a trade plan that shares a lot philosophically with … President Donald Trump. Warren wants to Make American Manufacturing Great Again by boosting U.S. exports with some arguably protectionist policies, including beating up on the dollar. It’s a plan so Trumpian even Tucker Carlson [had to praise]( it. Karl Smith is less of a fan. He notes America’s shrinking manufacturing sector is a sign of economic strength; [trying to revive it will be impossible and damaging](, making Warren’s approach as misguided as Trump’s. Noah Smith finds more to like in the plan, but says the idea of [trying to manage the dollar is problematic]( for a plethora of reasons, including the fact that top trading partner China still controls how much its own currency moves. Bloomberg’s editorial board takes that last criticism a step further: Warren’s plan would require the Fed to actively weaken the dollar, which is [exactly what Trump has demanded](, the editors write. But this would defy the Fed’s mandate and erode its independence, while inviting even more currency manipulation around the world. Further Dem-Candidate Reading: Joe [Biden’s abortion stance]( highlights a problem for Democrats. – Jonathan Bernstein Don’t Abandon the Sudan A massacre of protesters in Sudan this week got little attention, but could be an early chapter in [an unfolding tragedy that echoes what happened in Egypt]( in 2013: A dictator is overthrown, and then the military violently crushes a peaceful democratic transition of power. Bloomberg's editorial board writes the U.S., Europe and Middle Eastern allies must respond forcefully to keep this history from repeating itself. One specific step the U.S. could take would be to pressure [Saudi Arabia to stop supporting the military]( junta, Eli Lake writes. Otherwise Sudan will lose its chance at democracy. Fiat, Renault Should Keep Talking Speaking of blown chances, Italy’s Fiat Chrysler and France’s Renault have abandoned merger talks almost as abruptly as they began them. Their failure to strike a deal [exposes both companies’ many weaknesses]( to the world, writes Chris Bryant. Fortunately, there’s a [still a way to make a deal happen](, writes Chris Hughes. However awkward and joyless such a marriage would be – not to mention how Nissan will fit into it – a deal is probably the least-awful option for both. Telltale Charts Traders [used a time machine, apparently](, to drive up PG&E Corp. stock ahead of news of a plan to cover California wildfire costs. Timebound ratepayers may be much less happy, writes Liam Denning. Congratulations, Uber Inc., on regaining your IPO price. Now you must prove [people will use more than one of your services](, as ride-sharing revenue slows to a crawl, writes Shira Ovide. Further Reading Acquisitions alone won’t make [Google a big player]( in the cloud. – Shira Ovide New EU rules are a [big problem for the bubbly fintech]( industry. – Lionel Laurent Israel’s economy is a [triumph of neoclassical economic]( theory. – Tyler Cowen Narendra Modi is driven by the same kind of [anti-elite resentment seen in Mao](, Nixon and Trump. – Pankaj Mishra Traffic [jams are a sign of income inequality](, which congestion pricing only makes worse. – Leonid Bershidsky China’s [refusal to accept the West’s recycling]( is part of a dangerous trend away from handling waste cleanly in places where raw material is needed most. – Adam Minter The late Herbert [Sandler was unfairly vilified]( for his role in the financial crisis. – Joe Nocera ICYMI Commerzbank [might merge with ING](. Billionaire Warriors investor [shoves Toronto Raptor](, gets banned. Marine salvager wants to [use an iceberg]( to provide drinking water for 4 million. Kickers Area tourist, on first try, [guesses safe combination]( that defied experts for decades. (h/t Scott Kominers) Area storm-chaser [launches rocket into tornado](. (h/t Ellen Kominers) Vulture’s [best books of 2019]( so far. Vulture’s [best movies of 2019]( so far. Note: Please send safe combinations and complaints to Mark Gongloff at mgongloff1@bloomberg.net. New to Bloomberg Opinion Today? [Sign up here]( and follow us on [Twitter]( and [Facebook](. [FOLLOW US [Facebook Share]]( [Twitter Share]( SEND TO A FRIEND [Share with a friend] You received this message because you are subscribed to Bloomberg's Bloomberg Opinion Today newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( Bloomberg L.P. 731 Lexington, New York, NY, 10022