Who wages war against someone is always convinced that he can win, otherwise he would stay calm and think, if anything, of defending himself. In the end, however, it often happens that those who wage war end up defeated. It is evident, in these cases, the overestimation of one's own forces and the underestimation of those of the adversary.
If the calculation of the forces in the field proves to be frequently wrong ex post, it is because it is carried out almost exclusively on the external front. If you have more men, tanks and planes than the enemy, if you have a better fighting technique and a favorable battlefield, highly probable. The home front is rarely taken into account and it is here, most of the time, that the donkey falls.
The Franco-Prussian War of 1870-71, the two world conflicts, the Cold War and the Vietnam War were lost by the attackers due to a wrong calculation on the holding of the internal fronts, their own, the enemy's and that of third countries.
Napoleon III waged war on Germany riding the nationalist wave, but at the first difficulties its internal front fell apart and France, with the Paris Commune, plunged into civil war. In World War I, Germany underestimated the American home front, deemed isolationist to the bitter end, and was severely weakened by internal revolutionary pacifism. In the Second World War the German home front held up to the last, but Germany again underestimated the American home front and its willingness to return to fight in Europe, did not understand the incredible resistance of the Russian home front and overestimated the internal resistance of the fascist ally.
The Vietnam War was lost by the attacking America both on the internal front and for an underestimation of the strength of the North Vietnamese internal front. The Soviet bloc began to collapse, after a long phase of expansion in the Third World, when internal consensus on the occupation of Afghanistan broke down.
When Trump decided to take the first steps of a trade war with China the announcement tweet made a point of presenting her as destined for an easy and sure win. As net exporters they have much more to lose than we do, she wrote. This, in economic terms, is absolutely true, but is equivalent to an analysis of the external front only. As for the domestic front, Trump has thought about strengthening his support in the manufacturing states of the Midwest and in fact, according to the polls, his popularity has improved and has reached that of Trump, however, he may have made three errors of assessment, two of which are respective home fronts.
The first is that in a conflict it is not necessarily the winner who has the least to lose but who is more willing to lose what they have, even if it is a lot. And here China, an authoritarian country, has a very advantaged side. While American importers of steel or Chinese technology immediately tore their clothes at Trump's tariff announcement and while CNBC presented a one percent stock price drop on Wednesday as a dramatic example of the damage that protectionism is already doing to America, in China no association of soybean importers or pig farmers has risen to criticize Chinese tariffs on American products and all the media and blogs rallied around the government.
The second is that China is not the Japan of the eighties and nineties, a country that allowed itself to be commercially abused by the United States in the name of a political and military alliance. China is perfectly aware of its strength, showing in every way its will to surpass the United States technologically (and therefore militarily) and has a home front that, at least officially, is ready for a tough confrontation.
The third is that China has been viciously targeted in its response to Trump. The tariffs on agricultural products affect all Trumpian agricultural states. The tariffs on American cars do not affect Detroit, which does not scare China, but Tesla, which annoys a China that wants to quickly become the global leader in electric cars. The tariffs on aircraft, for now the small ones, accelerate China's race to become a world producer of aircraft alongside Boeing and Airbus.
It is still early to tell how the trade conflict with China will evolve, but from the first signs it appears that Trump and Xi, pragmatic men, are ready to curb the escalation. China will make concessions on intellectual property, America will make it more difficult to export technology, and some tariffs will remain here and there. Better than nothing for Trump, better than a full-blown war for Xi. What's more, to calm the markets, Trump will speed up the conclusion of negotiations with Canada and Mexico for the new NAFTA as much as possible.
If so, it will be a tactical success for the United States, but the strategic problem of the imbalance between American and Chinese technological growth will remain intact. On the one hand, China intends to become a global leader in artificial intelligence by 2025 and is opening a large pole entirely dedicated to the sector on the outskirts of Beijing. The military implications and those linked to internal security are evident here. And to make it clear who's boss, the government buys shares and the Communist Party buys seats on the boards of technology companies.
On the other side an increasingly bitter civil conflict is underway in the United States (once again the internal front is decisive) on the question of the overwhelming power of Silicon Valley. The new technology (especially its pop component) is fiercely politicized and aggressively uses its platforms, from social networks to the controlled press, to exert political influence and pass on its values, from open borders to the citizen's salary paid by general taxation ( to which it contributes very little). The new large online commercial platforms, for their part, increasingly assume a monopsony and monopoly profile. At this point the new technology suddenly finds itself politically isolated, it is being attacked not only by Trump's daily tweets but also by the radical left, by large and small distribution and by a growing number of small businesses who find themselves downgraded to mere suppliers of the commercial platforms. It is easy to think that, in the next recession, this sector will be at the center of populist attacks from all sources (including establishments) and will be taxed, regulated and fined exactly as happened to banks after 2008.

Europe, for its part, is not received. The European Commission has just allocated a handout of 50 million to support artificial intelligence and has published 14 strategy pages, 12 of which are dedicated to how to fight the attack by artificial intelligence on civil liberties. Macron, having understood that nothing will come of Europe, has commissioned the Macronian mathematician Cédric Villani a rather articulated French plan and will invest a billion and a half in it, a decent figure which however disappears in the face of Chinese appropriations.
In market correction (stock markets down, bonds up) fears of a trade war, the reconsideration of technology as a leading sector and the perception of a slowdown in growth on the one hand and inflation on the other have intertwined.
Fears of a trade war seem decidedly excessive to us, if only because of the slow time frame (six months) that the eventual entry into force of the measures under discussion will take.
Reconsidering technology as a leading sector makes sense in a mature phase of the equity rally in which the value sector tends to become more attractive again. In technology, however, one must distinguish. One thing is pop technology, actually made by companies that sell advertising, movies, and information about their customers' habits. This sub-fund, which has very high multiples, will rebound when the current correction is over, but will need to be lightened strategically for the reasons we have seen and for the crisis some of its business models are entering.
Hard technology, especially if it has military implications, will instead be maintained, both for its more reasonable multiples and for growth prospects.
The ups and downs of inflation and interest rates should be read in the light of enthusiasm linked to the sudden positive conclusion, in December, of the laborious US tax reform. For a few weeks, euphoric companies relaxed their traditional inhibitions, accelerated hiring programs and granted more pay raises, offsetting it all with price increases for their customers. This carefree phase, also thanks to the stock market correction, quickly came to an end and inflation returned to calmer conditions.
Beyond these ripples, however, the underlying picture remains that of a rise in US inflation above two and a half percent over the next six months. Once the excess short positions on bonds are eliminated, they will start to fall in price again, although not dramatically. Stock exchanges, for their part, will struggle to return to the January highs. If they do, they will need to be lightened.
