The Seven Seas of Rhye

Today, the Middle East remains at war. Israel broke the fragile ceasefire with Hamas, and Gaza remains coated with battlefield dust and humanitarian toil. US President Donald Trump’s boast to end wars with his “Day One” is a yet-to-be-realised fantasy.

1973 was also the year when the US Senate commenced probes into Watergate triggered by the break-in of the Democratic National Committee headquarters. Before the constitutional crisis could worsen, Republican President Richard Nixon, in an unprecedented move, resigned before 1974 was up.

Today, shell-shocked and divided US Democrats could hardly challenge Trump’s barrage of executive orders, especially with their party’s popularity at a new low. Yet Washington is not the political crisis Watergate was. Rather, Trump is facing mounting push backs of his campaign promises from Federal judges, including Chief Justice John Roberts, a Republican.

The similarly Republican-controlled Congress has so far been compliant to Trump’s actions. The jury is still out if the court orders will be respected and, if not, what action, if at all, will be taken. After all, judges don’t hold guns, and Presidential pardons for the Capitol Hill rioters had already been granted. 

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Meanwhile, First Bro Elon Musk’s Tesla has been receiving whole-hearted plugs, as the electric vehicle maker suffers from plummeting sales partly because of safety recalls but also from boycotts from his political activism. Trump posed with Teslas on the White House’s South Lawn. He then called arson attacks on Tesla dealerships domestic terrorism. Commerce Secretary Howard Lutknik potentially crossed legal lines for calling Tesla’s stock “unbelievably cheap” — indeed, it might, given how it has halved from the post-election peak.

Musk, on his part, has implored Tesla staff to “hang on to” their shares as its future is “incredibly bright”, and that a US$5 trillion ($6.6. trillion) valuation is attainable. For context, at the Trump Bump peak last December, Tesla was valued at US$1.5 trillion.

Again, in 1973, my favourite band, Queen, debuted their first album featuring their first chart hit: The Seven Seas of Rhye, which describes the magical and peaceful Kingdom of Rhye, ruled by a wise king until an evil creature disrupts the peace. The destruction of land and seas follows with the rain stopping and the waters drying up. 

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Today, Queen — and, of course, frontman Freddy Mercury remains in popular culture. The 2018 biographical film Bohemian Rhapsody was the highest-grossing musical biographical film of all time.

We Will Rock You
Another Queen hit, We Will Rock You, is an evergreen sporting anthem today. However, we hope it is not becoming a metaphor for the world today, where climate change, diversity, equality and inclusion and even free speech appear to be non-grata in MAGA quarters of the US. 

At a recent conference in Hong Kong, my fellow panellists and I debated a wide range of topics. We discussed Trump, Europe and US-China competition, mulling the impact on companies and economies caught in the middle and whether net zero has run its course. 

We pondered if America First is becoming America Alone. It does appear that being a strong competitor, the way China and Russia are is safer than being weak friends like Canada and Europe. If so, we are heading towards One World Two Systems — America First and what will be left of multilateral institutions and the rule of international law. 

When Russia was cut off from Swift by the West following its 2022 invasion of Ukraine, and when Chinese tech companies were hit with sanctions, the US effectively forced other countries to fall in line and work within its paradigm of costly technology infrastructure. This has fueled the growth of multi-trillion-dollar market cap US tech giants, whose CEOs were quick to bend the knee and, therefore, given front-row seats at Trump’s inauguration. 

Under such a deal, private profits from innovation accrue to shareholders even if in receipt of substantive public grants. Substantial rewards and the profit motive have kept the US in the lead for innovation and global capital gravitating there even if its supply chain from raw materials to manufacturing has been surrendered to China and other parts of the global south. This is something Trump is seeking to rebalance. 

There remain two residual issues. In trying to win more with might than right, allies at the short end of the stick might also have to find alternatives to the US paradigm. With clever computing, DeepSeek and other new Chinese transistor technology innovations have proven that you do not always need high energy-consuming Nvidia chips. The future of AI could go hand in hand with the green economy, and one does not need to “drill, baby drill” per se.

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At the conference, I learned that some of my fellow panellists who flew into Hong Kong carried burner phones for their own security. Others were worried that their phones would be screened for anti-regime collateral. More recently, it was the US instead that has made headlines for screening the phones of French scientists and other tourists, barring entry or detaining visitors at border controls. 

Throughout our panel, our moderator, an Australian, gingerly prevented us from tripping over Hong Kong’s national security laws. The worries were evidently unfound. We all made it out of Hong Kong with no hiccups.

Under Pressure
As Trump had proclaimed, he plans to introduce the “Big One” set of reciprocal tariffs on April 2. In his first term, tariffs on US$425 billion of US imports were imposed. President Joe Biden who followed largely left it unchanged, including tariffs on China. At least US$1.6 trillion of US imports have been levied with Mexico, China and Canada, followed by steel and aluminium, impacting 50% of US imports for now.

If and when reciprocal tariffs kick in, up to US$3.2 trillion, or 100% of US imports, will be affected. The current administration considers consumption taxes, including VAT and GST, tariffs that require retaliation. The Boston Consulting Group suggests that the top 10 US trading partners could be subjected to a US$350 billion tariff cost come April 2. 

Reciprocal trade tariffs would be material for many economies, including India, the EU and UK. If the impact of “harmful trade measures” — defined broadly as government interventions or policy measures that discriminate against foreign commercial interests — are to be added, India and China, followed by Vietnam, will be the ones hit the most.

As such, India, with the Modi-flying of its stock markets in the last three years, is likely to splutter. Besides US tech, I will avoid Indian equity markets for now. There is significant growth from its demographic dividend, but India, too, will have to painfully pivot like China at some point to rely more on domestic consumption and be more self-reliant. For now, it will be an adjustment and a pause as equity markets reprice the forward.

I Want To Break Free
Thus far, traditional US allies in the Asia Pacific, like Australia, have been spared Trump’s attention aside from some tariffs pain. Rather, Europe has been in the eye of a storm with overbearing US interest in Greenland from its West and Russia’s threatening overtures from the East. Remarkably, Europeans are belatedly cranking up their factories to build more war toys for themselves. 

With tit for Dom Perignon and tat for Jack Daniel’s, Europe could do with new markets and friends. In this regard, an EU-India free trade agreement could be opportunistic for what is coming on the economic front. If the UK could transcend oceans, literally, to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, why not the rest of Europe in another shape or form?

Again, in 1973, the current London Bridge replaced the 19th-century version. However, it was the opening of Istanbul’s 1,560 m long Bosphorus Bridge the same year, linking Europe and Asia, that was more significant. 

Today, this bridge could be useful, provided Syria and Iran are stable and assimilated back into a multilateral rules-based world. Otherwise, it can plumb through the Suez as long as the Houthis are kept at bay in the Gulf of Aden.  

Even with Europeans miraculously uncapped their fiscal reticence in the face of the Russian Bear and the back of the American Eagle, public capital will still be constrained. However, can Europe ultimately avoid buying Chinese tech products to fund defence and energy? Yes, some rumours about measures against BYD in Europe last week started the Chinese tech correction, but faced with a less reliable US friend, would it choose cheaper Chinese solar panels and tech?

For now, Chinese equity indices have started to correct after the DeepSeek “stimulated” rise thus far this year. We called this year to be positive Chinese equities but with some snake-like gyrations. I would give it a few weeks minimally to see if the Lion-OCBC Hang Seng Tech ETF, which broke out from the 70 cents range to $1, might correct in reaction to the reciprocal tariffs in April. If so, I will buy again in the mid-80 cents range.

To get invested in the Seven Seas of global geo-economics reordering, I am now more comfortable investing in the broader Lion-OCBC China Leaders ETF, which gained just 20% versus 40% for China tech, or even the upcoming Lion-China Merchants CSI Dividend Index ETF.

Chew Sutat retired from the Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange. He was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore