Growing tensions over China’s handling of coronavirus could lead to a ‘much worse’ trade war, investor says

FAN Editor

A woman wearing a protective face mask in France. The country is slowly reopening after almost two months of strict lockdown.

Pascal Le Segretain | Getty Images

Escalating tensions over China’s handling of the coronavirus pandemic could be a “major risk” to economic recovery —and may even lead to a trade war worse than the one between Beijing and Washington, one investor told CNBC. 

From the U.S. to Europe to Australia, more and more world leaders are calling for China to be investigated over the origins of the outbreak, which was first reported in the Chinese city of Wuhan in late December.

As economies prepare to reopen again after weeks of lockdown to stem the virus’ spread, recovery could be derailed by political tensions, said David Sokulsky, CEO and chief investment officer of Concentrated Leaders Fund.

“That’s a major risk which isn’t being priced in at the moment,” he told CNBC’s “Capital Connection” on Thursday.

“As we pass peak infection rates, the politicians are going to want to blame somebody, and the obvious target for that blame is China,” he added.

Blame game

The world economy came close to a standstill in March as nations shut down borders and businesses were shuttered in a bid to blunt the spread of the disease. So far, the disease has infected 4.4 million people and killed more than 302,000 in over 180 countries and territories.

Some countries have blamed China for mishandling the virus outbreak and are calling for compensation for the paralyzing impact on their economies. Others are calling for an inquiry and want to know if China could have prevented the outbreak from spreading so widely.

But Beijing has repeatedly rejected claims it mishandled the situation. 

“China is a victim, not an accomplice to it,” said Chinese Vice Minister Le Yucheng, according to an official transcript of his interview with NBC News. “It is not a time for accusation and political manipulation,” he added.

The U.S. has threatened retaliation against Beijing, while European Commission President Ursula von der Leyen has backed calls for an investigation into the disease’s origin.

“If you have a look at the rebound during (the fourth quarter) last year, and during January this year, a lot of that was due to improved trade negotiations and signing of (the) phase one between U.S. and China,” said Sokulsky. 

We could see a very quick rehashing of the trade wars that we had, but potentially on a much worse scale than what we had last year.

David Sokulsky

CEO of Concentrated Leaders Fund

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