We may not need to be that concerned about a global trade war as there is an emerging risk that is potentially a bigger threat to global economic growth than tariffs.
While the International Monetary Fund (IMF) cut its global growth forecast for the first time since 2016 on the back of the US-China trade war, it's the hardware hacking scandal that has the potential to hurt ASX investors more, in my opinion.
There are allegations revealed in Bloomberg that Chinese electronics manufacturers are planting tiny chips into devices (such as motherboards) that would allow its government to intercept sensitive information.
If you thought this cloak-and-dagger issue is confined to cybersecurity and spy agencies, you'd be wrong. The fallout is much wider as Western customers could stop buying Chinese made IT components.
I suspect this will be a much bigger blow to the Chinese economy than Trump's trade tantrum as China is the world's largest electronics manufacturer and the industry is worth circa US$250 billion ($350 billion) a year, according to IBISWorld data.
Any large cracks in the Chinese economy will be painfully felt by Australia given our trade reliance on China.
What's worse, this risk is not priced into our market. The S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index has suffered big falls over the past two days but that's due to the spike in US Treasury yields and not the looming trade war – let alone the hardware hacking scandal.
The problem with hardware hacks is that it's a lot harder to detect and is probably why Australia (on advice from the US) has banned Chinese telco Huawei from supplying any equipment to the upcoming 5G network buildout.
To be clear, these are just allegations and nothing has been proven. US tech companies such as Super Micro Computer, Inc. have denied there's a problem with its hardware, which is made using Chinese sub-contractors, although that hasn't stopped its share price from tanking.
It is unclear how widespread this potential problem may be or what other countries (besides the US) may be affected, but you can bet security experts will be kept busy for a long time combing through racks of servers.
This is an emerging risk that Australian investors need to keep an eye on as any sharp drop in demand for Chinese-made IT equipment will hit blue-chips first, probably starting with our miners BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited Fully Paid Ord. Shrs (ASX: RIO).
Other ASX darlings that rely on the Chinese consumer like A2 Milk Company Ltd (ASX: A2M), Bellamy's Australia Ltd (ASX: BAL) and Blackmores Limited (ASX: BKL) won't be far behind, although I can't really think of a safe place except cash to park capital if China's economy slows much more than the market is expecting.