There is always a sense of unease when the US and China tiptoe towards the edge of a circle and face-off over what lies within. The bones of contention within that circle have taken on many forms: from the Taiwan Straits crisis of 1953; to the Tiananmmen Square massacre in 1989; to Trump’s trade war in 2018; to COVID in 2020; and to Taiwan resurfacing in 2022.
So, it’s with that same sense of trepidation that market participants now watch a new bone of contention appear within that circle: a US-China face-off over Fentanyl.
I have followed the Opioid Crisis in the US on and off over the last decade (much in the same manner that I follow the school shootings in the US, with a sense of despair and wondering why is it so difficult to prohibit, especially when the policies and enforcement around anything that could potentially harm a life are so weak), but I remember first reading up Fentanyl early last year after Johnson & Johnson and major distributors like AmerisourceBergen, Cardinal Health and McKesson finalized nationwide settlements amounting to a mammoth $26 billion settlement for their role in the opioid addiction crisis.
But wasn’t the J&J settlement bandied by mainstream media as an opioid crisis? What does that have to do with Fentanyl? Turns out that there is a direct connection: Fentanyl is an opioid. And so are the widely used Methadone and Demerol.
Key point: Opioids are not Opiates (and there in exists the possibility of how the rise of Opioids could be a nasty side effect ─ forgive the dark humor ─ of the FDA being captured by Big Pharma. A classic example of a Regulatory Capture?)
Opiates, like Morphine and Codeine, are directly derived from the plant source ─ Opium; whereas an Opioid is synthetic or entirely man-made and Fentanyl, an Opioid, is approximately 100 times more potent than morphine and 50 times more potent than heroin as an analgesic.
Read that again in super slow-motion: Fentanyl is approximately 100 times more potent that morphine. Where did I get that hellish statistic? From the official website of the US Drug Enforcement Administration (The DEA)!
The US, as it heads into an election next year and facing a growing backlash at home over the opioid crisis, is possibly trying to redirect this issue to an old bogeyman, by indicating that China hasn’t done enough to stem the inflow of Fentanyl into the US.
What give this story an unusual twist is this: China banned all variants of Fentanyl in 2019.
Drugs are as bleak as it gets for any society and yet there is a silver lining in all this: the US has created a coalition of at least 80 countries to combat opioid trafficking and that by itself may lead to an immediate increase in societal awareness around opioid addiction.
The 80+ governments that have formed the coalition would do well to remember that: it is easier to stay off drugs than to get off drugs. Policy matters. Enforcement matters even more. And Zero Tolerance matters most.
