The Great Decoupling

In terms of economic relations, the U.S. and China have been coupling up for decades. So much so that they became the biggest trading partners on the planet starting in 2014. Now, amid trade and technology wars, a pandemic and strained diplomatic relations, the world’s two largest economies appear bound for a seismic “decoupling.”

                 The trade between two countries is on decline due to tariff war. The pandemic and new fights over market access are further depressing trade as tensions on multiple fronts provoke what some see as an unavoidable tumble into a new cold war that could rival the old U.S.-Soviet divide.

A growing list of disputes includes alleged spying and intellectual property theft by China. The U.S. sees China’s ambitions in advanced technologies and involvement in foreign communications networks as a threat to national security and has banned American sales of components to various Chinese companies including Huawei Technologies Co., the world leader in 5G wireless technology.

Root cause of the Problem:

Trump brought his “America First” agenda to the White House just as President Xi Jinping was flexing China’s military, economic and technological muscle. Having lambasted China for harming the U.S. economy and stealing American jobs during his 2016 campaign, Trump instigated the trade war two years later with the first imposition of tariffs that eventually applied to around $500 billion of goods.

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