Tuesday, June 30, 2020

Are US and China Heading Into a New Cold War?
Sunday, 28 June 2020 3:12 PM

In this file photo US President Donald Trump (L) and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing on November 9, 2017.

With tensions continuing to rise between the US and China, experts warn that the two rivals are potentially heading into a new “cold war” that could prove damaging to the global economy.

President Donald Trump has raised the possibility of a “complete decoupling” from China. Decoupling, the process of breaking the deeply intertwined economic links between the two countries, would represent a major change in US-China relations.

Inconsistent messaging from the White House, coupled with the coronavirus pandemic and Beijing’s drive to limit Hong Kong’s autonomy, has led to frictions between the world’s two largest economies far beyond tariffs or targeted sanctions.

“Unlike the first Cold War where the primary contest between the United States and Soviet Union was a geopolitical one ... both systems, both constellation of countries, didn’t have much to do from a trade and financial point of view. That is not the case today,” Alan Dupont, chief executive of risk consultancy Cognoscenti Group, told CNBC.

“That is why I think the ramifications of this conflict — this worsening rivalry between the U.S. and China — (are) going to be potentially very serious,” he added.

Relations between the two rivals have deteriorated to their worst in decades since Trump took office in 2017. The US and China have engaged in a destabilizing trade war with each slapping new tariffs on the other since 2018.

More recently, US-China relations plunged even lower after Washington accused Beijing of keeping the world in the dark over the coronavirus pandemic and hiding the extent of the outbreak.

China is America’s largest trading partner and next to Mexico and Canada, is the third-largest export market for the US.  China has for long been a key test of America’s foreign policy, its national security and preservation of interests.

But President Trump has exploited and manipulated this crucial relationship almost entirely to serve his political and personal interests, according to a damning new memoir by his former national security advisor, John Bolton.

Despite the recent tough talk, there has been no coherent and consistent policy on China. Administration officials have been divided by factional infighting and conflicting policy goals, with security hawks often clashing with Wall Street advocates and free traders.

President Trump himself has been sending conflicting messages, which appear to be designed to boost his reelection prospects.

Even in the midst of the trade war, Trump casually offered to reduce tariffs on Chinese goods in order to secure a deal with Beijing that would make him look good in November.

The president also reportedly pressed China to buy US agricultural products so that he would poll well in Midwestern states.

The fate of that “Phase One” trade deal now hangs in the balance with Beijing threatening that US intervention in matters China regards as off limits could cause it to reconsider purchasing American farms products and other exports.

Chinese media, meanwhile, say the US is hoping to see a showdown, even an eruption of war, between China and its neighbors.

In recent months, the US has stepped up military pressure on China. American Navy ships and Air Force B-1 bombers carried out missions in the disputed South China Sea, sending a message that the US intends to maintain its military presence in the region.

Washington is also looking to further engage with India to bolster the country as a geopolitical bulwark against China amid a border dispute between the neighbors.

However, the rest of the world -- even America’s traditional allies -- appears more likely to side with Beijing than Washington as tensions continue to mount between the two rivals.

At a vote during the World Health Organization's annual meeting last month, Europe resisted US calls to investigate how China had handled the coronavirus pandemic, while Trump branded the organization as a Chinese puppet.

The world has ample reasons to be worried about what is increasingly becoming inevitable, but the real question is how a decoupling between the US and China will shape a post-pandemic world.

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