Yahoo Finance's Editor-in-Chief Andy Serwer breaks down the US-China trade relations.
One of the top priorities President-elect Joe Biden will have to tackle—right after COVID-19 and shoring up the economy—is our relationship with China, (which of course figures in those two issues as well.) The U.S.-China relationship re-emerged this past week and I suspect will continue to do so as we move towards Inauguration Day.
It was a central tenet of Trumpism that China was demonized and blamed for our economic and societal woes—everything from job losses and trade deficits to fentanyl—and of course the COVID-19 pandemic too. And guess what? In some respects President Donald Trump was spot on, but he so conflated these truths with hyperbole and falsehoods that he undermined his own argument and as such gave ammunition to the Chinese.
Bottom line: Relations between the two biggest economies in the world are a mess right now. (Just this week Trump banned investments in Chinese companies he says do business with its military.) The question is what should Biden, (who late this week was belatedly congratulated by the Chinese for winning the election), do? We need a reset to be sure. But exactly how, and to what end?
One thing’s for sure, we’re never going back to where we were before with China, simply because the Chinese economy has nearly caught up with ours. Also it’s now the case that folks on both sides of the aisle agree that China plays by its own rules to our detriment and we need to call them on that, (one of those Trump truisms.) How we do that is where we disagree.
“The Chinese hawks want China to fail,” Silicon Valley VC and entrepreneur Reid Hoffman said to me this week. “But China is an important part of the global economy. If China fails, we all fail. Bridge building is really important, while still, of course, fiercely competing, and making sure that China plays its fair and just role on the world stage and doesn't pretend it's an emerging economy anymore, and isn't allowed IP theft. We have to have a collective set of rules that we all play together that allow the world to progress.”
A few points to pull out there. First regarding Hoffman’s “collective set of rules.” If Trump was the ultimate bilateralist, Washington watchers agree that Biden will almost certainly revert to traditional multilateralism. That means he will likely work with China as part of a group, along with say APAC allies like Japan, Australia and Korea, perhaps by rejoining the Trans-Pacific Partnership (TPP), which the U.S. quit in 2017 and of which China is not a member.
But the second bigger point which I really want to expand upon is when Hoffman says “fiercely competing.”
Oh indeed.
Simply put, this economic tug-of-war between the U.S. and China will be the defining geopolitical mega-trend of our lifetime. And that rivalry, (and rivalry is the perfect word for our relationship), for global hegemony, will take place primarily on one virtual battlefield, that being the business of technology, writ large.
Welcome then, to the new Digital Cold War.
Think back to the last time the U.S. was engaged in a bilateral rivalry like this. It was with Russia during the (original) Cold War, which began the day the Axis powers surrendered in 1945 and ended with the fall of the Berlin Wall in November 1989.
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