The Great Decoupling? What’s Next for U.S.-China Rift

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.” Yet these two giant markets could find that breaking up is hard to do.

Bilateral trade sank 15% in 2019 after U.S. President Donald Trump began imposing tariffs on Chinese imports and China responded in kind. It had surged by an annual average of 11% from 2001 to 2018, a stretch that included China’s admission to the World Trade Organization and transformation into a global manufacturing powerhouse shipping cheap electronics, toys and clothes to American consumers. 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. There’s a big difference during this showdown, though: The two combatants’ economies are linked in ways difficult to undo without cost and disruption.