Relations between the United States and the People’s Republic of China have gone down the hill due to the protracted stand-off over trade and attendant rivalry in other areas. The trade conflict has had a negative effect on the military, political, technology, finance and education spheres and severely eroded diplomatic gains made in the 40years of establishing diplomatic relations between the two countries. In terms of the size of their economies, defence budgets, and their global greenhouse gas emissions, they both lead the world. The seeds for the trade war may have existed over time, but the protectionist measures initiated by President Trump with retaliation from China triggered it.
President Trump accused China of stealing U.S. technology. Beijing requires foreign companies to share their intellectual property in exchange for access to the Chinese market. The trade war started with items like solar panels and washing machines and then steel and aluminium products. It has escalated to aircraft parts, T.V.s, medical devices and even luxury delicacies like caviar have been added to the ever-growing list of Chinese goods that face a 25 per cent import tax. But this situation got worse when China retaliated with its own tariffs and the bilateral relationship came the lowest since the start of their diplomatic relationship. Further looking to the impacts of the US-China trade war it is believed that it paves a way towards decoupling. Chinese government emphasizes that the trade tension causes severe damage to economic relationships on both sides and poses a threat to the multilateral trading system and the principle of free trade.
There is a troubling long-term trend in bilateral ties with the decrease of bilateral trade between both nations. Trade is being undermined, which is the pillar of bilateral relations between the U.S. and China. If the situation remains volatile, then it would significantly undermine the substantial basis of future U.S.-China cooperation. As U.S.-China relations deteriorate, the costs have wide-ranging ramifications. China still needs to do its best to protect the cornerstone of bilateral trade. While geopolitical turmoil remains, the impact of the trade war on the bilateral relationships of the two economic giants is that it will further push them to compete for economic superiority and global dominance.
Regarding decoupling, evidence so far points to the fact that full decoupling is a very unlikely scenario due to the fact that President Trump initiated the trade war, and China only counteracted it. However, a reconfigured era of globalization could occur with no full-scale decoupling. This argument is premised on the fact that both countries need each other and have invested in each other’s economy over the years. Therefore, there is intense corporate pressure to keep this relationship open.
The Biden administration will use a strategy of engagement and pressure and emphasise market access and protection of intellectual property rather than full decoupling. Without any doubt, this trade war has a significant impact on the bilateral relationship between both states because it will shuffle the new liberal orthodoxy that the U.S. has supported so far.