US and China Decoupling: The Era of Trump vs Biden
With Election Day just around the corner, how Trump or Biden will handle international economic policy has been heavily scrutinized, especially with the China U.S. trade war still in full swing. China has been a hot debate topic that has come up in the recent debates and news as Trump initiated bans of Wechat and Tiktok. Regardless of how America plans to position its foreign economic policies, one thing is certain: The United States will begin to perceive China as a formidable opponent to be taken down and this sentiment will not change for a while regardless of election results.
The U.S.-China trade war that began in early 2018 has already cost 300,000 jobs according to Moody Analytics. How the next administration will craft policy to counteract China’s rising economic power and its internal economic stagnation could redistribute power and capital from a global network of supply chains that were established over the last four decades. The main concern is how to conserve the security of American citizens in terms of technological primacy and the protection of intellectual properties.
One point of division concerns the logistics of how the drive for American companies to switch investments to the domestic market can be realized. According to a survey by the American Chamber of Commerce in Shanghai, despite governmental pressures, only 4 percent planned to redirect investment to the United States, while 79 percent will continue operating as normal. Difficulties lie ahead in terms of disentanglement with China, particularly for American companies, as China continues to be a fruitful market.
If President Trump is reelected, there is potential to see concrete actions on punishing American companies that create jobs overseas and prohibit those that do business in China from receiving federal contracts. So far Trump has placed tariffs on imports from all foreign entities and countries to block the access of Chinese companies to American technology. In terms of global economic cooperation, Trump has “renegotiated the North American Free Trade Agreement, short-circuited the World Trade Organization’s dispute settlement system, and pulled the United States out of the Trans-Pacific Partnership” according to the Wall Street Journal. However, this has come at a cost. Not only were American jobs lost, but tariffs imposed by the United States and counteracting policy have taken billions out of the U.S. economy. Another negative included imposing additional burdens on American households by raising the cost of imports and diminishing exporter’s access to foreign markets. With all additional efforts, the American trade balance has continued to increase in the deficit. Prospects to carry through with a stricter Phase Two trade deal with China may also be in the works.
Biden presents a different storyline, but with a similar theme. Rallying behind an economic strategy to “rebuild domestic manufacturing capacity”, Biden is pushing to restore local supply chains and implement a reward/punishment system based on taxes for companies operating in the United States. One point of differentiation from Trump’s policy is his optimism to work with the world, taking defense against China by working with global partners and allies. However, the focus of America First is also quite apparent. Biden is pushing for a $400 billion “Buy American” strategy in terms of infrastructure and clean energy technology. Critics of his stance point out the potential to upset previous long-standing commitments made by the United States to other countries as such a policy would cut out several competitive European and Asian suppliers--not just from China. Despite Biden’s domestic first approach, he pushes for diplomacy when it comes to dealing with China. Potential renegotiations of international organizations that Trump has deserted is also in order.
All in all, regardless of which candidate is elected, the distrust of China will continue to drive American economic policy to regain control of an American-led global order-- especially in sectors dealing with technology or deemed to provide a competitive edge. American manufacturing will see a boost from the administration in terms of support due to the interests of decreasing reliance on China. Even so, the economic intertwinement between both global powers will prove to be a difficult mountain to navigate as the idea of “complete decoupling from China” may be nothing other than wishful thinking in today’s globalized world.
https://foreignpolicy.com/2020/10/02/biden-trump-trade-wars-election-2020/
https://www.wsj.com/articles/where-trump-and-biden-stand-on-china-11600767002
https://www.weforum.org/agenda/2020/09/us-china-tensions-hamper-development-efforts/
https://www.nytimes.com/2020/09/28/business/economy/biden-trump-made-in-usa.html
https://www.moodysanalytics.com/-/media/article/2019/trade-war-chicken.pdf
https://carnegieendowment.org/2009/11/19/china-what-risks-lie-ahead-pub-24192
https://www.cnn.com/2020/09/09/business/amcham-us-china-business-report-intl-hnk/index.html
