Alchanati Campbell & Associates
War of the Worlds
Tensions between the United States and China are higher now than at any other point during the last three decades. As a result, the world’s two largest economics continue to clash politically and economically, increasing uncertainly in an already chaotic world. Despite being as economically intertwined as two nations can be, the U.S. and China have vastly different political ideologies and are often on opposite sides of geopolitical issues.
Starting with the trade war, the two nations began decoupling their economies, an action that had economic implications for nations across the world. As the trade war dragged on, Chinese firms found other markets to sell their products and U.S. companies found other nations to manufacture their goods in. China fell from the United States’ top trading partner to 3rd place behind Canada and Mexico and is not expected to regain its place anytime soon. Just as it seemed a lasting agreement had been made the world was blindsided by the novel coronavirus and U.S.-China tensions skyrocketed once more. Sticking to his nationalism sentiment, President Trump shifted blame from his administration's handling of the pandemic to the initial cover-up by Chinese officials. This created a nationalistic fervor in both nations with officials on either side accusing the other of false claims. As a result, increased tensions can be seen in the South China Sea (North Natuna Sea). The U.S. and China have both sailed naval vessels through the area as a show of strength. Conflict in this part of the world is recognized as one of a few flashpoints that could spark a massive international war. While displays of strength are common, both nations have also demonstrated more commitment to the area. This week the U.S. announced a sale of $180 million worth of torpedoes to Taiwan. This sale comes as both nations are drastically upgrading their militaries. The U.S. is midway through an ambitious plan to shift its fighting force to focus on near-peer enemies that includes upgrading almost every weapon in the U.S.'s expansive arsenal, while at the same time the Marine Core is disbanding most of its armor battalions to shift its fighting force to become more agile and able to quickly assault and take small islands in the South China Sea. China for the first time is preparing to outfit its troops with body armor and improve its training platform, both of which have long been considered major setbacks for the PLA. At the recent semi-annual meeting of party members, Chinese officials discussed plans to take a long-term approach to retake Taiwan through political means as opposed to military action, and a new security law for Hong Kong that may jeopardize the “one country, two systems” framework. These are just some of the events that the global markets are looking to for insight on relations between the two counties that make up approximately 40% of world GDP. Another important indicator is the weakening of the Chinese yuan which has reached the level it was at during the height of the trade war. In the near future we can expect more events like the U.S barring American companies from supplying Huawei as China retaliated for the striking blow to the telecommunications giant. These events will only accelerate the pace at which these economies decouple.
The ACA Foundation
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