America vs China: Trade Wars, Covid-19 and Future Economic Relations

The two largest economies in the world, the US and China, seem to be on a collision course that has been accelerated by the Covid-19 crisis. Since President Trump came to office, the two superpowers have upped the ante in their economic confrontation. Tensions rose with President Trump’s ambitious plan to close his country’s massive trade deficit with China. Convinced that the US has been disadvantaged by the current arrangement of the global economic order, President Trump took radical action to tilt the international trade system in America’s favour. What began with higher tariffs on Chinese imports has continued with increased pressure on Chinese companies trying the penetrate the American market. Beijing has responded with equally aggressive measures, leading to escalation.

With Covid-19 pandemic, the economic rift between the two countries took a new turn. Prior to the pandemic, the US and China had announced the signing of the first phase of a trade deal. However, following the economic shock caused by anti-Coronavirus measures, the realisation of the trade deal has been complicated. Furthermore, given the fact that the virus originated and spread from China, anti-China sentiments are now on the rise across the globe. Multiple governments have criticised China for mishandling the crisis and for failing to prevent it from becoming a global pandemic. With US elections on the horizon, President Trump may find it increasingly attractive to leverage on anti-China sentiments in order to gain the sympathy of voters at the expense of escalating the tensions even further and potentially burning bridges for future negotiations.