In this report by Dr. Rukmani Gupta, independent defense analyst, assesses the evolving narratives and misperceptions around ‘economic decoupling’ between the United States and China, arguing that these can have serious consequences for the China-US relationship, as well as states in the region.
The report refutes the argument that United States and Chinese tit-for-tat tariffs suggest a trend of bilateral ‘economic decoupling’, and argues that this is a misreading of the patterns of China-US economic interactions. Rather, the “economic decoupling” rhetoric is being used to bolster negative political and public narratives and support national security objectives – with potentially worsening outcomes for global stability.
In analysing trade and investment data since the start of the trade war in 2018, Dr Gupta argues that there has been no suggestion of breakdown – or decoupling – in economic relations. The United States has maintained its place as China’s third-largest trade partner, following ASEAN and the European Union. However, the rhetoric around the tariff and trade wars continues to negatively impact relations. These narratives inform and shape domestic perceptions and attitudes of the other.
President Xi Jinping has argued that “attempts to erect barriers and decouple go against economic and market principles”. Chinese officials, such as former Foreign Minister Wang Yi continue to characterise the current situation as one in which “the US is actually pushing an economic decoupling.” In the Chinese view, US policies “take aim at China’s political system, development path and governing party.”
Gupta points out that these official narratives impact public perceptions and that public opinion polls in both countries show worsening public attitudes towards the other country in recent years. In the face of these narratives, avoiding a new cold war is extremely challenging.
Under the Biden administration, the aim of continuing the Trump administration’s trade tariffs and now introducing new export controls on semiconductor chips is intended to impede China’s military-civil fusion, i.e., the use of commercial technology for military purposes. This is a shift in the stated purpose of tariffs and trade restrictions: from correcting the trade imbalance under Trump to bolstering national security under Biden.
If decoupling encompasses far more than economic issues and is more broadly defined as a breakdown of bilateral relations, a reduction in points of contact, and a process that varies in intensity over time, then under this scope ‘decoupling’ is underway between China and the United States. This has repercussions for regional and global geopolitical stability, most notably for the Asia Pacific region. Gupta stresses that “the burdens of strained bilateral ties between China and the United States will be borne by ASEAN and other actors in the region that seek to maintain balanced relations with both countries.”
About the Author
Rukmani Gupta is an independent defence analyst with over 15 years of experience in academia, think-tanks and industry having previously held positions at the Janes Group, the Institute for Defence Studies and Analyses, the Institute for Peace and Conflict Studies and served as the Associate Editor for the India Quarterly. Her work concentrates on issues of international security, geopolitics, defence strategy, and military capabilities in Asia, maintaining a special focus on China.
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This publication was made possible by a grant from Carnegie Corporation of New York.