International Policy Digest

Andrea Hanks
Emerging Voices /10 Aug 2020
08.10.20

The New Cold War and What it Means for Americans

As tensions flare between China and the U.S., many experts warn that Sino-American relations are headed for their worst point yet, with some even warning that war may be on the horizon. On July 22, the U.S. State Department ordered China to close its consulate in Houston, Texas. This move has escalated already tense relations, as China has promised to “react with firm countermeasures” to what it calls an “erroneous decision.” Though the closure of one consulate may seem insignificant, it is a symbol of the growing hostility between the two countries.

This end of a relatively peaceful era has been incredibly rapid, occurring within the span of just a few months. How did such an alarming breakdown happen so quickly?

It’s a little complicated because there is no single, simple answer to this question. However, a key player in this heightened tension is unarguably the coronavirus pandemic. Both countries have played the blame game, where each country tries to shift the responsibility for the pandemic onto the other. President Trump has repeatedly referred to the virus as the “China virus,” and has gone so far as to demand coronavirus reparations. China has responded in turn, refusing to back down to American accusations. These unending recriminations have revealed just how deep their mutual mistrust is.

Unfortunately, this comes at a time when the two countries clash in nearly every other sphere as well. Take the Uyghur internment camps, where China has detained hundreds of thousands of ethnic Muslims. After years of inaction, the U.S. imposed visa restrictions and sanctions on officials and companies linked to the camps in early July. China has retaliated by banning entry to American senators, a move that indicates the growing shift away from diplomacy. This pattern of American condemnation and Chinese retaliation appears across all different sorts of issues, from conflict in the South China Sea to the Hong Kong protests.

As Chinese and American interests grow further and further apart, several historians have drawn comparisons to the Cold War. Other experts have criticized this analogy as an exaggeration because the USSR, unlike China, had nearly no trade or other sorts of external interconnections with the United States. Indeed, for many years, Sino-American relations have been preserved by bonds that neutralize any political hostility – such as trade connections, tourism, and education. In fact, many analysts even believe that these seemingly unbreakable links erase the possibility of a new Cold War.

However, restrictions and difficulties imposed by the COVID-19 outbreak have made these “shock absorbers” weaker than ever. As trade ties between the two countries deteriorate, the Carnegie Endowment for International Peace found that imports from China declined by $87.3 billion, the largest annual decline between trade partners outside of the 2009 recession. Trade has long been one of the most important areas of cooperation between China and the U.S., making its sharp fall incredibly concerning, and even dangerous.

But for those in the U.S., what will the decay of the usual interconnectedness of information, trade, and people between the two countries mean?

For companies who rely on the closely connected economies, the effects would drastically change the way they operate. Many technology companies worry that they will have to make a “zero-sum” choice – and decide whether they are fully American or Chinese. In order to accomplish this, many companies will have to create two separate entities to operate in both countries, taking away all the benefits collaboration can bring, such as more innovative designs and products.

Another problem to worry about is the interruption of supply chains, since a significant number of U.S. corporations rely on Chinese labor. Heavily regulated trade and increased hostility would make these supply chains extremely volatile and fragile. Unfortunately, this means that U.S. consumers, who rely heavily on Chinese-produced goods and services, would see difficulties buying all sorts of items, from furniture to bicycles.

This scenario is relatively low magnitude and does not take into account some of the more extreme effects that could occur. For example, as trade crumbles, the dollar will likely take a hit, hurting financial stability across the U.S. and globally.

Cooperation between the United States and China is critical not only for the two countries, but also for the rest of the world. Thus, efforts to de-escalate tensions must be prioritized before it is too late.

As news outlets report more escalations nearly every single day, one will inevitably be “the straw that breaks the camel’s back.” Only time will tell the consequences of the breakdown of relations between the world’s two biggest superpowers. Whatever the effects are – whether it is war or trade disruption – they are sure to be catastrophic, and far-reaching.