Few relationships in the annals of history have been as complicated as that between the United States and China. Theirs is not only an economic tie but also a decades-long relationship marked by conflict, need, and changing power dynamics. But this once-thriving alliance has soured in the past ten years, casting doubt on the direction of world trade and the financial repercussions of a society growing more split apart.
Those who have long profited from the abundance of globalisation find the waves moving toward “de-globalisation” unsettling. But are we seeing a deliberate, if sloppy, diversification of supply chains and allegiances, or is this a worldwide unravelling?
To address this, one must navigate a sea of tariffs, trade conflicts, and rising tensions—both metaphorical and real. The rise of a global powerhouse wasn’t limited to the rivalry between the United States and China. Their economic connection perfectly embodied the promise of globalisation throughout much of the late 20th and early 21st centuries.
With its large workforce and developing infrastructure, China became the world’s factory. Accounting for 28% of world production in 2018, it had surpassed the United States as the biggest value-added manufacturer by 2010.
A Harvard Business Review analysis claims that China’s explosive climb was not accidental. It drew upstream players—those handling components and raw materials—by using its size, low-cost labour, and major expenditures in infrastructure and education. Drawn by China’s competitive advantages and promise of large profits, over a million global businesses set up operations there. For the United States, this system was mutually advantageous until it wasn’t. The political currents started to change as industrial employment disappeared on American territory. Once praised as economic synergy, it turned into a disadvantage for US politicians.
Trump’s trade war: Filing for divorce
Under Donald Trump’s administration, 2018 saw the first notable cracks in US-China ties. Driven by a vision of “make America great again,” Trump started a trade war, imposing 25% tariffs on $34 billion worth of Chinese imports, including vehicles, hard drives, and aircraft parts. China retaliated, leading to a reciprocal exchange of taxes and levies that shook global markets.
Companies caught in the crossfire had an ugly choice: stay in China and pay the expenditures or move and deal with logistical headaches and exaggerated expenses. Although Trump presented the trade war as a battle to recover American jobs, the truth was more complex.
Decoupling from China, America’s biggest trading partner, was not easy work. China’s excessive reliance on international supply networks has isolated the US economy, necessitating more than just aggressive language and punitive taxes.
US-China relationship: Ballooning tensions
By 2020, the COVID-19 pandemic exacerbated the US-China relationship, transforming from a health crisis into a geopolitical flashpoint marked by mutual accusations over the virus’s origin, further eroding trust between Washington and Beijing. Trump’s voice wavered between confrontational and conciliatory. He said at Davos in January 2020 of his unmatched friendship with Chinese President Xi Jinping: “Our relationship with China has now perhaps never, ever been better… He is for China; I am for the United States; other than that, we adore one another.”
Four months later, the tune evolved. Declaring Beijing to have “ripped off the US like no one has ever done before,” Trump charged China in a Rose Garden speech with decades of misbehaviour. Once regarded as a victory, the first trade pact collapsed. China had far missed its buying targets by the end of 2020.
Little relief came when Joe Biden entered the White House. Biden instead doubled down, tying economic recovery to manufacturing independence, whereas many expected his presidency to take a softer posture. Declaring in his first speech to Congress, “There is simply no reason the blades for wind turbines can’t be built in Pittsburgh instead of Beijing.”
Decoupling in “Use Decoupling” for the United States meant spreading supply chains and depending less on Chinese labour. Among the alternatives were Mexico, Vietnam, and other ASEAN nations.
Mexico had grown to be America’s top commodities trading partner by 2023; US imports of Vietnamese computers doubled between 2017 and 2023. China was not lazy either. By raising domestic content in important sectors to 70% by 2025, the “Made in China 2025” project sought to lessen reliance on outside technologies.
Beijing simultaneously signalled a turn from Western markets by strengthening connections with rising economies in Latin America and Southeast Asia. There was a drawback, though, with this “diversification.” Many Vietnamese computers, for example, depended on parts imported from China. Thus, the US unintentionally kept indirect linkages even as it tried to separate itself from Chinese manufacturing.
Lessons learnt from Russian
As the United States and China navigate their uneasy relationship, another decoupling is reshaping global trade and geopolitics—Russia’s growing estrangement from the West and its deepening partnership with China. Triggered by Western sanctions and Russia’s own geopolitical ambitions, this pivot is altering power balances and creating new challenges for global stability.
Russia’s decoupling from the West began in earnest after it annexed Crimea in 2014 and accelerated following the 2022 invasion of Ukraine. The West responded with sweeping sanctions that targeted Russian energy exports, financial institutions, and access to advanced technology.
Europe, once Russia’s largest market for oil and natural gas, reduced its energy imports drastically. The Nord Stream pipeline explosions in 2022 symbolised the end of Russia’s dominance in European energy markets.
Faced with economic isolation, Russia sought alternatives to maintain its resource-dependent economy. This included diversifying trade relationships, strengthening self-reliance, and deepening ties with non-Western allies. Among these, its growing alignment with China emerged as the most significant development.
China and Russia have long shared a pragmatic relationship, rooted in mutual distrust of the West and complementary economic interests. As the West imposed sanctions on Russia, China became a critical economic partner. Bilateral trade reached $190 billion in 2022 and continues to grow, largely driven by energy. Russia’s crude oil and natural gas exports to China have surged, facilitated by major infrastructure projects such as the Power of Siberia pipeline. This partnership is not limited to energy. Russia has turned to China for advanced technology, including semiconductors and telecommunications equipment, to mitigate the effects of Western embargoes. Military cooperation has also deepened, with joint exercises and arms trade fostering strategic alignment.
For China, Russia represents a reliable energy supplier and a geopolitical ally that can help counterbalance US influence. Russia’s willingness to sell energy at discounted rates makes it an attractive partner for Beijing, especially as it seeks to diversify its supply sources amid its own tensions with the US.
The Russia-China alignment has profound implications for global geopolitics and trade. Economically, Russia’s dependence on China risks making it a junior partner in the relationship. While Beijing benefits from favourable trade terms, Moscow faces limited bargaining power, which could undermine its long-term strategic autonomy.
Geopolitically, this partnership challenges the Western-led global order. It strengthens the influence of authoritarian regimes and creates a bloc that can resist American economic and diplomatic pressure. For instance, Russia and China’s cooperation in forums like BRICS and the Shanghai Cooperation Organisation enables them to advocate for alternative financial systems and governance models.
However, the partnership is not without vulnerabilities. China’s cautious stance on openly supporting Russia during the Ukraine conflict demonstrates its interest in balancing ties with the West. Meanwhile, Russia’s over-reliance on China could stifle its ability to diversify trade and modernise its economy.
In the long run, the Russia-China alignment underscores the fragility of a polarised global order. While it provides short-term gains for both nations, it also risks creating economic dependencies and deepening divisions that could destabilise global trade and diplomacy. As with the United States-China decoupling, the question is not whether this relationship will reshape the world but how sustainable it will be in the face of shifting geopolitical priorities.
The cost of de-globalising
One cannot overestimate the financial effects of de-globalisation, or its variants. McKinsey claims that up to 90% of important commodities and services traded between Eastern and Western countries might be reduced by a fragmented global trade system.
From technology to agriculture, the repercussions would affect several sectors and challenge economic stability. Not everyone, meanwhile, believes that de-globalisation is approaching. Zidong Gao and Joe Seydl contend in an article for JP Morgan that rather than swiftly de-globalising, supply networks are diversifying.
This “slow-moving maturation” shows a movement from too high a concentration in China away from a full retreat from globalisation. Education in Economic Diplomacy In a 2022 Vogue story, Gwyneth Paltrow compared her divorce from Chris Martin to the detonation of a helium balloon.
She noted, “The beginning of the end was something more unconscious than conscious.”
A genuine helium balloon, China’s infamous “spy balloon,” would capture the frailty of United States-China ties months later. Beijing said it was a meteorological gadget gone off course, while Washington argued it was surveillance equipment.
Biden said the episode represented a new low, embarrassing Xi Jinping, a “dictator” ignorant of the events in his own country. One wonders whether the two countries may adopt Paltrow’s “conscious uncoupling” idea among these theatrics.
If a friendly economic split is conceivable, it would benefit both sides significantly more than the current cycle of escalation and retribution. Despite their disputes, the United States and China remain deeply intertwined.
Goods valued at $576 billion came from China to the United States in 2022; $179 billion made the opposite trip. Such amounts underscore the challenge of achieving a clear break. Watching as these two economic heavyweights negotiate their tense relationship is the world. Whether they can coexist—or even cooperate—will decide the direction of world trade for the next decades. Right now, on all sides, the language of economic nationalism rules.
As history has demonstrated, nevertheless, isolationism hardly produces wealth. Instead of whether the US and China should decouple, the question is how to do so without destroying the global economy.
According to McKinsey, diversification rather than de-globalisation will define commerce going forward. Let’s hope the United States and China follow this counsel for the sake of world stability—and maybe draw some lessons from Paltrow’s book. After all, even the most turbulent relationships may finish civilly.