After months of “I love you, me neither”, the United States and China found, at the end of October, a provisional solution to their trade dispute. This truce should last at least until Trump’s official visit to Beijing next April. “Nevertheless, structural rivalries still lock this G2 into a logic of escalation», Warns Raphaël Gallardo, chief economist within the Cross-Asset team at Carmignac. The economic symbiosis between the two giants was built from the 1990s, when the United States welcomed China into its commercial and financial orbit in the hope of triggering its political liberalization.
But, burned by Tiananmen and the collapse of the USSR, the communist leaders “had accepted this ‘made in USA’ globalization with the sole aim of economic prosperity guaranteeing the survival of the regime. Building on its economic resurrection, Beijing is now aiming for global hegemony and is working to systematically dismantle its reciprocal dependencies with its strategic rival.», argues the expert. On the American side, the realization that this marriage of convenience had failed dates from the Obama era. But it was Trump who officially began divorce proceedings in 2018 with the imposition of massive tariffs. Since then, Washingtonconsiders the emancipation by force of the Chinese giant, of which the reconquest of Taiwan is an integral part, as an existential threat. Commercial, financial and technological decoupling is therefore inevitable.», with en garde Carmignac.
Also read Towards a Star Wars? United States, China and Russia sharpen their anti-satellite weapons
The degree of economic intertwining is nevertheless such that the divorce will be painful for both parties. China “still depends on the United States along four critical lines: finance, food, energy and technology. Beijing holds more than 3 trillion in dollar assets, subject to the risk of confiscation by Washington. More than 70% of its foreign trade remains denominated in dollars. Its food and energy security relies on maritime imports crossing straits controlled by the US Navy.», Reports the expert from the management company. And despite colossal subsidies, its semiconductor industry still faces the insurmountable wall of 7 nanometers.
The United States depends on China for a number of critical minerals (graphite, rare earths, cobalt, etc.) and certain industrial segments, from solar panels to antibiotics. However, these vulnerabilities “are reversible. Washington can diversify its supply chains in less than a decade. The deposits and know-how exist on its soil or among its allies (Japan, Australia, etc.). China’s weaknesses are structural. A decade of relaxations of the one-child policy has failed to reverse the demographic implosion. The dependence on imported raw materials is part of the geography of the country and the long term of climate change. The technological gap is much more difficult to bridge close to the technological frontier,” judges Raphaël Gallardo.
