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Opinion

US and China: The odd couple, decoupled

The US and China are growing apart by the day, and whether Trump or Biden is in the White House come January may make no difference. What does this mean for financial institutions everywhere?

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In March 2001, America’s hawkish defence secretary Donald Rumsfeld handed a report to George W Bush. It urged the new US president to see not Russia but China as the primary threat, and to redeploy more military resources to Asia.

Doing so would have altered history, but that had other plans. The September 11 attacks redirected Washington’s gaze from Beijing to west Asia. Three months after that, China joined the World Trade Organization and began its rise to become a trading superpower.

For 15 years, relations between the two powers were mostly cordial. Then Donald Trump came to power.

By now, America’s 45th president’s act is a known quantity. There is a lot of huffing and puffing, but most of it is hot air.

Except when it comes to China.

On the campaign trail, Trump accused Beijing of currency manipulation, stealing intellectual property and being “neither an ally or a friend” to America.

After the election, he dialled up the narrative, appointing Peter Navarro, author of ‘Death by China’, as his trade adviser. Later, he installed secretary of state Mike Pompeo and commerce secretary Wilbur Ross, China hawks both.

A trade war followed, then sanctions. Washington imposed tariffs of $360 billion on Chinese goods; Beijing retaliated with $110 billion in tariffs on US products.

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