So when Washington and Beijing engage in an economic battle, as they have for five consecutive years, the rest of the world suffers as well. And when they hold a rare high-level summit, as Presidents Joe Biden and Xi Jinping will do this week, it can have global consequences.
“Having the world’s two largest economies at loggerheads at such a difficult time,” said Eswar Prasad, senior professor of trade policy at Cornell University, “exacerbates the negative impact of the various geopolitical shocks that have hit the global economy.
Hopes are high that Washington and Beijing can ease at least some of their economic tensions at the Asia-Pacific Economic Cooperation summit, which begins Sunday in San Francisco. The meeting will bring together 21 Pacific countries, which collectively represent 40% of the world’s population and almost half of world trade.
The highlight will be the Biden-Xi meeting Wednesday on the sidelines of the summit, the first time the two leaders will speak in a year, during which friction between the two nations has worsened. The White House sought to temper expectations, saying it would not expect any progress.
At the same time, Prasad suggested that the threshold for declaring a positive result is relatively low. “Preventing any further deterioration of bilateral economic relations,” he said, “would already be a victory for both sides.”
In 2018, the Trump administration began imposing tariffs on Chinese imports to punish Beijing for its efforts to supplant American technological supremacy. Many experts agreed with the administration that Beijing had engaged in cyberespionage and wrongly asked foreign companies to disclose trade secrets as the price of gaining access to the Chinese market. Beijing responded to Trump’s sanctions by imposing its own retaliatory tariffs, making American products more expensive for Chinese buyers.
One of Biden’s economic policy tenets has been to reduce America’s economic dependence on Chinese factories, which came under strain when COVID-19 disrupted global supply chains , and to consolidate partnerships with other Asian countries. As part of this policy, the Biden administration last year forged the Indo-Pacific Economic Framework for Prosperity with 14 countries.
In some ways, trade tensions between the United States and China are even higher under Biden than they were under Trump. Beijing is furious over the Biden administration’s decision to impose — then expand — export controls intended to prevent China from acquiring advanced computer chips and the equipment needed to produce them. In August, Beijing retaliated by imposing its own trade restrictions: It began requiring Chinese exporters of gallium and germanium, metals used in computer chips and solar cells, to obtain government licenses to send these metals to China. ‘stranger.
Beijing has also taken aggressive action against foreign companies in China. Orchestrating what appears to be a counterintelligence campaign, authorities this year raided the Chinese offices of U.S. consulting firms Capvision and Mintz Group, questioned Shanghai employees of consulting firm Bain & Co. and announced a security review from chipmaker Micron.
Some analysts speak of a “decoupling” between the world’s two largest economies after decades of being deeply dependent on each other for trade. Indeed, imports of Chinese products to the United States decreased by 24% through September compared to the same period of 2022.
The divide between Beijing and Washington has put many other countries in a difficult situation: deciding which side they are on when they actually want to do business with both countries.
The IMF says such economic “fragmentation” is harmful to the world. The 190-country lending agency estimates that rising trade barriers will reduce global economic output by $7.4 trillion once the world adapts to rising trade barriers.
And those barriers are growing: Last year, the IMF said, countries imposed nearly 3,000 new restrictions on trade, compared to fewer than 1,000 in 2019. The agency projects international trade growth of just 0.9 % this year and 3.5% in 2024, a sharp drop compared to 2024. the 2000-2019 annual average of 4.9%.
The Biden administration insists it is not trying to undermine China’s economy. Treasury Secretary Janet Yellen met with her Chinese counterpart, Vice Premier He Lifeng, in San Francisco on Friday and sought to set the stage for the Biden-Xi summit.
“Our mutual desire – China and the United States – is to create a level playing field and continued, meaningful and mutually beneficial economic relations,” Yellen said.
Xi also has reason to try to restore economic cooperation with the United States. The Chinese economy is under severe stress. Its housing market has collapsed, youth unemployment is rampant and consumer morale is at an all-time low. Raids on foreign companies have scared off international businesses and investors.
“With serious headwinds facing China’s economy and many U.S. companies packing up and leaving China, Xi must convince investors that China remains a profitable place to do business,” said Wendy Cutler, vice -President of the Asia Society Institute and a former US trade negotiator. “It’s not going to be an easy sell. »
What complicates matters is that the tensions between Washington and Beijing go well beyond the economy. Under Xi, the Chinese Communist Party has punished dissent in Hong Kong and the autonomous Muslim region of Xinjiang. His government has made aggressive territorial claims in Asia, engaging in deadly border clashes with India and intimidating the Philippines and other neighbors in parts of the South China Sea it claims as its own. He is increasingly threatening Taiwan, which he considers to be a renegade Chinese province.
Tensions between the United States and China could intensify next year with presidential elections in Taiwan and the United States, where criticism of Beijing is among the few areas that unite Democrats and Republicans.
Xi’s policies appear to be costing China dearly in the battle for world opinion. In a recent survey of people in 24 countries, the Pew Research Center reported that the United States was viewed more favorably than China in all but two countries (Kenya and Nigeria).
Could China change course?
Speaking at the Center for Strategic and International Studies think tank in Washington, Rep. Raja Krishnamoorthi, an Illinois Democrat who sits on a House committee that monitors China, noted optimistically that Xi was reversed before – notably by declaring the sudden end of the draconian regime. zero COVID policies that crippled China’s economy last year.
“We need to give this possibility a chance, even at the same time as we protect and safeguard our interests,” Krishnamoorthi said. “That’s what I hope we see come out of this meeting as well.”