Far from bringing nations together, COVID-19 has radically altered the global economic status quo and the near future will be characterised by increased strategic competition between the US and China.
“The COVID-19 crisis has intensified the “cold war” between China and the US (and may have hardened attitudes elsewhere too),” Aviva Investors said in their House View 2020 report. “Prior to it, there had been some significant, if stuttering, progress towards a phase 1 deal that seemed to have partially defused trade war concerns.
“But hostilities have resumed, with President [Donald] Trump making political capital where possible by referring to the Chinese virus and accusing China of not taking adequate steps to control the disease or to be honest about its origins.”
And while both sides pay “lip-service” to the idea of bridging differences – and might even be able to reach minor agreements on trade and technology – “a more antagonistic positioning is likely”.
“It would be [naive] to believe that US and China differences in areas such as trade, technology and international relations can be quickly resolved,” Aviva said. “How this pans out over the next few years will help frame the boundaries of the new world order and will be a key driver of both economies and financial markets.”
The US presidential election will also be a deciding factor in the future relationship with China, though it is still unclear who China would prefer to see in the Oval Office.
“China might be happy with the way that Trump has disrupted internationally coordinated diplomatic efforts to tame them, but less keen on the collapse of the global trading order that has materialised,” Aviva said. “On the other hand, a Democratic administration might be even tougher on China, and include their questionable human rights record. Moreover, [Joe] Biden’s team might be more effective.”
