Has COVID Changed the World's Relationship with China?

U.S. President Donald Trump recently said complete decoupling of the U.S. economy and China was on the table. It's more than just political rhetoric; the world's relationship with China has changed. 

For most of the last 20 years, the notion was that you had to trade with China, despite the pitfalls – for example, China's frequent violations of intellectual property rights. Even before the pandemic outbreak, the world's views of China had changed and resulted in a global trade war. With COVID, the dispute could further escalate.

This sentiment is not limited to U.S.-Sino relations. Europe, too, is increasingly talking of rolling back trade and investment ties with China. Japan has already started a program under which it provides monetary support to Japanese businesses that relocate their operations out of China and back to Japan.

How far will the decoupling go?

Not everybody agrees that decoupling is a smart policy move. U.S. Trade Representative Robert Lighthizer told lawmakers that "I don't think [decoupling is] a policy or reasonable policy option at this point." He also said the U.S.-China trade deal is on track.

The decoupling of the two biggest economies is risky, if not practically impossible. It would hurt businesses and consumers on both sides and send shockwaves through the global economy. Thus, the question is, how far such a decoupling will go.

Undoubtedly, trade tensions – amplified by the COVID-19 virus – will force multinational companies to change their business models and bring supply chains closer to home. That alone could alter entire industries, and it would profoundly affect economic growth in China. It will also force China to keep developing its ecosystem at an even fast pace and could trigger hostile political reactions.

Much of this will also depend on the outcome of the U.S. presidential elections in November. Although it is not clear today what that might look like, a new government might take another course of action. However, one thing is for sure: The COVID-pandemic has significantly changed the world's relationship with China.  

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