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The Global Implications of the Increasing Tensions between the US and China

by Samuel Soman

Following the construction of the post-world War liberal order, the US “possessed the full panoply of means—political, economic, and military—to organize the defense of the non-communist world.” By taking on this mantle, the US assumed responsibility for instilling global capitalistic and liberal democratic values. During the Cold War, the US sought to spread both values while hedging the threat of communism. Through the ensuing proxy wars, the US inconsistently balanced promoting liberal economics with liberal values, backing right-wing authoritarian regimes in areas such as Chile, South Korea, Nicaragua, etc., to subdue communism.

These short-sighted strategic partnerships did not account for the detrimental domestic repercussions and willfully ignored the human rights violations of such regime changes. As shown through colonial legacies and cold war actions, US intentions seemed less pure and more self-serving from the developing world's perspective. The Cold War thus proved that “non-capitalist economies could not compete with market economies over the long run,” but that liberal values could also be used as a disingenuous tool. Acutely aware of this, developing nations have bought into “the structures of the market, and thus the economic side of the liberal project” but not into “liberal culture and governance.”

Through the creation of the Belt and Road Initiative (BRI) and Asian Infrastructure Investment Bank (AIIB), Chinese institutions now offer alternative economic means of growth to that of the IMF and World Bank. These emerging institutions credit a potential global economic shift to the East. To the discontent of the US, 22 European nations, including the UK and Germany, have joined the AIIB along with 81 other nations. The success and appeal of Asian programs are inherent to their convenience and utility. A lack of infrastructure is the largest barrier to a developing nation's economic and social progress. The AIIB and BRI offer loans with no economic or political conditionalities, serving as a very attractive alternative to the IMF and World Bank. The BRI works effectively for both borrower and lender needs as China can “transfer its overwhelming excess of supply and meet the huge construction demand of developing countries.” Additionally, the BRI is projected to benefit 63% of the world’s population and add $2.1 trillion to the world GDP. However, the BRI is criticized for its lending practices for “lacking transparency, failing to uphold environmental and safety standards, and

leading recipient states to incur high levels of debt.” Although the AIIB and BRI are fiscally too small to replace the Bretton Woods institutions, their utility is still significant and dramatically highlights the growing divide between the West and the Rest. Ultimately, whether Chinese intentions are disingenuous or not, through the development of alternative financial institutions and their positive global reception, the US and the West must be made aware of their eroding credibility within the financial sector.

In addition to these externalities, internal factors also threaten the longevity of the Western order. Trump believed that global institutions mistreated the US. He left Obama’s Trans-Pacific Partnership (TPP) and the Paris Accords, froze the dispute-mediating ability of the WTO, and left the WHO amidst the pandemic (later overturned by the Biden administration). In turn, these institutional attacks were met with Chinese reaffirmation of the global order. When Trump denounced globalism and left the TPP, Xi attended and spoke at the Davos World Economic Forum in defense of free trade. When Trump left the Paris Agreement, Xi urged other signatories to maintain their obligations, and when Trump paralyzed the WTO, Xi joined the Ottawa Group with the EU and Canada to support WTO operations. Thus these actions proved that China holds a level of commitment to preserving the rules-based system rather than opportunistically looking to end it.

The election and inauguration of Joe Biden reaffirmed US support and participation in existing institutions and mechanisms. But, despite this more general shift in foreign policy, Biden and Xi continue to reject bilateral relations with one another. Biden has chosen to continue Trump-era “tariffs, export controls, and visa restrictions,” additionally imposing his own sanctions against Chinese officials and companies. The international community, especially the global south, does not want to get drawn into a trade war between the world’s two largest

economies. A trade war would “weaken the trading system that has allowed the global South to flourish.” The US justifies its Chinese stance through the same explanation it gave during the Cold War– to promote democracy. As discussed, this moral ground holds little weight in the Global South, whose primary concern is economic.

China, on the other hand, doesn't divide nations along moral lines but readily deploys sanctions along political. Mainly pertaining to sovereignty, China has readily punished nations economically and multilaterally for opposing PRC stances regarding Taiwan and the South Chinese Sea. In response, the Global South has rejected binary alignment, employing its own strategic non-alignment to advance its economic means opportunistically. For example, since the US has begun to decouple from China to secure their supply chains, ASEAN nations such as Vietnam and Indonesia have been seen as alternative vessels for US companies’ production and investment. And, as their role is purely transactional, they can operate without undermining Chinese authority. So, speaking more generally, nations don't want to limit their economic outlooks by aligning themselves with one nation and subsequently facing sanctions from the other. As such, actively non-aligned nations, especially ones with geo-political significance, such as ASEAN, must walk a fine line to not end up in the crosshairs of either nation. But, ultimately, this balancing act will be meaningless if US-China tensions boil over into war.

In terms of global governance, this modern form of active non-alignment empowers the global south to forge a more equitable future amidst growing power competitions collectively. As Beijing believes that only “through protracted struggle will Americans be persuaded to coexist with a strong China,” and Washington believes that it must “check Chinese power and influence to defend U.S. primacy,” a zero-sum escalation has ensued. In a global era defined by shared fate, issues such as “climate change, biological and digital viruses, the proliferation of weapons of mass destruction, space rocks, and the management of the global economy” require global collaboration.

The most important non-aligned nation, India, will play a central role in easing escalated tensions. India has been able to maintain ties both to Beijing and Washington. The US is its largest trade and technological partner. India exports its largest sums of goods to the US and works closely in developing nanotechnologies and semiconductors. They also share similar fears over Chinese aggression, with recent skirmishes along their shared Himalayan border escalating tensions. Through joint military exercises, arms deals, and its participation in the quadrilateral security dialogue (a multilateral institution that balances Chinese influence in the Indo-Pacific region), India can safeguard against Chinese aggression. On the other hand, India’s participation in trilateral meetings with China and Russia, its participation in the BRICS (Brazil, Russia, India, China, South Africa) grouping, and its membership in the Chinese-led Shanghai Cooperation show the nation's commitment to maintaining and strengthening relations with China. As India is set to host the 18th G-20 summit, with both Xi and Biden expected to come, India’s maintained middle ground will allow the nation to foster dialogue between the two powers. In fact, the only time Biden and Xi have met face to face post-Biden’s inauguration was in November 2022 at the last G-20 meeting. The host, Indonesia, was able to bring the two leaders together through its neutral stance, reinforcing the idea that “multilateralism remains invaluable even in a disorderly world.


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