China and the US have long competed for supremacy, with each country focusing on upholding the “world superpower.” The conflicts are accelerated by US trade deficits, US IP theft, China's state subsidies, and market access. The Chinese government has well-developed trade and manufacturing, creating economic stability in China, and raising insecurity in the US on losing its position as a world superpower. The escalating war between China and the US is traced to the first term of Trump's presidency, when the two countries started intense economic confrontations. Since 2017, the US imposition of tariffs on China marked the beginning of such policies and severe economic aggression. In 2018, the US imposed a 25% tariff on Chinese goods worth 50 billion. Consequently, China countered by imposing a 25% retaliatory tariff targeting American agriculture exports to China and reduced energy and manufactured goods imports from the US. In the struggle to acquire and maintain power, each of the countries established alliances with other nations and sought to have them on their side to control the world. Additionally, they impose policies that aim to support their superiority.
The inferiority complex between the East and the West has made these countries undermine the trade and economy of many countries especially poor countries whose economy is driven by developed countries. Early this year, the US new president, Donald Trump took over and is introducing new economic policies which in his words aim to “restore the glory of the United States.” Bearing in mind that these two countries are the world's largest economies, the actions to fight for power, superiority, and control are plunging the globe into many uncertainties, especially markets. This is a ripple effect across the world in the race to determine who should hold the superpower title. The escalating tensions between these two countries have affected global commerce and economic relations.
Among the trade policies include the US actions to impose a 10% tariff on Chinese imports to reduce US importation from China has adversely affected markets such as energy markets and forex markets. One of the notable effects is on the S&P 500 which has experienced a 0.72% decline after the tariff policy in 2018 after the imposition of tariffs on 50 billion worth of Chinese goods. The energy markets also demonstrated their vulnerability with energies such as LNG and Crude oil causing uncertainty. Moreover, the forex markets have increased volatility on currencies such as USD/CNH. This is accelerated by continuous changes in the relationship between the two countries. The world has in many ways felt the impact of the China-US fallout through economic disruptions, global trade alliance shifts, technological decoupling, and geopolitical tensions. Due to the conflicts and confrontations of China and the US trade war, the globe is facing supply chain disruptions and inflation pressure. For instance, while the US lacks manufacturing power equal to China, imposing tariffs on China goods leads to trade deficits and inflation. Also, China has responded to the US actions by seeking new markets for their goods. In addition, other countries sought new global trade alliances. Countries such as India, Mexico, and Vietnam are shifting their supply chains from other alliances other than China. The technological decoupling is another interesting impact that has led to great innovations and competition in the tech world. Due to the existing rivalry, between the US and China and leading in technological production, 5G technology, artificial intelligence. Moreover, there are geopolitical tensions between countries that are attributed to relating with any of the two countries. Consequently, countries are obligated to support either the East or the West or get support from either of the countries. The fight for supremacy is causing global division and tensions among many countries. Although the main idea is to improve trade and economic trade, the two countries are treating the situation as a war and an avenue to promote trade injustices. Underlying competition between the two nations is likely to persist. However, as the two countries seek to achieve their goals to hold the title, they should consider global economic stability and mutual respect.