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The 'great uncoupling' of the U.S. and China?

The Week Staff

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The U.S. moved last week to tighten the vise on China's technology ambitions with a "one-two punch of industrial policy" said Ana Swanson at The New York Times. First, Taiwan Semiconductor Manufacturing Co., one of three companies in the world capable of making the most advanced microprocessors, announced it would build a $12 billion plant in the United States, a longtime White House goal. A day later, the U.S. issued a rule that effectively "bars companies around the world from using American technology" to create any products shipped to the Chinese telecom giant Huawei. That puts "survival at stake" for Huawei, a company China sees as a national tech champion. The new plant and the divorce from Huawei effectively pull TSMC — which also fabricates chips for Apple and Qualcomm — into the U.S. orbit, bringing it closer to "becoming a trusted member of the U.S. military's supply chain" while locking China out of crucial advances. That TSMC is based in Taiwan, whose sovereignty China rejects, adds "a dash of geopolitical insult to the injury."

We are witnessing the "great uncoupling" of the world's two largest economies, said Keith Johnson and Robbie Gramer at Foreign Policy. "Rolling back U.S. reliance on Chinese factories, firms, and investment was always the endgame of the endless trade war" and a particular obsession of President Trump. The pandemic has "turbocharged" that initiative by shaking "decades of faith in the wisdom of international supply chains." When China shut down, "medical suppliers, automakers, electronics makers, and factories of all sorts struggled to keep operating," deepening convictions that "the U.S. is too cozy" with China. If a "fundamental reshaping of the global economy" is to begin, the pandemic created "an opportunity to start with something like a clean slate."

Getting cut off from TSMC risks "setting off a dangerous game of chicken," said Alex Fang and Yifan Yu at the Nikkei Asian Review (Japan). Huawei lost no time in firing its own shots across the U.S.'s bows. Huawei chairman Eric Xu said he does not think "the Chinese government would sit and watch Huawei be slaughtered," and Chinese officials are already threatening to "restrict or investigate U.S. companies such as Qualcomm, Cisco, and Apple, and suspend the purchase of Boeing airplanes." A "tit-for-tat conflict" would make decoupling very costly for the United States.

"U.S. companies are doubling down on China anyway," said ­Trefor Moss at The Wall Street Journal. Despite the "heated rhetoric," U.S. business is betting that nothing will change in the long run. To see why, just look at Shanghai, where "hundreds lined up around the block" last week, "defying coronavirus social-distancing advice," to visit the first of 1,500 planned Popeye's Louisiana Kitchen outlets. Walmart, Tesla, Exxon Mobil, and Costco are all expanding their footprint in China. For its part, China is "entirely pragmatic" when it comes to trade, said David Fickling at Bloomberg. The government will issue fiery statements, as it has about South Korea, Brazil, and Australia, but trade will continue. The "real ties between nations are among people and businesses," not diplomats and presidents.

This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.

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