9. A Pyrrhic Victory? The Political Economy of US-China Competition from Trump to Biden

Economic interdependence has served as an anchor for the post-Cold War US-China relationship. Despite ups and downs in the bilateral relationship, such as following the 1999 NATO bombing of the Chinese embassy in Belgrade and the 2001 mid-air collision of US and China military aircraft, the two countries have been able to manage the relationship due to strong common interest in economic cooperation. However, today even economic cooperation has become increasingly difficult as US-China rivalry intensifies. How have rising political tensions affected economic cooperation since the Trump administration? What political developments on both sides have led to the current situation? This chapter examines the rationale behind growing US-China economic tensions during the Trump and Biden administrations, reviews major actions by both sides that escalated rivalry, and assesses initial outcomes of the intense economic competition. Based on case studies and empirical analysis, this chapter argues that normal competition benefits both sides since “a rising tide lifts all boats,” but zero-sum competition will only hurt both sides. Despite efforts to decouple, the two economies remain joined at the hip. The chapter concludes with some discussions about how the two countries can manage their complex economic relations as strategic rivalry between the two powers deepens.