The US-China decoupling is reshaping global trade and economies, with far-reaching implications. This process, driven by rising tensions and increasing tariffs, is expected to be chaotic and painful, causing significant disruptions to global supply chains.
The US may face rising inflation and slowing growth, while China’s growth could still surge. The recent increase in tariffs and focus on technological competition have accelerated the decoupling process, leading some to suggest that there is “no way back” from this trend.
Global supply chains are being impacted, with countries like Mexico, Vietnam, and India emerging as key players. US foreign direct investment in ASEAN countries is nearly triple that of flows into mainland China. Chinese firms are relocating production to countries like Vietnam and Mexico, retaining “Chinese characteristics” through foreign manufacturing affiliates.
The US-China decoupling is realigning international alliances, forcing countries to choose sides or navigate a delicate balance. The technological decoupling does not necessarily mean deglobalization is happening, as elements of global trade, including green and digital trade, remain robust.