High-Stakes U.S.-China Summit Expected to Impact Global Economy
When it comes to the global economy, the United States and China are two of the biggest players worldwide. Together, they produce over 40% of the world’s goods and services. However, their ongoing economic battle is taking a toll on the rest of the world as well. This week, Presidents Joe Biden and Xi Jinping will hold a rare high-level summit, and this meeting holds the potential to have global consequences.
Given the various crises that have unfolded since 2020 – from the COVID-19 pandemic to violent conflicts in Ukraine and elsewhere – the global economy is expected to grow at a lackluster rate of 3% this year and 2.9% in 2024, according to the International Monetary Fund. These issues are only exacerbated due to the tensions between the world’s two largest economies.
The Asia-Pacific Economic Cooperation summit, starting this week, is aimed at defusing some of the economic tensions between the U.S. and China. The upcoming Biden-Xi meeting is expected to be the highlight of the event, marking the first time the two leaders have spoken in a year. Although the White House has played down expectations, many hope for a possible easing of economic frictions between the two superpowers.
The deterioration of the U.S.-China economic relationship has been ongoing, primarily attributed to trade disputes that escalated in 2018 into an all-out trade war initiated by the Trump administration. The U.S. accused China of violating its commitments upon joining the World Trade Organization, which ultimately led to mutual tariffs that made U.S. goods more expensive for Chinese buyers and vice versa.
The Biden administration has maintained a confrontational stance in its trade policy with China, intensifying existing tensions and prompting Beijing to respond with its own trade curbs. Additionally, the U.S. aims to reduce reliance on Chinese factories and solidify partnerships with other Asian nations.
According to some experts, the ongoing rift between the two economic powerhouses could result in a “decoupling” after decades of deep trade reliance. This has also forced other countries into a delicate position, having to decide between doing business with both the U.S. and China.
Further highlighting the repercussions of these trade tensions, the IMF estimates that higher trade barriers will subtract $7.4 trillion from global economic output. The rise in these barriers has also seen countries implementing nearly 3,000 new restrictions on trade — a substantial increase and a threat to international trade growth in the coming years.
Against this backdrop, both the U.S. and China seem to embrace the idea of fostering ongoing, meaningful, and mutually beneficial economic relations. While this holds the potential for alleviating some of the economic tensions, achieving a successful outcome largely hinges on preventing further deterioration in the bilateral economic relationship.
With that being said, these tensions extend well beyond just economics. China’s aggressive territorial demands and human rights issues are at the center of continuing debates, prompting concerns that tensions could intensify with the upcoming presidential elections in Taiwan and the United States.
Despite the tumultuous backdrop, there is still a glimmer of optimism that China might alter its course, a possibility which policymakers hope to explore further at the highly anticipated Biden-Xi summit.