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US-China trade

New Cold War: De-risking US-China conflict

Published 24 June 2020

This report provides a comprehensive analysis of the New Cold War. It examines the underlying causes of the US-China conflict and the reasons for the recent tensions. It evaluates the costs and impacts for China, the US, Europe and Asia of an escalation and outlines seven recommendations for preventing and mitigating worst-case outcomes.

The report concludes that the linked US-China trade, technology and geopolitical conflicts have precipitated a new Cold War. The world’s two major powers are now wrestling for strategic advantage in an increasingly bitter contest for global leadership.

Although a simmering rivalry is more likely than a hot war, according to Dupont, this is hardly cause for relief or complacency.

A second Cold War could be worse than the first, given the interdependence of the US and Chinese economies, their centrality to global prosperity and the proliferation of dangerous military and digital technologies.

These all increase the risks of collateral damage, and proxy conflicts especially in cyberspace are already increasing.

Dupont’s report challenges the traditional framework for analysis of the US-China conflict. It expands on the relationship between seemingly disparate arenas of competition and enables policy-makers, business leaders and scholars to understand the true costs of the conflict, make better success calculations and improve decision-making. The report draws out the risks – and likely consequences – for a system already in a state of flux as the transition to a post-American world accelerates and the coronavirus wreaks havoc on the world economy and international trade.

A worsening of the US-China trade and tech wars would fracture already-stressed supply chains, reduce international cooperation, reinforce protectionist tendencies and open new fronts of conflict and contestation. It could also complicate the economic recovery and lay the seeds for a second global recession, or even depression.

An extended period of great power competition could roll back the gains from more than 70 years of trade liberalization, disrupt global supply chains, Balkanize the internet and bifurcate the world into two mutually incompatible political systems.

Diminished trust, different world views, the systemic nature of the confrontation and domestic politics all present significant challenges that will need to be overcome in order to avoid the worst-case outcomes of the New Cold War.

The report comprises four chapters and recommendations.

  • Chapter 1 examines the origins of the trade war from both American and Chinese perspectives, focusing on the phase one trade deal, the increasing ‘weaponization’ of trade and the implications for the multilateral trading system.
  • Chapter 2 sheds light on the linked tech war, explains why industrial policy has become a new Sino-US battleground and assesses the probability of a Balkanized internet and decoupled global supply chains.
  • Chapter 3 appraises China’s strategic challenge and the US response, drawing out the parallels to the Cold War. It concludes that the real problem in the bilateral relationship is the diametrically-opposed political systems and values of the two powers, compounded by their sense of exceptionalism.
  • Chapter 4 outlines a strategy for reducing Sino-US tensions. It makes an explicit effort to understand the causes of the two countries’ differences and to suggest ways of mediating conflict. The report illuminates pathways to compromise and renewed habits of cooperation.

Read the report and recommendations.

Interviews with Dr. Alan Dupont

Listen to Dr. Dupont's interview with the Centre for Independent Studies (CIS) about how the US-China standoff over trade, technology and strategy “has precipitated a new cold war.”

Listen to Dr. Dupont's interview with Prof. Kerry Brown of King's College London on the future of the West's engagement with China.

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Alan Dupont

Dr. Alan Dupont is a Senior Research Fellow at the Hinrich Foundation and CEO of the Cognoscenti Group, a geopolitical risk consultancy. He has been named by the Australian Financial Review as one of Australia’s leading strategists.

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