Wall Street Journal: Decoupling amid the pandemic?

US economy cannot swallow the higher cost of decoupling with smaller trading partners, let alone Chin

Once an outbreak of the suspected pneumonia plagued parts of China and the government stalled all economic activities to control its spread —Trump’s aides wielded maximum force to aggrandise that Beijing won’t outlive the trade war and epidemic. It was a good omen for American economy, dismissing the idea of suspending tariffs on Chinese goods if Beijing’s economy was overwhelmed by the coronavirus.

Strict lockdowns and other measures by the Chinese government at the deadly disease’s outburst, nevertheless, turned out to be a groovy strategy that not only helped Beijing pull through the health crisis but also to drub all forecasts about the falling trajectory of its economy by recording a growth rate of 3.2% in Q2-2020.

At a time when nearly all major economies were wolfed by Covid-19, the sweeping anti-pandemic and disease-preventive gauges put China in a position to prevent a tailspin and resume its prior high-octane growth. The US, meanwhile, is knee-deep in the first wave of Covid-19 though Trump is still showboating that his handling of the lethal germ has eclipsed other countries.

In its recent World Economic Outlook, IMF got the whiff about Chinese economic arousal, which was untwisting to echo its recent past, and projected China to be the only major economy to post a positive growth in 2020 and sustain its leadership with an 8.2% growth in 2021.

Last week, a Wall Street Journal article also touted China's early control on the fatal illness as a prime mover for the quick resumption of economic activities and economists such as Brookings Institution’s Homi Kharas predicted Beijing to square off the gap with Washington beforehand.

Mark Henry, CEO of the world’s largest miner BHP, who expects a sharp contraction, says that Beijing is a beam of light where “pretty solid V-shaped recovery” is underway. His expectations surged on the back of an infrastructure boom in China as cash injections of hundreds of billions of dollars by the government ramped up imports of iron ore and boosted its prices to the highest level since 2014 even amid a pandemic.

The evolving scenario, in which Chinese economy is set to outperform US, is pushing Trump to scale up his bullheadedness and his decoupling campaign with the world’s second-biggest economy. His idolisation of the White House has emboldened him into pursuing a sheer hostile attitude toward Beijing ahead of looming presidential elections.

In order to take charge of the most advanced nation for another four years, Trump needs the support of an outsized number of voters to ward off his hyped China threat. As Americans may not pass over his derisory policy of Covid-19, which has viciously sickened them in throngs and roiled the economy to the brink with millions losing their jobs and businesses struggling to drive sales, his out-coupling manoeuvres may suffer a strong setback.

While divorce is still “a long way away” due to the deep integration between the two powers, his drive for a China-free global environment is further defied by Beijing’s ramped up trade with ASEAN and Europe, seeing their bilateral trade increase by 6.6% and 1%, respectively in July. The nations’ trade interests would additionally deal a harsh blow to Trump’s decoupling.

The besieged Trump is however convinced that confrontation with China could turn the tide of his nationwide declining approval trend and decoupling would bag him a second term. His political blunderbuss, through risking the economy and pressing the US allies to follow his footsteps to decouple from China, is a recipe for disaster.

In the Q2-2020, the US economy has shriveled at 32.9% and cannot swallow the higher cost of decoupling with smaller trading partners, let alone China. Despite Trump’s tariff and sanction jolts, Beijing is still Washington’s third-largest trading partner. The economic assimilation of each other would therefore force both to remain tied in a messy-but-compelling relationship.