How the coronavirus legitimizes the decoupling of the Chinese and American economies

Audio 04:18

By: Dominique Baillard Follow

The trade conflict between China and the United States has been relegated to the background by the coronavirus. However, this war is still brooding, it could even worsen due to the pandemic, favoring the decoupling of the Chinese and American economies.

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A priori , the mood is good between Washington and Beijing. But a month after the signing of the so-called " phase 1 " agreement, trade negotiations have stalled. They have still not resumed, contrary to the commitment of the White House. A break amply justified by the coronavirus and the procession of precautions it imposes. Donald Trump has not set aside his anti-Chinese agenda. According to our colleagues from the Wall Street Journal, he threatens Beijing with a new sanction: he could veto the delivery to China of aircraft engines co-produced by the American General Electric and the French Safran, for fear that he would either copied by the Chinese aeronautical industry. The decision will be made on Thursday. Far from being extinguished, the trade war could be relaunched in the coming days. In addition to this very political risk, the trade war has in fact been reactivated by the coronavirus which is legitimizing the thesis of the decoupling of the Chinese and American economies.

China is upset, it fears that the coronavirus is a pretext to justify a renewed protectionism

A few days ago in Geneva, Beijing expressed its concerns within the World Trade Organization , recalling in passing that it was the first exporting country and the second importer. Decoupling is not the official White House doctrine but it is a scenario that is gaining credibility with the progression of the virus. The world could find itself cut in two parallel systems, with on one side countries pegged to the United States and on the other those who chose China. Should we choose one or the other? The question is already posed in political terms in a country like Taiwan. The island, which refuses to fall under the yoke of the People's Republic, nevertheless realizes a quarter of its trade with mainland China, 12% with the United States. The epidemic highlights the fragility of a trade that is too dependent on this shady partner. The government is in favor of the relocation of industries located in China. The Taiwanese Foxconn, which manufactures Apple iPhones, was the first to review its production chain. Part of its Chinese activity has been transferred to India.

Are other manufacturers in the process of rethinking their supply chain ?

For the moment, the companies make with the stocks built up to face the New Year holiday. According to the cabinet Dun and Bradstreet, the Chinese groups installed in the 19 provinces most touched by the covid-19 directly supply about 51 000 companies foreign and 5 million second-degree businesses, through their service providers. All of these companies find that the coronavirus has succeeded in isolating China from the rest of the world much faster, more efficiently than customs barriers. It could therefore, in the medium term, push them to review their supply chain. Politicians in the United States strongly encourage them. Trade secretary Wilbur Ross already sees the epidemic as an opportunity to relocate jobs to American soil. Peter Navarro, one of Donald Trump's economic advisers, is alarmed by the over-dependence of the American pharmaceutical industry which imports some of these components from China. For this hawk it is time that this industry regains its sovereignty.

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• China
• United States
• Industry
• coronavirus
• Xi Jinping
• Donald trump

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