Tensions between the U.S. and China have been steadily escalating on a range of issues, but there’s one place where a clash of superpowers would be most likely to happen: the South China Sea. Even with a new U.S. president, the disagreements that led to this moment won’t be easy to resolve. So how did this body of water become a major flashpoint in U.S.-China relations?
Dr. Doom lives up to his moniker
.. Roubini pointed to the ongoing U.S.-China trade conflict as the likeliest trigger of the next crisis. “There is a cold war between the U.S. and China,” he said. “We have a global rivalry . . . about who is going to be controlling the industries of the future: artificial intelligence, automation, and 5G.”
Because the standoff has evolved into a one about national security and geopolitics, Roubini predicted that “there will be a trade and tech war between the U.S. and China that’s going to get worse.”
Roubini dismissed the trade truce declared by U.S. President Trump and Chinese President Xi Jinpeng over the weekend as mere talk, though stock market investors appeared to think otherwise this week. The S&P 500 index SPX, -0.05% closed at a record high Monday, while the Dow Jones Industrial AverageDJIA, -0.09% and Nasdaq Composite index COMP, -0.11% also gained to be within 1% of their record closes.
The uncertainty that the standoff has created is forcing businesses to delay or cancel plans to make additional investments, Roubini added. “There’s already been, in the data, a collapse in [capital expenditures] and once capex is down, industrial production is down, and then you have the beginning of a global recession that starts in
- tech, then spreads to
- manufacturing, then to
- industry and then it goes to
- services,” he said.
The Sino-American trade dispute will have even further consequences than just triggering the next recession, as it will cause “a complete decoupling of the global economy” as private entities and countries will have to choose whether to do business with China or the U.S., and it will lead to a reconstruction of “the entire global tech supply chain,” which will be a drag on economic growth going forward.
He compared the predicted U.S.-China “cold war” with that between the Soviet Union and the U.S. during the last century, arguing that the coming war will be more disruptive. “This divorce is going to get ugly compared to the divorce with the U.S. and the Soviet Union,” because there was little economic integration between America and Russia prior to the conflict.