The U.S. and China’s feud shows no signs of abating. It’s starting to worry international organizations such as the World Bank, which recently predicted that the rift between the two superpowers could hurt the growth of other economies.
Now, former Treasury Secretary Henry “Hank” Paulson is echoing similar concerns about intensifying geopolitical tensions.
“The U.S.-China relationship is on the brink. Communications have ground to a halt,” Paulson said in an interview with the Financial Times published Friday. “There’s a lot going on in the world that’s troubling, but to me it’s the U.S.-China relationship that is the most worrying.”
The two countries have gone head-to-head in trade, foreign policy, and the race for technology in recent years. While tariffs and trade restrictions are already in place, a complete “decoupling” scenario, where the economies work separately from each other, could have a significant impact. China is still among the U.S.’s top trading partners and the world’s second largest economy.
The economic importance of the two nations raises the stakes of them clashing, and Paulson thinks America may be underestimating what China can do.
“This is a dangerous situation,” he said. “I strongly believe that [President Joe] Biden would like to stabilize the China relationship, but both Republicans and Democrats in Congress have staked out a very strong line which complicates things for Biden. I have a concern that Congress is underestimating the relative power of China, the permanence of China, and China’s relationship with so many other countries.”
According to Paulson, China is boosting its presence around the world, and putting out a clear message that “China is open for business again.” So, if the U.S. responds with further curbs on trade and investment, even as other nations deepen ties with Beijing, the U.S. could become more isolated.
