Can the West Actually Ditch China?
The economic relationship between the United States and China has long been uneasy. President Trump has launched a trade war between the two countries in part because of his frustration with China’s policies on intellectual property and exports. With hostility between the two largest economic powers on the rise, the question of whether or not the West can survive without doing business with China arises.
In this article, we will examine the potential repercussions of divesting from China, what measures other countries have taken, and the overall feasibility of the West cutting off economic ties with China.
Understand the Potential Long-Term Damage of Ditching China
Though the idea of divesting from China’s economy may seem like a simple solution to a complex problem, there could be significant long-term ramifications if the West severs economic ties with the world’s second-largest economy.
First, U.S. businesses could face costly tariffs of up to 25 percent if they source from another country or make their products at home. International firms could suffer from reduced profits as a result of a decrease in demand for products containing Chinese-made parts.
Second, the U.S. and its allies could lose their access to important Chinese-made technology. Many businesses and industries rely on Chinese-made tech, including electronics, telecommunications, and semiconductors.
Third, businesses relying on cheap Chinese labor could suffer economically. For example, the U.S. apparel industry would have to find other sources of inexpensive labor if it divested from China. This could lead to skyrocketing costs of production, making it difficult for some businesses to stay competitive.
Finally, Chinese-made products are integral to many supply chains, particularly in the automobile industry. Without access to Chinese-made parts, it may be difficult for the U.S. and its allies to continue producing the same number of completed cars and trucks.
Analyzing How Other Countries Have Cut Off Economic Ties with China
As the U.S. and its allies consider divesting from China, it’s worth examining how other countries have approached the issue.
Japan has been vocal about withdrawing from the Chinese economy, as the country’s trade minister recently stated that economic ties between the two countries have reached an abnormal level. Japan is also encouraging domestic companies to take their business elsewhere and is offering subsidies if they agree to move production overseas.
The European Union, on the other hand, has approached the issue differently. European countries have attempted to diversify their sources of supply and develop closer ties with other countries in the region, rather than cutting off all economic ties with China.
The United Kingdom has sought to break away from the European Union while staying within the same trading bloc. The UK has signed trade deals with China and launched an Infrastructure Investment Bank in an effort to help its businesses stay competitive in global markets.
Assessing the Feasibility of Going Alone
The West’s desire to hold China accountable for its trade practices is understandable, but going it alone isn’t necessarily feasible.
On the one hand, the U.S. and its allies possess the economic power to survive going it alone. That said, Congress would need to raise taxes and borrow funds to plug the fiscal gap that would be created by breaking away from China. There is also the chance of entering a prolonged recession and drastically raising the unemployment rate if the West acts in haste.
On the other hand, if the West is to stand any chance of succeeding in its attempts to pull away from China, it will need a strong international coalition to back its efforts. Countries like India, Canada, Germany, and Japan would be essential partners in such an effort. The West would need to work closely with these countries to devise a plan to replace China in the global supply chain.
The U.S. and its allies have long been uneasy with Chinese trade practices, and the possibility of divesting from the world’s second-largest economy is becoming increasingly likely. Withdrawing from the Chinese economy could have significant long-term repercussions and would be difficult to achieve without the support of a strong international coalition.
However, other countries, such as India, Canada, and Japan, have taken steps to reduce their dependency on Chinese-made products, and the U.S. is likely to follow suit in the near future. Ultimately, a successful move away from China would require careful planning and a commitment from the U.S. and its allies to stay united in their efforts.
