The United States and China do not want to coexist. Their massive economies are deeply intertwined in ways that it makes the intensifying trade war unsustainable and unbreakable.
China’s booming middle class is in a critical growth engine for Boeing (BA), Apple, Nike (NKE) and other American brands. China has been expected to keep growing in importance as a buyer. And America’s insatiable appetite for cheap goods has created a Chinese factory juggernaut that employs millions of workers in them.
The world’s two largest economies are one of the other are biggest trading partners. Nearly $700 billion in goods were sent between China and the United States in 2018 alone. And with $1.1 trillion of Treasuries, China is America’s largest foreign creditor.
The United States has legitimate complaints about China’s trading practices, and persuading China to open its market to American sellers has become an important goal now and for the further future.
But China and America need one another. The tit-for-tat tariff battle is threatening one of the world’s vital economic relationships — and because of their size, the global economy. At a time when the two nations should be forging rules for the next 20 years, they are pointing a gun at one another.
For good reason, the breakdown of the US-China relationship is spooking investors and economists alike.
At the Dow plunged 617 points, or 2.4%, on Monday after China retaliated against tariffs announced last week. Beijing vowed to impose higher levies on $60 billion of US goods, everything from cotton and aircraft parts to wine and machinery.