The US-China cold war can be “potentially very serious" and damaging to the world compared to the geopolitical issues between the US and Soviet Union.
According to Alan Dupont, chief executive of risk consultancy Cognoscenti Group, the difference between the two rivalries is the extent of inter-dependency between the US and China. The consultant provides advice for clients on geopolitical, financial and national security trends.
“Unlike the first Cold War where the primary contest between the United States and Soviet Union was a geopolitical one ... both systems, both constellation of countries, didn’t have much to do from a trade and financial point of view. That is not the case today,” he said during an interview with CNBC’s “Squawk Box Asia.”
“That is why I think the ramifications of this conflict — this worsening rivalry between the U.S. and China — (are) going to be potentially very serious,” he added.
The US-China cold war have developed into their worst in decades since President Donald Trump was elected in 2017. The two countries have imposed a series of new tariffs on each other since 2018. This became a damaging trade war that influenced other areas such as technology and finance.
More recently, the Trump administration blamed Beijing for not revealing their information on the virus outbreak earlier and for concealing the extent of the crisis. Beijing has denied those accusations.
The US government also slammed Beijing for imposing a national security law on Hong Kong, a semi-autonomous Chinese region with a special trading relationship with the U.S.
According to analysts, the US-China tension could deepen further as Trump is expected to make tough stance against China as he runs for another term in the White House. The next presidential election is on November 3.
“Now the contest is becoming more systemic and it’s really becoming a winner-takes-all kind of contest — so that’s the worst potential outcome,” said Dupont.
“Unless there’s some kind of a circuit breaker — there’s no prospect of that in sight in the short term — the worry is that while we cope with the effects of the pandemic, you have this worsening tensions between the U.S. and China which is going to spread throughout the world and impact on global supply chains, on business and finance everywhere.”
"Lose-lose" situation
The US-China conflict is a “lose-lose” situation for both sides, according to a political science professor from Harvard University.
Graham Allison, Harvard’s Douglas Dillon professor of government, said that the tension between the world’s major economies, US and China, may worsen. He added that the result is a “lose-lose” situation for both sides.
“The endgame will probably be lose-lose,” he said during an interview with CNBC’s “Squawk Box Asia” on Tuesday.
“I think this will be worsening across the board and I hope that they don’t do any permanent damage,” said Allison. He served as assistant secretary of Defense under President Bill Clinton and special advisor to the secretary of Defense under President Ronald Reagan.
Allison pointed out that the US-China conflict could lead to the collapse of the phase one trade deal and resume with the blame game over the origins of the coronavirus.
