Arvind Subramanian says, the US and China may well avoid the “Thucydides Trap” – which refers to the theory that when “a strong rising power has challenged a weakening incumbent,” the result is often war. But China, the rising power, and the US, the ruling power, do not seem to be headed there, because “the powers of both the aspirant and the incumbent are eroding – albeit in different ways.”

The author says almost a decade ago when China rose at the expense of the US. Today amid the ongoing tug-of-war, it is time for “a fresh assessment.” The current struggle between the two “fading” hegemons has made “the outcome preordained. The only question was whether the transition would be peaceful or violent.”

America’s decline could be traced back to the end of World War II, when the US had half the world's wealth and incomparable security and global reach. In the course of decades, the decline continued. By 1970, US share of world wealth dropped to about 25%. From the 1970s, there had been a significant change in the economy. The new phase proved to be a conscious self-inflicted decline. The economy was shifted toward financialisation and the offshoring of production, due to falling profit in domestic manufacturing. Wealth became highly concentrated in small elites, yielding concentration of political power, with fiscal benefits benefiting the rich. Meanwhile, for the majority, real wages stagnated, and people – grappling with unsustainavle debt – could get by only by sharply increased workloads. In parallel, the political system has been increasingly shredded as both parties pander to corporate elites to finance their campaigns. Yet they have failed to tackle the “unfavorable domestic economic and social trends such as slowing productivity growth, declining social mobility, and worsening income inequality.”

Today under Trump, “soft-power currency, more valuable than the dollar itself as a source of US hegemony, has been debased beyond recognition. US global leadership is now associated with disastrous wars, repudiation of the collective commitment to address climate change, sabotage of the global trading system, and unraveling international security arrangements.” At home he has demoralised the institutions, and trashed the Constitution, making the US the global laughing stock.

The author believes, if Trump be removed from office, “whoever wins the 2020 presidential election will find it hard to restore the luster of US political and economic institutions, owing to America’s deep polarization and entrenchment rather than attenuation of adverse economic trends. This raises increasing doubts about America’s ability to project its power externally.”

China had seen phenomenal growth in recent decades, but it has enormous domestic problems not faced by the West. China is the world's major manufacturing hub, but largely as an assembly plant for its advanced industrial powers and for western multinationals. President Xi Jinping’s “Made in China, 2025” plan seeks to focus on high-tech manufacturing over time. China's economic growth had relied substantially on a very large working-age population. But the window for harvesting this demographic bonus may close soon, due to an aging population and low birth rate. Excess cheap labour supply - one of the major factors driving China's economic miracle - will no longer be available.

There is criticism that the leadership in Beijing invited trouble with its unabashed projection of economic and military might. China seeks to challenge US supremacy in science and technology amid growing hostility to Beijing across the American political class. The author says “the risks of a Chinese economic derailment have increased, as domestic debt has climbed to vertiginous and unsustainable levels while export opportunities have shrunk.”

Morever, Xi has abandoned the private sector-led growth model “that served as the country’s transformational golden goose for over four decades. As a result, China’s economic prospects seem far less bright than they did a few years ago.”

But what is unsettling is China’s increasingly repressive turn at home. Xi’s pet project, the Belt-and-Road initiative has not generated as much goodwill as intended. This nearly one-trillion-dollar project has become a debt-trap for countries that have borrowed heavily from China to develop their infrastructure.

Trump’s erratic and bullying behaviour, his ignorance and the isolationist polices he pursues have given Beijing a unique opportunity to cement its position as the next global hegemon. The two countries “look like two tired boxers who go at each other for 15 grueling rounds, not to determine who will stay upright, but rather to discover who will be the first not to go down.” And the world is watching, while finding itself “in a leaderless and rudderless drift.” It remains to be seen whether China will prevail in this struggle for global hegemony, despite their diminished potential and capacity.