The Trump administration’s international economic agenda is still haphazardly playing out, but the basic contours are clear. At its core, it seeks to disrupt the world’s pre-existing trajectory by moving away from the ‘positive-sum’ economics of globalisation towards the ‘zero-sum’ logic of mercantilism and geostrategic competition. At a minimum, it wants to rewrite the global economic rules in ways it finds more favourable.[2] At worst, it may seek to reverse globalisation itself.

A new mantra of ‘decoupling’ is also emanating from Washington, with the goal of disentangling America’s economy from China’s so as to no longer facilitate the latter’s rise and to reduce their interdependencies.[3] Related to this are growing concerns that a new Cold War may be emerging, with the United States and China each looking to establish their own economic blocs and spheres of influence.[4]

What a US decoupling agenda might entail exactly is still unclear. In its most narrow form, it would target specific security risks (e.g. critical infrastructure). More damaging would be a broader approach to reduce entanglements with China across large swathes of the US economy. Most aggressive would be a multilateral approach, where America would seek to enlist other countries to also decouple from China in some way. So far we have seen elements of each, including tighter inward investment screening and export controls on technology, broad-based tariffs on Chinese imports, and the inclusion of a so-called “poison pill” clause in the US–Mexico–Canada agreement aimed at forcing America’s trading partners to choose between closer economic ties with either the United States or China — a choice US Commerce Secretary Wilbur Ross says it may also seek to force upon others.[5]

The potential economic costs of decoupling will depend on how far such measures are pursued. Even seemingly targeted policies can easily blur into more expansive restrictions. For example, there is already a concern that new technology export controls might be applied too broadly.[6] Crucially, the risk of further escalation is high. In the short run, Trump’s unpredictability and penchant for cutting deals offers some hope that the current tariff war with China may be resolved or at least stabilised. However, support in the United States for decoupling runs broader and deeper than the Trump administration alone.[7] Ultimately, rising commercial and geostrategic competition with a more advanced and powerful China risk becoming structural geopolitical drivers towards further escalation. Avoiding this, and containing the economic costs, will require a far more nuanced policy strategy from both the United States and China than seen to date.

This outlook has serious implications not only for China but also the rest of East Asia. Complex global value chains mean higher US tariffs on China indirectly hit other East Asian economies along the way.[8] A general rise in US protectionism and the desire to re-shore manufacturing activity will also directly disrupt broader East Asian access to the US market. Meanwhile, there is a real risk that other countries might also pursue greater protectionism, as the rules-based system built around the World Trade Organization withers, and possibly cracks under pressure. Finally, the US decoupling agenda could either present other East Asian economies with opportunities as supply chains relocate out of China or force them to confront a stark choice between the world’s two largest economies if the United States does indeed seek to multilateralise decoupling. In any case, a fragmenting global economy will be less prosperous, undermining the global flow of goods, capital, people, and technology that has historically propelled East Asia forward.