And second, because, now that China is a technology powerhouse — and technological products all have both economic and military applications, unlike the toys, T-shirts and tennis shoes that used to dominate our trade — the two sides are struggling to figure out what to buy and sell from and to each other, without damaging their national security.

The net result, argued Paulson, is that “after 40 years of integration, a surprising number of political and thought leaders on both sides advocate policies that could forcibly de-integrate the two countries across all four of these baskets.” And if that trend continues, “we need to consider the possibility that the integration of global innovation ecosystems will collapse as a result of mutual efforts by the United States and China to exclude one another.”

That, Paulson concluded, is “why I now see the prospect of an Economic Iron Curtain — one that throws up new walls on each side and unmakes the global economy, as we have known it.” Yikes!

One could argue that a digital Berlin Wall began rising years ago when China created its Great Firewall to seal off the internet inside China from the global internet — so Beijing could censor all news and online internal discussions, freezing out Google, Facebook and Twitter. China, as well as other countries, has also begun ring-fencing certain data pools, software and technology stacks to make sure that all of them, or at least key elements, are stored on domestic servers and not accessible from abroad.

But the digital Berlin Wall took a big step up on May 17, when Trump placed China’s Huawei — the world’s second-largest maker of smartphones and the world’s largest manufacturer of 5G telecom equipment — on the U.S. “Entity List.”

That meant that China’s most important technology manufacturer and scores of its affiliates across the globe were blacklisted and could no longer buy parts from their major U.S. suppliers — such as Google, Qualcomm, Intel, Micron and Microsoft — without a special license. U.S. officials argued that Huawei was guilty of facilitating Chinese espionage — or would do so in the future if China’s government asked it to — and had engaged in fraud, technology theft and violations on U.S. sanctions against Iran.

However much justified, this move was the equivalent of China freezing out Apple and Microsoft. In was an earthquake in China’s tech lands. It “woke up everybody in China,” a prominent Chinese telecom executive told me. “We now have to think about this world differently,” the executive explained. “We need to build on a mix of our own technologies to be sure that we are safe. They totally underestimated what they have done.”