Why exactly is Uncle Sam taking on the Asian dragon?

In the red corner, we have the self-proclaimed champion of democracy, still sporting stars and stripes, but with a slight tear in the fabric. It is Uncle Sam himself, USA. And in the blue corner, the sleeping dragon awakens, flexing its economic muscle and showing off its high-tech scales - let's hear it for China.

Folks, the tension in the ring is thicker than General Tso's sauce. Trade wars? Check. Military manoeuvres? You betcha! This ain't your grandpappy's Cold War – this is a global rumble for dominance, played out in boardrooms, on battlefields, and on and for TikTok.

The US and China relationship is perhaps the most important bilateral relationship today. And lately, this all-important relationship has been under heavy duress.

Back in the day the US played an instrumental role in helping China achieve its remarkable economic growth. Today, it is China's economic brawn that has soured the relationship between Beijing and Washington. So much so, that many today believe that the US is in a new cold war, with China assuming the role of the Soviet Union, with a weakened Russia as its ally.

Today, the US sees China as their biggest threat. With the Dragon clawing its way to the top of the economic food chain - not always through savoury means - and now eyeing a piece of the geopolitical dominance pie, the Eagle is more desperate than ever to maintain the status quo. Things are quite tense between the countries at the moment.

On top of that, if former President Donald Trump somehow finds himself in the Oval Office again despite his conviction, the situation could spiral. But how did we get here, what does the US want from China and vice versa?

Uncle Sam, why the long face?

China is now the biggest threat to global hegemony of the US. The CCP has successfully blended authoritarian communism with unbridled capitalism - a brew which has helped China beat the US at its own game. Some say the red scare is back; but the red US is seeing now is a shade apart. 

Once close economic partners, things started to sour between China and the US by mid- 2010s when the Americans finally realised that China was beating the US at its own game. The trade deficit with China by then had exceeded $300 billion annually. 

This in turn meant a significant decline in American manufacturing jobs, especially in sectors such as textiles and steel, resulting in a growing sense of economic anxiety and increasing resentment towards China. 

Concerns began to rise about China's trade practices, such as intellectual property theft and currency manipulation, which further strained the relationship.

How we got here

How we got here is also a fascinating story.

Following the normalisation of diplomatic relations through ping pong diplomacy, the US played a crucial role in China's economic rise. China initiated economic reforms in the late 1970s and early 1980s under Deng Xiaoping's guidance, embracing foreign trade and investment, which received strong support from the US. 

The granting of Most Favoured Nation (MFN) status to China in 1980 marked a significant milestone, paving the way for increased trade between the two countries. This status enabled China to export goods to the US on favourable terms. 

China's entry into the World Trade Organization (WTO) in 2001, with strong support from the US, expedited China's integration into the global economy. 

The economic relationship between the US and China was advantageous for both countries for a considerable period. American consumers benefited from reduced prices on a diverse range of products, while American companies reaped the rewards of the growing Chinese market and the cost benefits of manufacturing in China. 

China in turn underwent rapid industrialization and economic growth, uplifting hundreds of millions from poverty and establishing itself as the world's second-largest economy.

The Obama administration's strategy, known as the "Pivot to Asia," was the first noticeable change in the tone of US-China dynamics, and was a direct response to China's growing influence, emphasising the significance of the Asia-Pacific region in shaping American foreign policy. 

The Trump administration's approach towards China became significantly more confrontational, further escalating tensions. The president who came to power on the promise of 'making America great again' accused China of engaging in unfair trade practices, intellectual property theft, and currency manipulation.

In 2018, a trade war began as tariffs were imposed on billions of dollars' worth of Chinese goods by the US. China's response included retaliatory tariffs, resulting in a prolonged economic standoff. 

In recent years, the trend of hostility has continued as there has been a significant increase in export restrictions imposed by Washington, aiming to prevent US businesses from sharing sensitive technologies with Beijing and to reduce dependence on Chinese imports in key sectors like telecommunications and infrastructure.

So what exactly does the US want from China?

The list is not exactly short. 

The US argues China subsidises its industries and manipulates its currency, hurting American businesses. Experts say The US seeks a level playing field in trade relations. This includes addressing issues such as market access barriers, and unfair trade practices that have led to significant trade imbalances. The US also wants China to adhere to international trade rules and to open its markets to more American goods and services.

"The US wants China to adhere to the rules of the road, to play fair," Rush Doshi, Director of the China Power Project at the Brookings Institute, wrote in a recent article for Foreign Affairs. 

China has allowed the Yuan to appreciate in recent years, but the US remains concerned about potential manipulation. The ability to manipulate its currency gives China a powerful tool to influence trade flows. The US is pushing for a market-determined exchange rate for the Yuan.

US companies see China as a haven for intellectual property theft, costing them billions. "The Chinese government has a long history of supporting and tolerating the theft of American intellectual property," read a press release by FBI Director Christopher Wray. 

According to him, the US government wants to hold the Chinese accountable for what they believe is not just an infringement of US intellectual property, but its way of life.

China's claims in the South China Sea also worry the US, who say they want freedom of navigation for all countries. 

US authorities want China to respect the 2016 Hague tribunal ruling that rejected its expansive claims in the South China Sea. The official statement is that the US wants to ensure that the South China Sea remains open to navigation for all countries, consistent with international law.

The US is a harsh critic of China's human rights record, particularly its treatment of Uyghur Muslims and the political situation in Hong Kong. "China needs to respect human rights and fundamental freedoms, including freedom of religion or belief," said Secretary of State Antony Blinken in a recent speech. 

What does China think?

This trade war has not been fun for China as economic growth has declined steeply. China desires a stable and predictable economic environment to continue its growth. Experts like Susan Shirk from the Wilson Center believe this is a core motivator for China. China wants the US to reduce tariffs, trade barriers and sanctions. 

These tariffs raise prices for Chinese goods in the US market. Chinese authorities believe the current US trade policy is unfair and protectionist, harming not only China but also American consumers.

China also aspires to play a more prominent role in shaping the global economic order. This could involve increased participation in international economic institutions and potentially establishing alternative frameworks that lessen US dominance. To that end, China has established alternative financial institutions like the Asian Infrastructure Investment Bank (AIIB) to potentially rival US-led institutions like the World Bank.

China views itself as a rising power with a rightful sphere of influence, particularly in the East and South China Seas. China wants the US to acknowledge Chinese claims over disputed territories and limit US military presence in the South China Sea. 

China views Taiwan as a breakaway province and considers US support for Taiwan a violation of its sovereignty. They want the US to reduce support for Taiwan. "The core national interest for China is the reunification of the mainland and Taiwan. And the US commitment to Taiwan is seen as the most significant obstacle to the achievement of that goal," wrote David Sanger, China Correspondent for The New York Times.

How dicey can it get?

Under Biden's leadership, US-China relations have ebbed and flowed. The tension between the two nations began in Alaska in 2021 and culminated in Xi's appearance in San Francisco at the Asia Pacific Cooperation Forum in late 2023, where he openly appealed to US tech investors to return. 

Even though tensions remain over issues like the South China Sea, Taiwan, and the US forcing China's ByteDance to divest from TikTok, the situation is not all doom and gloom. 

Recently, Beijing has shown signs of being less inclined to invade Taiwan in the near future. This shift in attitude may be due to the potential consequences of facing more economic sanctions, especially considering China's slower economic growth rate of 2-3% annually, compared to the previous 8%. 

The Xi-Biden meeting in late 2023 also led to measures taken by the Chinese authorities to curb China's fentanyl-related exports, to help control the US's opioid crisis and military-to-military communications were also restored to reduce the risk of an unintended crisis.

As the world watches the ping-pong between these two superpowers with bated breath, one thing is certain: neither side can afford to miss an opportunity to ensure that they remain in a cold peace rather than simply stumbling into a new cold war.