The US led the free world during the cold war and offered mutual economic access and military protection in return for setting the majority of economic terms. However, since the collapse of the Soviet Union, the US is reneging on its part of the deal. The US has been increasingly unable to guarantee security, as seen in ongoing conflicts in Ukraine, Afghanistan, and Iraq. The US is now asking allies such as Australia to spend more on defense and reduce exposure to China, which raises concerns about risking Australian access to the large Chinese market.
The US is also adopting industrial policy and offering heavy subsidies to attract new business at the expense of its allies. The US does not need the rest of the world anymore due to the advent of shale oil and gas, and domestic politics has become poisoned due to extreme income inequality, making concessions politically impossible. US policy is driven by corporate interests, and while US corporates love access to Chinese markets, they are uncomfortable with Chinese competition in leading industries. Thus, Chinese tech needs to be disparaged as dangerous to stop it taking market share, and threats to the payment systems of Visa and Mastercard will portray WePay and AliPay as security threats.
However, China is getting to a position where it could offer the deal that the US used to offer, which is military protection, and access to a vast domestic market. This could be a non-US centric system, but the US seems to be helping the Chinese by increasing the attractions of a non-US-based system every time the possibility of a US debt default rises. If the US wanted to damage China, a return to the tight monetary and fiscal policies of the 1980s and 1990s would be the best possible reaction to China’s rise. However, US corporates may be unwilling to endorse a policy that could see profits and valuations fall.
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