[The Editors' Verdict] Post-COVID-19: US-China Conflict Reignites

by Hwang Junho

Published 17 Apr.2020 11:00(KST)

On the 5th (local time), the U.S. Department of the Treasury designated China as a currency manipulator. This is the first time in 25 years since the Clinton administration in 1994 that the U.S. has designated China as a currency manipulator. On the 6th, an employee at the KEB Hana Bank Counterfeit Response Center in Euljiro, Seoul, is organizing U.S. dollar and Chinese yuan bills. Photo by Moon Honam munonam@

As the novel coronavirus infection (COVID-19) somewhat slows down, attention is turning to whether the economy will recover and what obstacles lie ahead. One of these is the direction of the US-China conflict, which was a major issue in the global economy before COVID-19. The United States and China signed a Phase One trade agreement on January 15, marking a turning point in the fierce trade war that had been raging since 2018. However, the efforts to implement the agreement disappeared due to the COVID-19 crisis that erupted 'before the ink was even dry.' Instead, the confrontation between the US and China over COVID-19 is intensifying. How will the US-China tussle unfold? Let’s examine the key variables expected.

First, the issue of responsibility for COVID-19 is a hot potato. COVID-19 is a much more powerful pandemic than SARS or MERS, and the economic impact is so severe that it is compared to the 'Great Depression,' so the question of who is responsible is likely to become a serious debate. The first round has already begun. On the 11th of last month, US President Trump officially blamed China by calling COVID-19 the 'China Virus.' The following month, China’s Foreign Ministry spokesperson Zhao Lijian used Twitter, which is not used in China, to counter by suggesting the possibility that 'the US military brought COVID-19 to Wuhan.' President Xi Jinping also posted an article in the Communist Party theoretical journal 'Qiushi' stating that 'it is not clear where COVID-19 started.' It feels like the full-fledged second round has begun. President Trump has called for a thorough investigation into the so-called 'COVID-19 Wuhan laboratory origin theory.'

Second, the localization of supply chains is also an issue. Experts evaluate that the US efforts to localize its supply chain will be further strengthened due to COVID-19, and at the same time, this is likely to rekindle issues of Chinese subsidies and technology transfer that remained a spark in the US-China Phase One trade agreement. For now, 90% of the masks used by Americans are made in China. China produces mask filters and nonwoven fabrics domestically, reorganizing its supply chain in a short period, currently producing over 100 million masks per day. Some suggest that China may restrict exports of pharmaceuticals to the US in response to US trade attacks.

Third, the acceleration of 'divide-and-conquer competition' between the US and China is another expected variable. The responsibility debate over COVID-19 is expanding into diplomatic and propaganda battles between the US and China in the global community. China is providing medical supplies to countries suffering from COVID-19 such as Italy and Iran. The US declared a suspension of funding to the World Health Organization (WHO) on the grounds of its pro-China stance. Both sides are also competing to control the media to gain an advantage in the international public opinion war. The US has limited the number of staff of five media outlets, including Xinhua News Agency, considering them Chinese propaganda organs. China expelled three reporters from the US Wall Street Journal (WSJ) in Beijing in response to its COVID-19 coverage.

What will happen going forward? The medical community believes that it will take at least one to two years until a vaccine or treatment for COVID-19 is developed. Ultimately, no matter how much money is pumped in, economic recovery like before will be difficult. From the perspective of President Trump, who faces the year-end presidential election, and President Xi Jinping, who is on the verge of deciding on long-term rule next year, it is more likely they will choose blame games and divide-and-conquer rather than cooperation that is hard to achieve results. There is an opinion that the 'prisoner’s dilemma' theory, where prisoners in jail betray rather than cooperate, will come into play. For us as well, the dichotomy of 'security and politics with the US, economy with China' may increasingly become a problematic way of thinking. We are moving into an era where independent competitiveness is essential in both security and economy.